art price indices

17 December 2010 § Leave a comment

I thought I would bring to your attention a very useful service provided by the Financial Times (FT) on their online arts pages ‘Arts Extra’. Over and above the fact that this section is well worth watching for some well-written and regularly updated news on the whole of the arts, they feature an Art Price Index (provided by Arts Market Research) which is available as a free service.

Anyone wanting to keep up to speed in the art market could do worse than take an occasional look at the varied indices shown: Old Masters 100’s, America Art 100, Photography 100, and Modern 100. The ‘100’ by the way refers to the fact that the top 100 artists in each field are used to calculate the index. The photographic Index is shown below as an example.

Talking of indices there are a few others of which perhaps the Mei Moses is best known. Created by Jianping Mei and Michael Moses it uses art price ‘pairs’ from works that have sold more than once in auction. It is widely quoted as it was probably the first such index of its kind.

An example of an overall Mei Moses analysis of the market is shown below and seems to confirm what we are often told – that art is a good alternative investment and can often outperform conventional investmnts like equities and gold. A general concensus is that over the last 20-30 years art has more than kept pace with other investments with a compound return of some 7-8% p.a. 

However, by using only auction ‘pairs’ Mei Moses of course omits huge swathes of the art market: work sold only once at acution plus sales by artists, galleries, dealers and at art fairs for example. Old Masters, Modern and long-established artist values are probably the best served by their system.

The FT’s indices are of course similarly flawed although not limited by pairing auction sales. It does not take a rocket scientist to realise that all these indices, along with similar price analyses available from other subscription services like artprice, artnet and artfacts, should be used with a great deal of caution. Clearly one cannot buy a work from a gallery and estimate its value a few years by looking at a graph (as one can do more reliably with say, equities or even precisely with say, gold).

The indices neither take account of the costs of buying and selling which, especially for lower value lots are considerable – as much as 30% when various charges and taxes are added in. If you buy at a gallery of course they too add a sizeable margin and you lack the consolation available at auction – the fact that someone was willing to pay a few pounds less than you, meaning that, theoretically, you have a known resale ‘value’. On the other hand if you do purchase from a reputable gallery (not any old high street gallery!!) then they should be amenable to re-selling work at a modest commission. It is in their interest to not only maintain the prices for their artists but at the same time to keep their clients happy.

Now, as far as the painting over your mantlepiece goes is it even part of the index? If your chosen work has made the first (tough) hurdle of remaining a saleable commodity (it is said that only 20% of top gallery artists ever make it to auction) then you need to hope that they are well-enough regarded to be swept along with the same sentiment as for example the ‘top 100’ or a work of enough quality that it has been auctioned twice – an auction ‘pair’ .

You may have been lucky enough to have spotted the next ‘Warhol’ but in the end the following oft-repeated adage is well worth remembering: ‘always buy what you like’. If your work does not increase in value then you can always say that you have had the pleasure of its company on your wall! Unless you happen to enjoy hanging your share certificates on the wall alongside your gold bars then art, or other investments of passion like classic cars, antiques and jewellery, are by far the best way to create maximum pleasure from a financial investment.

Meanwhile buy with care, take your time, enjoy the process and lastly and most importantly do NOT spend large amounts on art without some impartial advice (ie: not from a gallery) – contact an art consultant or expert.

Postscript: As a consultant myself I must reveal I am biased in this respect, but I can guarantee that not only will you escape some serious mistakes, but you may well save on the art that you do buy!

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