It's a mug's game
You don't tend to read that much about art investment – buying art to make money when you sell it – in Spear's because it's something I'm suspicious of, for several reasons. First, the idea of art as a commodity (though widely accepted) is antithetical to its purpose or even existence. I don't want to encourage or endorse it.
Second, the financial value of a work of art is entirely determined by sentiment and can swing wildly up or down. There is no guarantee that even very similar pictures will fetch similar prices, depending on whether a bidder is in a good mood or had an unhappy Dover sole for lunch.
Third, the market is illiquid: you can't flog a painting like you can a share in Shell (which anyway bears some relationship to financial realities). The fashion for that artist has to be in. Their collectors have to be out. The wider economy needs to be healthy, otherwise you end up throwing canvas onto a fire sale.
Finally, the market is more opaque, more corrupt indeed, than you can imagine. Paintings at galleries are sold to 'good' homes, not just to those who can afford them. Auction rooms are rife with immoral tactics, such as chandelier bidding (about which we have a piece in the next issue), where 'bids' are taken from thin air. Dealers bid on their artists to support their prices, or collectors dump artists to crash their price. It's about as far from a free market as can be.
That has not stopped art funds, of course: the promoter takes in money from investors and buys artworks which they are sure will go up in value.
Now, it's not impossible to make a reasonably educated guess about what will happen to certain artists: it's been clear for years that late-period Picassos are on the rise because they're all that's left from the supply of a blue-chip artist. Never mind that they're not a patch on his earlier work. The same is true for Warhol and others.
But beyond that, it's a mug's game: you can assume that because Asian economies are getting wealthier, Asian collectors will pay more for Asian artists – but that's a risky proposition.
The reason I've thought about this is because of an interesting conversation on Twitter the other day between some keen observers of the art market:
Calling would-be art investors: What is perceived as low correlation may actually be… a lack of price transparency. http://t.co/DNfOZXQgIC
— Melanie Gerlis (@mgerlis) August 13, 2013
@mgerlis Exactly. Abysmal data quality in the art market is the reason why correlation guesstimates are quite irrelevant in the first place.
— Markus Stolz (@markusstolz) August 13, 2013
— Greg B Davies (@GregBDavies) August 13, 2013
Unlike a half-built wardrobe from Ikea (don't ask), there are no refunds in the art world.