Art as an investment: Paths to an art collection: opportunities and pitfalls for wealthy novices
Düsseldorf Art is a good investment, one hears and reads everywhere. In fact, amazing returns consistently outperform other forms of investment by far. As for example Pablo Picasso’s painting “Les femmes d’Alger. Version O ”a few years ago for a record price of 179.4 million dollars gross at the auction house Christie’s was auctioned, the painting had more than quintupled its auction price of $ 32 million twenty years earlier.
For comparison: the German Dax share index rose by just under 250 percent from October 2001 to October 2021. And such stupendous value developments can not only be seen in the high price range. So could the auction house from Ham 2019 knock in 28,500 euros for the joint work of Jonathan Meese and Daniel Richter “Dani + Ich”. Estimate: 800 euros. The seller was the fashion entrepreneur and collector Thomas Rusche.
But if you want to invest in art yourself, you have to deal with a scene that sometimes seems hermetically sealed to beginners. Gallery owners and dealers insistently adhere to the discretion that is customary in the industry. Prices are transparent in auctions, but only partially in retail. Buyer and seller names are only communicated if it is for marketing purposes. Market participants communicate using codes. They usually exclude newbies.
In the following, the Handelsblatt outlines the paths that a wealthy newcomer can take if she wants to make valuable investments in art in the upper price sector. And warns of possible pitfalls that threaten the novice.
Top jobs of the day
Find the best jobs now and
be notified by email.
Basically, there are two safe ways to select and acquire art. One leads through first-class galleries, the other through renowned auction houses.
We ask for Dominique levy, one of the leading gallery owners worldwide active in the high-end sector. The Swiss woman with galleries in New York, London, Paris and Hong Kong, like almost everyone else in the industry, is allergic to the word “invest”: “If you only invest, you run into financial losses.” Buying a single work and overloading it with hopes for returns leads easy to disappoint, she knows. “It’s about collecting and not about investing.” Art becomes an excellent investment for anyone building a collection.
The 54-year-old advises “passion, love, knowledge and time”. If you don’t have the time, you can hire a team, your gallery Lévy Gorvy, which will be called LGDR in the future, or another. The key is to “build up a high-quality collection and rely on different horses.” Her experience: In view of the countless sub-markets, there are three works of art that are increasing in value and ten that are not successful, says Lévy. Hence their advice: “Put eggs in different baskets”.
Another recommendation is: away from unknown artists who are only valued regionally, towards artists whose work is so diverse that it is traded internationally and also at auctions. The so-called blue chips of the art market include Pablo Picasso and Alexej Jawlensky, Jeff Koons, Joan Mitchell, Willem de Kooning, Lucio Fontana and many more established people.
The advantage for those willing to buy: There is a tested and analyzed market in this segment. Selling prices can be easily understood on the basis of auction results. The price development should be steady, but “not steep and fast,” warns Dominique Lévy.
Those who buy countercyclically pay less
The downside of the relatively safe strategy of only buying the best: “There is little choice. And art lovers have to get in with more money, ”admits Lévy.
However, those who buy countercyclically pay less. Recently, Italian artists like Piero Manzoni, Alberto Burri and Lucio Fontana have fallen in price by around 20 percent compared to 2019, says Lévy. There are therefore good opportunities to get on board this fall.
If you want to buy African-American art now, you have to dig deep into your pockets and often raise sums of more than a million dollars. Because this collecting area is experiencing a hype in demand in the wake of Black Lives Matter.
Let’s stick with the money and look at the costs.
Even a list price is often not a final price in a gallery. Many beginners are not aware of this. Sometimes the gallery owner includes VAT, sometimes not. The tax due depends on the destination country of the delivery. In addition, there is resale right. Up to 70 years after the death of an artist, up to 4 percent of the net sales value is added to the sales price as a copyright tax. In addition, the buyer incurs handling costs for transport, packaging and insurance.
What if the novice who is willing to invest wants to emancipate himself from his advisory gallery owner? What if he wants to get to know and acquire art beyond their regular artists? Then he will go to international auction houses.
We turn to Ketterer, currently Germany’s top-selling auction house, and talk to Sebastian Neußer and Nicola Countess Keglevich. The former gallery owner and the former Sotheby’s director recently hired in Munich. Both are now part of Ketterer’s six-strong management team.
Keglevich emphasizes: “The advantage of a larger auction house is that the range is much wider than in a gallery.” Anyone who has no market experience can clarify many questions with the experts. Not only in terms of aesthetics and intrinsic value, but also practical things: “Where should the work of art hang? In your own four walls? Or should it be stored professionally pending a potential resale? Should it be insured? “
At Ketterer, as in most German auction houses, the customer chooses where he wants to purchase art: in an auction or through a private sale sponsored by the auction house or even in one of the exhibitions held in between. In any form of sale, it pays to ask precisely about all price components.
Not only that the bidder in the auction, with her very special flair of love of art, lust and passion, lets himself be carried away to exceed his personal price limit. A buyer’s premium, sales tax and, if applicable, resale rights are added to the hammer price. The customer can also have this calculated. “A reputable auction house will deal openly with these costs from the start. As soon as you have the feeling that the real final price is somehow concealed, we advise against buying it, ”says Sebastian Neußer.
Every auction lives from good contacts to consignors who are willing to sell. The main reason for the sale of high-priced objects or entire collections is – as it is called in the Anglo-Saxon area – the “Three D: Death, Debt and Divorce”. The auctioneer estimates what is brought in through debt, death or divorce using market data and insider knowledge.
Ketterer deliberately sets the estimated prices low in order to encourage as many interested parties as possible to bid. But what a work of art is really worth is only determined by the auction through demand. As mentioned at the beginning, this can ensure that taxes and cost prices are multiplied. If there is a lack of competitors, the novice can also get his dream property relatively cheaply. For auctioneers, the fair, open competition for a work of art is the best measuring instrument for the current market price.
If you are interested in higher quality art, Ketterer asks for a bank report. It is “exhibited with a lot of room for improvement,” says Keglevich. After all, the customer should be able to bid freely if he feels competition.
Those who want to invest in art can train their eyes by visiting museums and trade fairs, galleries, exhibitions and auctions. Over time, a personal taste will develop. If that takes too long, an art expert looks for advice: a freelance art consultant, a gallery owner or someone you trust in an auction house.
Until Sunday evening, Art Cologne, the oldest fair for contemporary and modern art, still offers an excellent overview of established artists. German and international auction houses auction high-quality works of art secured by art history until December. If you haven’t found your favorite work of art, you should talk to the experts immediately.
More: Nice investment: the art of investing properly in art