Art is becoming an increasingly attractive option for investors. TIM LLOYD looks at what is driving the trend.
UNTIL recently, Austrian artist Gustav Klimt's auction record had been $38 million for a brilliant orchard scene, Landhaus am Attersee, sold in November, 2003.
Then, last week, billionaire cosmetics magnate Ronald S. Lauder forked out $183 million for one of the two luscious portraits in gold and oil of Adele Bloch-Bauer, pictured above.
Even for the international art market, that is a steep increase in price. It is the most paid for a painting, by anyone.
It outsold the world record price, for a Picasso in 2004, by almost $50 million.
It has focused attention on the huge profits being reaped from art investment, not just in New York, but around the world.
In the same week, buyers paid a world record price for tribal art, more than $10 million for a Gabonese mask - four times its pre-sale estimate and twice the price of any previous tribal artwork.
Klimt's century-old Adele Bloch-Bauer painting is a defining portrait familiar to all art lovers. It has been in print as a poster for decades.
The painting also was mired in controversy; the subject of a long legal battle since it was seized from industrialist Ferdinand Bloch-Bauer after he fled Vienna and the Nazis in 1938. The Austrians felt they had legal right to the painting and four other Klimts owned by the family. They only gave them back recently following a protracted legal battle fought by Ferdinand's New York descendants.
Art dealers seem to think Lauder got a bargain. The world art market has been on the up for a decade or more, since the stuffing was knocked out of it by the early 1990s recession.
While owning art does not pay annual dividends, it does give owners much joy - and financial rewards.
They can enjoy the artwork itself and count on the value of key works increasing in the long term.
Ron Radford, the former director of the Art Gallery of South Australia, and now director of the National Gallery of Australia in Canberra, long argued art outperformed conventional investments.
He said art bequests, where money is put in escrow to accumulate dividends and profits, could be a waste of money - it often was more profitable to buy the work today and watch it appreciate in value. His case in point was the Elder Bequest, which funded some of the AGSA's most important acquisitions, including its most popular painting, Tom Roberts' A Breakaway!
The gallery does not put prices on paintings but, as one of Australia's iconic works, A Breakaway! could be expected to bring millions of dollars on the market.
In 1899, the Gallery's honorary curator, Harry Gill, knocked down Roberts from pound stg. 300 to pound stg. 150, around $300, for the painting.
In 2000, Radford closed the Elder Bequest, spending the capital on two local artworks.
``Inflation had long since caught up with this once-valuable fund which, since the early 1950s, had not been a major source of acquisition income,'' he wrote in an article on the bequest.
Alan Young, the joint managing director of Adelaide stockbrokers Baker Young necessarily has mixed views on art investment. It is attractive and, chosen carefully, can appreciate well. It also needs much more investor care, he says.
He is an art investor and says his collecting, which started with his hometown hero Pro Hart in Broken Hill, has paid off. ``I have been collecting all my life,'' he says. ``It's just got more expensive as I grow older.''
Pro Hart was joined by top Australian artists, John Olsen, Charles Blackman, Brett Whiteley and the Boyds in Young's collection. ``You know you can't eat it but it's good for the soul and, I think, it's done well and those works have appreciated,'' Young says. He says those who invest in great art can reap staggering rewards. ``The trick is, what is great art?''
``Whereas we know if you select from the top 20 companies listed on the stock exchange, you don't have to be a connoisseur of the stock to understand they will do pretty bloody well,'' he says.
``The trouble with art is that there is a lot of work that is not great.''
Mr Young also points out other tripping points: You can't sell 10 per cent of an artwork when you are short of money. Art is very hard to sell whenever there is a cyclical downturn. You have to store and care for the work. You have to keep intact the artwork's provenance, the paperwork that proves that it is the genuine work.
``You have to have a whole gallery to do that,'' he says. He says the Gustav Klimt painting is a case in point. Because it had been in a major European art gallery for 50 years, its provenance and reputation was beyond reproach, vastly increasing its value.
TOP Adelaide art dealer, Sam Hill-Smith, says Australia, like the rest of the world, is seeing a buoyant art market. He recently was at auction in Melbourne to see a record almost $2 million paid for a Fred Williams, only shortly after a John Brack had sold for the highest price for an Australian painting, at $3.17 million.
``I can only assume that the last decade has produced an incredible amount of wealth for a select group of people,'' he says.
FOOTNOTE: The Art Gallery of SA owns a drawing of a nude by Gustav Klimt and assistant curator of works of European works, Jane Messenger, says the work will go on display in a week's time in response to the interest in Klimt. The drawing was bought in 1967. Was it a good investment? ``Yes'' says Messenger.