Insight


09. Valeska Soares, Galeria Fortes Vilaça, Sao Paulo.


Competitor Sotheby’s did even better, with a 21% increase in annual sales to $5.8 billion. Nonetheless, boom times for auction houses


The blend of increased investor interest and stronger market infrastructure has led to a surge in activity across a broad range of art markets. According to Artprice, leading provider of art- market information, 2011 was the best ever year for sales of art at auction. Auction house Christie’s had a bumper year, with sales up 9% over the previous year to a record $5.7 billion. Christie's CEO Steven Murphy attributed his firm's sales increase to a "growing worldwide de- mand for art, the quality and curation of important consignments and our consistency in offering the best service and broadest choice to our clients."


New European Economy


do not automatically translate into strong returns for investors. Collectibles markets are full of in- efficiencies. They are often obscure and illiquid as well as very volatile and risky. They encom- pass high transaction, storage, insurance and ap- praisal costs. Appreciation in value can also bring about a higher tax burden in some coun- tries. Some categories of art are also open to va- garies in fashion, which can cause prices to fall as dramatically as they have risen. For many collectors, the cost and financial risk of acquiring art are irrelevant due to the intel- lectual stimulation and aesthetic pleasure it brings to them. When acquiring art mainly for financial benefit, however, being extremely cautious is vital. Investors in numerous financial asset classes can be susceptible to biases though processes that make it difficult for them to make rational decisions. With art, these biases can be even more pronounced. When purchasing a painting, for example, collectors can very easily let their heart rule their head.


Of the 2,000 high net worth individuals that


Barclays surveyed for their June 2012 report Wealth Insights: Profit or Pleasure?, only 10% of respondents said they bought fine art pictures or paintings purely as an investment, while 69% believed that the financial value of art is driven by public taste rather than intrinsic worth. So, still want to invest? There is a current


trend for buying established Contemporary artists such as David Hockney. The market for working artists with a strong oeuvre behind them seems likely to improve going forward. New buyers looking at currently popular artists such as Banksy should be careful that over time the depth of such work will come under scrutiny, and its decorative value could wane as the trend dies down. Buying new artists is always a bit of a lottery in terms of making money back in the long term, but that is not to say that it is impos- sible. For investment purposes, it is recom- mended to focus on buying artists with an established auction record or at the very least buying from a gallery with a track record of hav- ing found artists that have gone on to interna- tional acclaim.


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