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ART THE FUN INVESTMENT

By Jacques Durandt

Fine art prices are rocketing globally and locally. Investors continue to buy pieces at record prices, particularly contemporary works. According to Business Times, 6 September 2009, Stephan Welz said that there were some 60 records set for South African art this year. A rare painting of Irma Stern bought more than 30 years ago for R4 800 recently sold for R7.2 million on auction at Strauss & Co. The May moses annual all-art index vs S&P 500 total return index from 1957, art outperforms the S&P. Art 30% a year from 1985 to 1990. The past 5 years averaged 23%. Art has been used by the wealthy for more than 5000 years to exhibit their wealth.

According to Stephan Welz art is not truly an investment. As it does not pay dividend, bring in no rent and then there is also the cost money to keep up. He calls it a form of wealth. On the other hand Graham Britz Fine art stakes his business that it is a definite investment and he regards himself as an art fund manager.

Our experience is that art is definitely part of one’s investment portfolio. South African art is currently performing in close relation to share portfolios and property investments. See Citadels art index http://www.citadelartpriceindex.co.za/ENG/Pages/Default.aspx

The current characteristics of the art market are that there is a shortage of quality stock and it is currently a world wide phenomenin. Also in SA there is a shortage of good quality stock. See Financial Times 18 Aug 2004 – Fine Art – Fine Investment. In Simpiwe Piliso’s article in the Business Times of 6 September 2009 he says that collectors show art is ignoring a recession and South African paintings are flying off the walls.

There is a very active secondary market of auction. The number of art auctions for example, in Pretoria Bernardi’s Auctioneers had four now six auctions and Stephan Welz & Co two and now four to six auctions per year. There are also new auction houses like Stauss & Co as well. Other auction houses are 5th Avenue and Westgate Walding in Johannesburg and Ashbey’s in Cape Town and Canons in Durban.

South Africa has a big international exposure as well. Bonham’s in London has two South African only auctions per annum and each time they advertise it as the largest ever SA art auction.

The number of Editorial received in newspapers, magazines and TV are also very high. There were the Pierneef record sales in Bonham’s London and the Brett Kebble auction recently. There are also numerous art fairs, like Exhibition Johannesburg art Fair.

There is also a tendency of contemporary art galleries jumping in to find and/ or sell on behalf of collectors their old masters art work.

Currently we are still behind international trends regarding art prices still being very low. There is a definite price difference between regions. As an example, Jan Volschenk sells for 20% higher at Cape auctions than in Johannesburg. An artist’s works sell for the lowest price in the town he/ she stays.

Some artists fetch up to 20% higher prices in Cape Town than in Pretoria. Hennie Niemand and Conrad Theys paintings sell for instance higher in Pretoria than in Cape Town.

Prices at auction fetch higher prices than at the galleries. Examples is works of Marie Vermeulen Breedt selling at Stephan Welz & Co auction house and Hennie Niemann junior also at Stephan Welz and Co..

Then, what are the evaluation criteria for determining a winning investment artist?

Firstly if one look at the old masters there is a traceable track record. There is a steady increase in their value from day one.

Secondly, for contemporary art and old masters the artist must be a professional artist. Painting for a living. Try to understand how ambitious and how dedicated they are. You can see how sustainable they are.

A living artist must exhibit regularly, solo exhibitions major galleries locally and overseas. The artist must have a foot in the international scene. With result that there is an intrinsic value in their art any where in the world. This can also serve as a rand hedge.

It is very important that the artist must have a secondary market at Auction. How will you be able to resell?

There is also the important question of who else collects the particular artist’s work and which big art dealers support the artist.

The general rule is that the artist should be good, the painting must be pleasant to view and the artist must be able work in oils, water colour and pastels.

Another important criteria is that the artist must bring in a new dimension into the art world e.g. Gregoire, Battiss and Fasciotti, Niemann. Buy innovators not imitators.

The artist should be diverse; he must be able to produce and also sell still life’s, landscapes, figures, interiors and wildlife. In today’s market the artist should also have his own book.

The question is how to start collecting art? I would recommend that one buy what you like or love as long as the artist concurs with most of the criteria given previously.

Buy preferably oils. In South Africa the tendency is that oil paintings are most sought after. Buy the best work of the artist you can afford. It is also very important to talk to experts, gallery owners and auctioneers. Buy from Gallery and Auction Houses with a good reputation. The auction market does not offer bargains anymore.

The work should be pleasant and enjoyable. You will be hanging it on your wall for years to come!

Ross Douglas says that you must listen with your heart. Use your intuition, but buy with your head. Melissa Mboweni a Soweto Born Contemporary art specialist says she uses her heart for collection and her head for investing.

There are also risks when buying paintings. The buyer must be aware about misinformation by so called experts. People who do not know art can be duped into the wrong purchases.

Why is art a fun investment?

There is an art genre for every taste. Conservative, romantic or modern. When buying art you can involve family and friends in the purchase process. It can be a nice relationship building activity.

Art is the ultimate shopping experience. Interior decorating can now be a real investment. One can buy pretty things for the house with investment orientated husband or wife actually agreeing. Your furniture is for the first time actually growing in value. Capital gains in reselling your art is currently not taxable.

You can now actually exhibit your wealth like the wealthy for the past 5000 years.

A painting is like a comfortable arm chair you can sit in it for hours.