Buy modern art and you’re taking a risk — unless it’s an established name like Damien Hirst

    An object lesson in investing in luxuries

    1 December 2018

    On Saturday afternoons, Bernie Ecclestone and I can often be found nudging in front of each other looking for bargains. Although the low guide prices for antiques at London auction houses might be a disappointment to some owners, they are a big draw for bargain-hunters like me and Bernie.

    Some parts of the market have been hit harder than others. Antique furniture — ‘brown’ pieces in particular — has nosedived over the past ten years. Adrian Amos, proprietor of Lassco, an architectural salvage dealer, puts it down to ‘millennial ignorance’ of antiques and a lack of interest in collecting, alongside the popularity of pared-down interiors.

    One happy result of this ‘millennial ignorance’ is I’ve managed to furnish my flat with beautiful pieces for around £2,000. While the velvet armchairs and mahogany tables might make it look like the pied-à-terre of Aunt Agatha, it cost much less than going to Ikea. But it’s also a reminder that it isn’t just shares and bonds that can crash in value: objects can be just as volatile. For investing in any artefacts, you should ask yourself: what are wealthy individuals in emerging markets spending their money on?

    If furniture is out, what’s in? Handily, Knight Frank, the property consultancy, has put together a ‘luxury investment index’ for those looking to make a healthy return from antiques and unique assets. This year’s winner was art, which overtook wine and classic cars to take the top spot.

    Over the past decade, the resale value of investment-grade wine has grown an impressive 147 per cent, based on sample bottles from across the market. Classic car sale values meanwhile grew 289 per cent — the biggest improvement in any luxury asset category over the past ten years.

    Art, looking at average performance at auction, has appreciated in value by 50 per cent over the decade, with a 25 per cent rise in the past year alone. Of course, ‘art’ covers an impossibly wide spectrum, including both traditional and contemporary pieces.

    Interestingly, it’s the classics — with the exception of the true greats — which are lagging behind their modern-day rivals. Some of the most charming Old Masters are these days selling for a fraction of the price of contemporary pieces. Though whether the latter will hold their value is anyone’s guess.

    Snooping around Frieze art fair in Regent’s Park in October, it was hard not to suspect an Emperor’s New Clothes bubble in contemporary art. Unless it’s the really big names, Damien Hirst and the like, buyers are taking a big risk — according to Adrian Amos, most contemporary pieces lose value immediately after sale.

    One section of the market that’s done well in recent years is works by female artists, old as well as modern. Take the Italian Baroque artist Artemisia Gentileschi: her ‘Lucretia’ reached more than double its estimate of €700,000 in October, and her newly discovered ‘Self-Portrait as Saint Catherine of Alexandria’ sold for £3.6 million this summer.

    Skipping ahead a few centuries, Jenny Saville’s ‘Propped’, a 1992 self-portrait with a feminist text carved into it, went for £8.3 million in October — a record price for a living female artist. Although feminists might find it ironic that this achievement was overshadowed by Banksy’s self-destructing ‘Girl with Balloon’ selling on the same day.

    If you’re willing to take a chance with contemporary art as an investment, expect a high minimum spend. According to a joint study by Harvard and Northeastern University, an artist’s success almost invariably depends on early endorsement by the right set of galleries. Which invites caution for anyone hoping to pick up a winner at an unknown gallery.

    An advantage of art investment is that it can be accepted by HMRC in lieu of inheritance tax. As an asset that can be disposed of quickly to raise funds, it’s useful to cash-poor estates, where the only other valuable asset might be the primary residence.

    Across all markets, one of the most solid predictors of healthy returns is the behaviour of big spenders. According to the experts, it is the purchases of high-net-worths (and ultra-high-net-worths) that are driving the real surges in value.

    Take whisky, for example, which has outperformed many traditional asset classes. Martin Green of Bonhams says that collecting whisky has become a ‘truly international phenomenon’, driven by unprecedented interest from Asia (especially China).

    With all of these luxury investments, initial outlay is considerable, so it is not for the faint-hearted or impatient. Changing tastes and fashions mean it’s notoriously hard to predict when they will peak. A common tip is to invest in something you enjoy — not least as it will provide you with consolation if your investment flops.

    After all, if the contemporary art bubble bursts, you’ll be the one with a painfully expensive light installation glaring from your wall. You had better love it — or it’ll drive you mad.