Do you buy art because you love it and think it is priceless or is there a price you pay for investing in it? Two of our columnists, Jose Santiago and Ali Asgar Mir, battle it out
Investment behaviour is spread across cash, bonds, equities, properties, commodities and collectables. Investment in art comes under the collectable category.
Last November saw thousands of the savviest local, regional and international art collectors heading down to Manarat Al Saadiyat on Saadiyat Island for Abu Dhabi Art. There were many contemporary and modern art featured in 45 galleries. It is good to know that the art market in the region has picked up since the 2008 financial meltdown, which saw closure of some prominent regional galleries. Last year, Art Dubai reached the highest level since 2010 in terms of size, representation and the auction sector. Christie’s Modern & Contemporary Arab, Iranian, and Turkish Art auction amassed an astonishing USD 12.5M to prove the growth. Looking into art development in UAE, we have The Guggenheim Abu Dhabi which is planned for completion in 2017, and in 2015 we’ve got The Louvre Abu Dhabi and Alserkal Avenue, an arts and culture hub in Dubai’s Al Quoz area.
Art investment has always been related to wealth, meaning only wealthy people invest money into art, most of the time as collectors and not dealers. Art is very much linked to our two most powerful senses: vision and audition. Art, hence, is seen as a social status and treasure to pass down to future generations. Looking from the investment perspective, there are only six original asset classes, no matter how many your financial adviser or banker tells you are there, some correlated, some not. These asset classes or categories are: cash, bonds, equities, properties, commodities and collectables. Art is in the collectable category.
Although art has little correlation (meaning its price variation is not directly or indirectly affected by the price of other assets) with other asset classes (called traditional), is movable (unlike real estate) and hedge against inflation (hopefully its value increases above the rate of inflation, not always) art can suffer from huge illiquidity as well as very short demand in certain sectors. It is obvious that other assets may suffer from the same problems (liquidity and market)
It is very common when you ask someone why do you like that painting or sculpture or photography or music, the person describes what they like with emotional descriptions of what they like in that particular piece of art. So, art is an emotional investment because most art investors simultaneously view themselves as collectors, never acquiring a work that does not also carry emotional value. But also, because you have very little chance to pick a piece of art, go down to the market and sell it. Art sales are most done in a very controllable environment. Adding to that you have no market (significant) to distress sales and even if it happens you have to reach people who feel they understand and have the money and time in their hands.
It is very difficult to sell art should you require the money quickly and not many pieces can be as secured as collaterals to loans, should you need it. Financial gain could happen, but it is always long term (five – ten years) and it is not guaranteed. If you want to start investing in art, spare the money you may never need (ideally $200K – $500K), learn about the art market, give yourself a threshold of five years and start with what type you like. As a rule of thumb we always advise to play with up to 5% to 10% of your wealth into art.
It is said that beauty lies in the eyes of the beholder. I believe that is true about art as well. For me, art is beauty. And beautiful things are priceless, so art is priceless.
I collect contemporary Indian art. I also collect antiques – cameras, typewriters, furniture, miniature paintings, lithographs, memorabilia etc. Right from Raza, Hussain, Padamsee, Jatin Das, Tayyeb Mehta, I collect the art of the masters – because each of them has a story to tell that supersedes time and space and those to me are priceless.
I have a rare Kangra art piece that depicts the Krishna Leela – using paint made out of precious and semi-precious stones. Isn’t that a treasure? Now that is the emotional part of it. But if you look at the contemporary art scene today and compare the prices of the works of certain artists five years ago to now, you will see the change – and that is when you know that art appreciates.
Works of contemporary artists namely MF Hussain, Raza, etc. have increased prices multifold in the last 20 -25 years. If you buy art like you buy stock, then maybe it doesn’t appreciate so randomly but for the world of connoisseurs and collectors, procuring rare pieces is a quest and they invest in art big time.
Haven’t you heard of Sheikha Al Mayassa bint Hamad Al Thani, chairperson of the Qatar Museums Authority, who in 2013 was named as the new biggest player in the international art scene, spending $1 billion annually on masterpieces? The latest news is the sale of a painting of two Tahitian girls by the French artist Gauguin for $300 million, making it the most expensive work of art ever sold. Nafea Faa Ipoipo, or ‘When Will You Marry?’ was painted in 1892 and had been owned by a Swiss collector. Qatar paid the previous highest price for a painting, a work by Paul Cezanne, which sold for $259 million.
During 2009 when the recession hit the world, a lot of contemporary works of art were available at low prices. Since 2011, the prices have grown from there. Yes, not all art appreciates in the same manner – apart from names of the masters, subjects are important too. Solanki’s line drawings or T. Vaikuntam’s works, an abstract by Laxman Shreshtha or pencil & water color by Laxma Goud. For me, art has to appeal to my eye, investment is by the way. I’m glad that my daughter Alisha Mir picked up my interest in art since her school days. Now she is pursuing her Masters in Fine Arts at one of the best institutes in the world, Central Saint Martins –University of the Arts-London. Who knows one day she might become a recognized artist? However one thing can be said about the art scene generally – many people buy art not because they appreciate it, it has a great deal of snob value. If that is the case, there is no limit to investment in art.