Canvassing the market
by Emma Gardiner
Virgin Blue Inflight Magazine
February 25, 2006
Warhol, Rembrandt and Picasso all had one thing in common: business acumen. Not only were they prolific artists, they ran studios, employed people and formed alliances in elite circles. Despite the high-brow hype that so often characterises the art world, make no mistake: art is a business like any other. Players, purveyors and producers are there to make money. And the good news is that in the current economic climate, the average punter can too.
Richard Martin, private collector and gallery owner, says, “Whatever you buy, you’ve got to love it. The investment side of the transaction should be secondary.” His advice to prospective buyers is simple. “Diversify. Just like with a stock portfolio, you should collect a couple of blue chips, a couple of solid, stable artists and a couple of high-risk, high-return emerging artists.”
The mistake that some people make is thinking that that you can go out and buy an artwork on a Saturday, much like a couch or a car. “You must do your homework,” says Martin. “Even though you’re the only one who knows what you like, reputable sources can help you with things like establishing provenance, assessing condition and giving you a background on the artist.” But there are times Martin says it’s fine to impulse-buy, provided you’ve done the necessary legwork beforehand. “When something strikes you and the price is fair, you should make an instant, quick, informed decision.”
The safe options for investors looking to enter the market without a sizeable outlay are prints or lithographs of established artists. “You won’t get the return that an emerging artist that does well will give you,” Martin warns. “But you can be sure that the work will retain its value.”
Martin also tends to be led by what he likes. “Galleries tend to get known for a particular style of work. I want to offer people artworks that will feel comfortable in their homes,” he says. While he offers cutting-edge, contemporary works, Martin says he stays away from video and installation art. “Those kinds of works take up a whole, huge floor. No one’s got the space for that.” For the same reason, Martin will never exhibit any of the really ‘way out’ artists of Damien Hirst’s ilk. “You need a big bankroll to back them and at the end of the day, the sales are negligible and they take up a lot of room.”
One of Martin’s artists is Sydney-based artist Craig Ruddy. Ruddy, who won the coveted Archibald Portrait Prize in 2004 and was a finalist this year, concedes that while fame and money are not his raison d’etre, they certainly make life a lot easier. “After I won the Archibald, I had a group of stockbrokers knocking the door down,” he says. “There’s nothing wrong with purchasing work for financial reasons.”
Imants Tillers, one of Art Gallery of NSW Artist’s Trustees and Archibald Prize judges, says he is well aware of the impact of the prize on the investment market but says that it is a by-product of the process. The distinguishing feature of the Archibald Prize is that the judges are from different walks of life, meaning it becomes a very good measuring stick for populist art as well as purist art. The Archibald is also a publicity dream come true for the finalists.
This phenomenon is one that Craig Ruddy experienced first-hand when his prices doubled after winning. “Just about every artist undervalues themselves,” says Ruddy. “That’s where the dealers come in. The artist needs to survive in order to keep working so they need to find a dealer who first and foremost appreciates, connects with, and understands their works. Secondly you need someone who is a good business person.” Ruddy claims the commissions he pays his dealers is well worth it: “It’s very difficult to put on two hats when you’re absorbed in the creative process.”
Artists of Ruddy’s calibre and notoriety can earn between $100,000 and 500,000 per year, but what of investors? Ralph Hobbs, Art Director of art investment brokerage Art Equity, says rental portfolios can earn up to a 10 per cent return annually. This is an unusual way of exploiting investment art but one that is proving enormously successful.
In order to dip your toe, Hobbs says that investors need between $10,000 and $15,000 but if you simply want to get into the market as a private collector, you’ll need about $2,000. Art Equity offers a unique service that harnesses the extraordinary connectivity of the internet, creating a virtual marketplace for clients. Although dealers like Art Equity do offer a gallery space and host regular exhibition launches, many of the works are sold before they even show.
Hobbs says that their customer base is neatly divided between private collectors and investors. Whilst he concedes that most of these people are high net-worth individuals looking to diversify their asset base, he says Art Equity also deals with many clients who simply want to get into the market and find galleries a bit daunting.
Also making a splash in the internet art market is www.artwhatson.com.au, which features artworks for sale by Australia’s best-known masters and emerging artists.
But before you jump in and buy up on art, there are three main criteria you should research in order to, as Hobbs puts it, “assess the risk profile of an investment piece.” These are: Does the artist have a strong reputation and are they likely to continue working? Is the artwork part of an ‘iconic’ collection or a more obscure piece? As it will influence the asking price, how was the work sourced - through the artist, a dealer, or a private collector?
Of course, sometimes an artwork’s value can be virtually guaranteed. These works, mostly classics by master artists, are for big-league buyers only.
A new record was set recently when, during a private sale to cosmetics mogul Ronald S. Lauder’s Neue Galerie, Gustav Klimt’s 1907 portrait of Adele Bloch-Bauer attracted US$135 million. The fortunate seller was Bloch-Bauer’s niece, Maria Altmann, and Ms Altmann’s family. The painting had hung for many years in Vienna’s Austrian Gallery Belvedere, near Klimt’s The Kiss, before becoming the subject of a legal battle between the family and the Austrian government. The artwork had been looted from the family home when the Nazi party seized power in 1938.
Whatever the works are worth, industry professionals say the greatest thing about buying a piece of art that you truly love is that it will enhance your life. Whether it evokes a purely visual enjoyment or stirs something deeper, you are engaging in something personal. Craig Ruddy says that artworks are, “…part of the artist’s spirit. You should feel like they fill your soul everyday.”