Invest in Art -Reason #3: Capital Appreciation

Art investment may benefits investors interested in long-term growth at a higher rate than inflation and outperform the stock market (especially in current economic conditions).

This upward trend is rationalized by globalization, rising incomes and increased access to information (equaling better art market transparency), helping to raise demand of art. Supply to this increasing demand has not been fully met due to a falling supply of top quality art that cannot be produced at will.

An added plus for Tax evaders: -Seeking capital gains rather than income? Art can be written-off as an expense.

Invest in Art -Reason #2 (or not): Speculation

"Like the share market, many factors can affect the price of an investment: a retrospective exhibition, biography, major art prize and death (which caps the stock available) inflate an artist's prices, while auction or gallery disappointments deflate them. So too does a general perception that prices have gone too far too fast or the work has become formulaic."
-David Tribe, Sun Herald

Art returns have been proven to be more in boom times and lower in crashes according to experts at Yale. Fortunately for speculative art investors, delay of up to 2 years can be possible based on the late 80's market crash, when Sotheby's and Christies achieved record prices. The market only crashed at the beginning of the 90's and paintings by art stars Sandro Chia, Julian Schnabel and Enzo Cucchi became unsellable. And that's another story for another day.

Conditions
Bullish stock markets, low interest rates, growing investors wealth and confidence are conditions in which speculation thrives. Recently art speculation has been boosted by increasing availability of comprehensive information from the media and internet followed by transparency which is positively helping to define art as the new kid on the asset block.

Proceed with Caution...
Note that the art market like most fixed assets are not liquid compared to equities due to lower turnover rates and subjective pricing. Art also has no income streams, are unregulated, difficult to compare and are susceptible to fads. In addition, necessary agent commissions may be high and tend to offset short term gains. A certain amount of holding power is required.

Although there are some hit and run success stories, speculative art investment should be avoided by novices, because most people who who make money, have not made it by purchasing art as short term investments. The key elements to a strong art investment portfolio is not unlike any other; -knowledge, quality and diversification, the bonus will be getting to enjoy its beauty.

The Starving Artist Debate

"There is an old-fashioned bohemian notion that truly pure artists must struggle for their self-sufficient vision without having to depend on commercial enterprises like awards, exhibitions and commissions. But these events have their purpose.

They provide a structure through which the art public - in particular collectors - can partake in the recognition and support of deserving talent. And if they're lucky, collectors may have the pleasure of acquiring works by such talent still emerging, before it becomes beyond the reach of all but the most elite wealthy. "

Barry Pearce
Head Curator, Australian Art
Art Gallery of New South Wales

Who is anybody to say what's good or bad art right?
-Wrong! I guess, according to this guy.

Invest in Art -Reason #1: Diversify Investments

In the current economic downturn, investors are turning to alternative investments such as art, because equities and property are seen to be over-valued. Quality art survives economic downturns because the value never goes down to zero (unless damaged), compared to most other investments and prices bounce-back quicker after crashes than most equities. Investing in art reduces exposure risk as part of an investment portfolio especially in volatile markets. Although careful evaluation of an artist's potential and the credentials of the gallery or dealer are musts. At the minimum, research, cross-check and verify rates from multiple sources.

Art market investments have in fact outperformed the S&P500 and more conservative investments in the long-term according to Finance professors Jiangping Mei and Michael Moses' (from the Stern School of Business at NYU) extensive research of paintings sold at auction over a 50 year period (vs. US stock market prices). The Mei/Moses Fine Art Index, comprised of 8,000 pieces of art auctioned by Sotheby’s and Christie’s since 1950.

Beware though that art is less liquid (average 10 years holding) compared to equities so it should be viewed as a long term investment except in rare cases when an artist is retiring or is soon to be deceased. Therefore it should be viewed as a long term investment.

