Investing in Art for your Home
Buying artworks for your home can be a costly exercise without the right guidance. Here’s what you need to know.
Art dealers and consultants will always warn you against buying art as an investment. Equally, they will warn you against talking about art in the context of your decor – certainly not within earshot of the artist, that is. But art can be both a good investment, an expression of personal meaning and a way of infusing your home with beautiful objects. It can also be a waste of time and money if you get it wrong.
‘Collecting art can become addictive,’ says Cape Town art dealer João Ferreira, who helps novices and established collectors devise a strategy for curating their own personal collection. Private consultant and curator at the Casa Labia Cultural Centre, his interest lies in creating debate while facilitating the establishment and enrichment of collections. Ferreira says he works within the client’s aesthetic to give them insight into pricing structures and to develop connoisseurship. ‘They gain insights into what makes a painting valuable. While we advise that buying the work of a blue-chip artist is some guarantee that the art will appreciate, we avoid what I call tokenism – buying a small work by every big-name artist you can lay your hands on. You will not enjoy your collection if you are just ticking boxes.’
Ferreira gives collectors the inside track – he takes collectors on gallery visits, introducing them to curators, artists and relevant people on the scene to further flesh out the discourse, which is important in order to prevent the dealer from dictating tastes. ‘We encourage them to read magazines, look at a lot of art to train their eye – to see and discern. Once they have a lot of information, we guide them on how to use it.’
Art as Investment
‘Art as a purely financial investment poses challenges. It is highly illiquid, the market lacks transparency and efficiency, and it is expensive to acquire and maintain,’ says Kyle Sommer of JP Morgan. He also says that, as a store of value, art has shown to be an effective hedge against rising prices when inflation is high.
Research by JP Morgan showed that on average only 10% of the high-net-worth individuals they surveyed own fine art and paintings purely as a financial investment. Motivation for owning art ranged from social status and prestige to the intangible value associated with having a piece of art that you can enjoy.
‘On average, art has done significantly better over the last 40 years when inflation runs high. Returns on art appear weakest in a low-inflation environment.’ He says JP Morgan’s analysis of art performance in various environments suggests that art can be used as an effective store of value in prolonged periods of high and rising prices.
South African Art
This is good news for collectors involved in the global art market. But if you are investing in local currency in South African art, things look a little different. South African art is of high quality and well priced, and works are definitely changing hands, says Stefan Hundt, Sanlam art curator and head of Sanlam Private Investment’s art advisory services. To put things into perspective he says, ‘The market is small in global terms. There are about 500 serious buyers who can spend over R200 000, and only 10 that will spend over R4 million. The entire annual turnover of the South African market is between R250 million and R400 million – that is one painting in America.’
Nonetheless, there is a healthy, complex and extremely diverse art market here, with high-net-worth individuals increasingly looking at art as an asset class. Hundt advises clients on investing in art as part of an overall investment portfolio. He is at pains to emphasise that he is not a dealer or a trader – and that there is no magic formula for making the right investment. His strategic advice begins with a client’s capacity to spend money. ‘Look at artists who are around 30 years old now, who are having success on the exhibition circuit. Don’t avoid work that is confrontational – too many people buy what fits in with their decor scheme.’
When buying a work, consider whether the artist has exhibited in prestigious local galleries and in international shows, and whether his or her work has been taken into corporate collections and museums. All of this will contribute to making the work increase in value over time. ‘Like a stockbroker, I tell people that I cannot predict the future, but we all make better decisions when we are informed. The market is open to manipulation.’
Hundt is averse to giving laundry lists of which artists to buy: ‘There is an enormous variance in the quality of work by one artist. Each work is unique, so make sure that you are trained to tell the difference between a good and a bad work by the same artist. If you are a serious collector you will look at work by emerging artists that is disruptive and provocative,’ he says. ‘It’s a gamble.’ However, like all good gamblers, it takes focus – and instinct – to pick a winner! His advice is to take into account the artist’s credentials and track record and the work within its historical art context.
The Sanlam Art Collection, established in 1965, is one of South Africa’s finest collections of South African art. With holdings of more than 2 000 items by some of South Africa’s most valued and emerging artists, the collection provides a representative overview of South African art dating from the late 19th century to the present. It can be viewed by appointment only.
Stefan Hundt: 021 947 3357.
Text: Andrea Vinassa
Photographs: Adriaan Louw, supplied