In the few short years since the global economic slowdown of 2009 and 2010—a period that registered a price drop of 48% across all art categories—the global turnover achieved in the auction room has almost doubled. Meanwhile, sales of postwar and contemporary artworks have ballooned from $260 million in 1995 to $7.8 billion in 2014.
When a category that spans a mere seven decades accounts for just under half of that year’s total fine art auction market, bargains in the field are few and far between. All in all, the global index of contemporary art prices has risen by over 70% over the last decade.
The post war contemporary art business is flourishing, enjoying continuous growth at the very top end of the market. In 2013, a record number of contemporary works sold at more than $1 million, and a giant Balloon Dog by Jeff Koons became the most expensive piece of work by a living artist of all time, selling for $58.4 million.
Attracted by the diversification of investment and exceptional yield rates, demand for postwar and contemporary art has increased substantially, meaning that five times more works are sold today than a decade ago, for figures that bear no comparison.
Why the explosion in post-war and contemporary art?
The art-advisor phenomenon is a direct result of the change in the way buyers view their art buying. Today, the ‘collecting’ audience hire an investment advisor or art consultancy to manage their portfolio, just like investing in capital or stocks.
Driven by powerful trendsetting gallery networks, leading curators, purchasing consultants, and publicity platforms, exposure is forming an integral part of the art business.
In the Middle East, where the contemporary art market is evolving at a rapid rate as personal wealth and global investment knowledge matures, art is emerging as a cultural marker too. According to the BBC, that’s coming more from the female populace and their savvy business relationships with private investors, which is also helping to empower them and allow them to express themselves creatively.
The fact that investors are warming up to contemporary art is fantastic news—not only for the global contemporary scene, but for the young emerging artist too. This is an age when they can market themselves globally like never before, thanks to the exponential growth of social media.
Why invest in postwar and contemporary art?
Modern art, for one, tends to be less dramatically affected by macroeconomic swings and geopolitical uncertainty, especially at the high and ultra-high end of the spectrum. It’s for this reason that wealth managers hold a view that art is well used as a store of value, rather than as a yield-oriented investment. Deloitte highlights that this return more than doubles that of gold and other commodities.
In fact, the art market rebounded quickly after the last recession, faster than traditional investments. The last sixteen years have shown that a well-diversified portfolio of contemporary artworks generate an annual yield of 5.6%, higher than the art market as a whole.
Investors looking to expand their portfolio with the latest in contemporary art don’t have to be seasoned collectors or millionaires, either. Rather, they can take inspiration from the Vogels, who amassed a priceless art collection on a working class salary. The key to a lucrative investment is all about knowing what to buy, and when.
How to buy postwar and contemporary art
Make a primary purchase
The first sale of a work is always ‘primary’, whether it is direct from artist, from the artist’s agent, or even a commissioned work. The price paid on the primary market sets a benchmark determined by the quality of the work, the artist’s reputation and availability of his or her work at the time of sale, and its nature—painting or print, for example, and even the size and the materials used.
All subsequent sales of a work are on the secondary market. That’s galleries, private sales and auction sales. Prices achieved on the secondary market are a measure of consumer demand and price expectation, and are indicative of the direction and momentum of interest in the artist and their work. It’s at this stage that primary sales register organic returns on investment. So consider investing in emerging and mid career artists.
Those we now consider masters like Van Gogh never gained recognition in their lifetime, suffering through poverty for the sake of their art. If you can make a direct, primary purchase before an artist gains widespread recognition, the proportional return on your investment is more likely to be huge.
Buy into a narrative
The auction performance of the world’s Top 500 artists in recent years paints an interesting picture of the contemporary art market. Although it is dominated by the major American signatures, the ranking reflects the diversity of the market’s offer and indicates the latest preferences of collectors for artists that contribute to a wider global narrative. Korean, Filipino and Cuban artists were particularly present last year, and the worth of all these artists is tied to the perceived political, cultural and historical significance of their work.
Artists like multimedia specialist Owais Husain and painter Sanya Kantarovsky are gaining momentum quickly. Mumbai-born Husain explores modern belonging in what he calls the “flux of identity in the nuclear and larger domains of human nature.” Now a native of Dubai, his work explores the consequences of shifting populations and environments. Kantarovsky depicts a biting socio-political commentary and satire.
Buy with your eyes, not your ears
Works of art are not commodities. Connoisseurship counts: condition, quality, message, visual impact, physical viability and how the work contributes to the narrative of art history all matter in sustaining value over time, whether or not the artist is the hottest of the moment.