"Unlike companies, the trouble with blue-chip art is you can't buy bits of it. But you can still do well buying lesser named artists at suburban and regional auctions, fairs, op-shops and garage sales. And there's also up-and-coming art at small primary galleries."
-David Tribe, Sun Herald

Singapore: Prime Locations at Lower Rent for Private Museum & Art Facilities

A total of three State properties in prime sites will be made available at lower rent to art collectors who are interested to open private museums through a Request-for-Interest exercise by The National Heritage Board (NHB) and Singapore Land Authority (SLA).

The properties at 222 Queen Street, 27A and 27B Loewen Road will complement existing museum and art facilities to help make Singapore the arts and tourism hub of the region. The three properties have fixed rents below commercial rates ranging between S$5,159(406.2sqm) - S$42,516(5,248.9sqm) renewable for up to 9 years. Each building is allowed to use up to 20 percent of the space for retail or dining.

Contact for details: Joanna Han at +65 6332 4419 or joanna_han@nhb.gov.sg
The submission form is available at: http://www.nhb.gov.sg/aim

Application closes: November 15, 2008.

Catching Up

YEE I-LANN
Kinabalu Series: Huminodun
Picture Source -Christie's

When it comes to Southeast Asian art at international auctions, Malaysian works seem to lag behind those of Indonesia, Thailand and the Philippines. But recent auction figures at three major sales in Hong Kong -- i.e. Sotheby’s in April 2008 as well as Christie’s in Nov 2007 and May 2008 -- suggest that contemporary Malaysian art is catching up.

Examples of Malaysian artists whose works sold relatively well, included:

· Ahmad Zakii Anwar (HK$427,400 / RM179,891; Nov 2007)

· Latiff Mohidin (HK$391,500 / RM164,781; Nov 2007)

· Jailani Abu Hassan (HK$391,500 / RM164,781; Nov 2007)

· Yee I-Lann (HK$295,500 / RM124,170; May 2008)

· Chang Fee Ming (HK$137,500 / RM57,850; Nov 2007)

· Ivan Lam (HK$125,000 / RM52,524; May 2008)

But such Malaysian works are “cheap” compared to contemporary works by other regional artists, as shown below. However, works by top Malaysian artists like Latiff Mohidin and Datuk Ibrahim Hussein sell at a much higher price domestically than at international auctions, as yet.

Source -Southeast Asian Art At Auctions by Johnni Wong, The Star Online

IVAN LAM
3 Buses
Picture Source -artlease

Why Malaysian Art?

Seated Figure 6
Ahmad Zakii Anwar

Contemporary Southeast Asian artists are becoming an increasingly sought-after group in today’s market and once again the region’s key painters such as I Nyoman Masriadi and Ahmad Zakii Anwar and others are represented by strong works. -artdaily.com

Investing in a good art piece may be as good if not better than buying gold especially in these uncertain economic times. Southeast Asian art has just started taking off globally and good Malaysian art is at this moment, the lowest priced in the region. But not for long... So if you're a collector, an investor or are thinking about becoming one of these things, get in on the action already! But please do a little research first...

Close to 80% of 22 lots of Asian and Southeast Asian artworks were sold at a recent Amsterdam auction, most of them by up-and-coming artists from this region. 40% went to European collectors, proving a rising interest in contemporary new and emerging Asian and Southeast Asian artists. Highest bids were for Ahmad Zakii Anwar's Seated Figure 6 and Chang Fee Ming’s “September 27th” at €13,750 each at the auction jointly organised by Asian Based Larasati Auctioneers & Amsterdam Auctioneers Glerum.

Globally, the primary art market (artists-to-gallery) is presently healthier than the secondary (resale) market because primary prices haven't reached the degree of auctions and are also less prone to speculation. Having said that Malaysia's secondary art market is still relatively young and has yet to hit its real peak at which point many genuine collectors get priced out. For the same reasons, we can expect to find more experimental, political, profound and honest work rather than mere novel trinkets for billionaires who don't know what else to do with their money.