Investments in Art
The global art market is considered to be interesting, fascinating, challenging and potentially yielding nice financial gains for investors who invest correctly in this market.
JacobsamuelArt website is reviewing the world’s art market development over the last decade, investment feasibility, leading major players in this market, trends in this evolving market and investment areas.
The art market, along with being a traditional market that keeps the value of artists and their works, it’s a dynamic and changing market that produces new artists and new lines in art and in particular when it comes to painting. Therefore, the investor must use experts who experience the art market trends, and the innovation and market development of painting around the world. An investor which is not an expert in the art market and doesn’t experience the fluctuations in this market perhaps should not buy art as an investment, but for hobby and spiritual satisfaction only. One, who wishes to invest in the market of arts, should advise professionals with experience in the field, those who have the ability to navigate the investor’s funds in the most appropriate art, and all this within the time specified by the interested investor.
The field of art has always been considered a staple in the culture of each nation and nation. The reasons are many and varied, but major. Accordingly, we see that the nations’ leaders and rich residents would retain art assets transferred from generation to generation at their homes. Art works was always considered desirable and as something that everything needs to be done in order to achieve it.
In the last decade the art field has evolved to become a global market and trade; Large companies have begun to stockpile works of art, people who can afford it acquired some of the best art creations and selected ones, and all that in order to invest their money in a product that yields safe and promising return. Investment in unique art was always a safe investment option for people with means as well as for companies that sought to invest their money, both for reasons of economic viability and long-term investment and/or for reasons of tax savings (a tax deductible investment).
In addition, over the years, art was seen as a safe investment with an annual double-digit yield growth due to the unique market conditions, due to the high requirements to enter this market (market entry barriers), low supply of art works, a high demand for art due to the entry of additional investors (increase in the number of rich people in the world) and the fact that investing in art is considered a safe investment.
Over the past decade we can see that the volume of investments in art grows with the years. In this matter we can cite ART PRICE founder and CEO, Thierry Ehrmann, “The cumulative data indicates a 30% increase over the last decade.”
Note the fact that paintings were sold in 20142 for $ 9.5 billion, compared to 2004, when paintings were sold for $ 3.8 billion, an increase of 250% in the total sales of paintings at auctions worldwide.
In addition, we can view the fact that in 20143, 125 works of art were sold for over $ 10 million for a piece, compared to 18 pieces sold for these prices in 2005. This is a dramatic increase of 694%
As the possibility to purchase art mainly focuses on auction houses, galleries and fairs, we can see that in the last decade the volume of these activities widened in accordance with the increasing demand for investments in art, as can be seen below. Moreover, in recent years we have identify a trend of new buyers who purchase works of art in the range of low to medium prices, as suggested by Mr. Yossi Filkann, the President of Christies “The greatest growth of the art market comes from an increase in quantity of new buyers in the range of low and medium prices” . Naturally low price and medium price are a matter of perspective.
This Article will discuss and focus on the international art in the field of paintings, and we will base our data primarily from auctions that take place worldwide, because this is the market that its transactions are well-known. Display of auctions’ data in Israel and worldwide Auctions in general, and in Israel in particular, are on the rise over the last decade for the reasons stated above.
To better understand the scope of the auctions that take place in the field of arts and the increase sales in this field, we will present the trend over the past three years, i.e. in 2012-2014. To remove all doubt, this figure refers only to auctions worldwide and not to other measures where paintings are being sold, such as galleries, trading between willing buyers and sellers, periodic sales and fairs held periodically around the world, and sales that take place through various websites. This market cannot be estimated or valued because these are trades between individual buyers and sellers, which at the vast majority does not reveal the volume of trade between them.
Sales figures of art products at international auctions for the past few years, and over the past decade in particular, indicate an upward trend in the volume of products sold in art auctions worldwide. You can see that between 2012 – 2013 and between 2010 – 2014 there was an increase in sales of art at auction at 30% and 26%, respectively. This data show, unambiguously, the strength of the international art market and the growing pace of its development.
Sotheby’s and Christies are among the leaders in international auction houses that and in charge of a significant portion of auctions performed worldwide.
Painting as part of art
Paintings have always been an important part of the art and have always been the main pillar in the area of art investment. Even today we can see that the substantive sales and trading focuses on the art of painting, particularly when it comes to oil paintings.
The table below, which focuses on data from art auctions around the world, shows a significant sale of paintings.
Art Investment Analysis
As seen in this diagram, the proceeds from the sale of auctioned paintings in relation to all the arts were in 2012, 2013 and -2014 to about 63%, 66% and 77%, respectively.
In light of this, it would be recommended to mainly focus on the art of painting, though to not rule out investments in other artistic areas as well
Based on the analysis of return on investments as listed in the above drawings, we can adopt the following conclusions:
- The terms of return, there is no difference between the investment amount, ie, if the painting was purchased in the amount of up to $ 100,000 or an amount of up to $ 1,000,000 the yield percentage will be the same;
- The return on investments in paintings that was examined was an average of 77% per year in investments of up to $ 100,000 for painting and an average return of 75% per year in investments between $ 100,000 to $ 1 million;
The difference between the estimated and the actual sale price
When reviewing the art market that is being sold through auction houses, we need to focus on two main issues concerning the subject of the sale, as follows:
- Evaluation of the sale price (pre-sale) consisting of a minimum and maximum price range.
- The actual sale price of the work.
Apart from the above there is another parameter, ie, the starting price of the painting (the first bid), which is in the lowest range of the estimated sale price.
As you can see from the displayed table below, there are three possible outcomes obtained from the actual sales, as follows:
- The work has not been sold;
- The piece was sold at the assessment price of the auction house;
- The piece was sold over the assessment price;
Sales Analysis of the auction house “Sotheby’s” for the years 2014 -2015
Two auctions of Sotheby’s in the field of painting in 2014 and -2015 were sampled. Sampled sales are sale No. 14022L CONTEMPORARY ART dated 06.30.2014 and sale No. 15020L
CONTEMPORARY ART dated 02.10.2015. The following table summarizes the results of the sales:
An analysis of these sales shows that between 2014 and -2015, 49% and 34% of paintings were sold beyond their assessment price, respectively, compared with 14% and 15% of the drawings, respectively, unsold. This figure confirms the assumption that a significant part of the paintings are sold beyond their estimated price, compared with a minority of paintings that are not sold.
Sales Analysis of auction house “Christie’s” for the years 2014 -2015
Two auctions of Christie’s company in the field of painting in 2014 and -2015 were sampled.
Sampled sales are sale No. 2817 Old Master Paintings Part 1 dated 01.29.2014 and sale No. 3715 FIRST OPEN NYC dated 03.06.2015. The following table summarizes the results of the sales:
An analysis of these sales shows that between 2014 and -2015, 24% and 30% of drawing were sold beyond their assessment price, respectively, compared with 34% and 24% of the drawings, respectively, unsold. This figure confirms the assumption that a significant part of the paintings are sold beyond their estimated price, compared with a minority of paintings
The recommendation is to focus the investment in the field of Modern art and Contemporary art due to the analysis of today’s market conditions and the expected market conditions in the coming years. In addition, the analysis of the results of paintings auctions in 2012-2014 at the leading auction houses Sotheby’s and Christie’s, and as shown in the following chart:
In addition, you can specify a range of selected articles in professional journals in the field that were published in 2014 and -2015 indicating of a strengthening trend in sales of paintings in the field of modern and contemporary art and the comments of experts with many years of experience.