The art of buying art

by Robyn Daly
September 1, 2011 Comments (0)

Investing in art isn’t simply a matter of buying a pretty picture. Before you throw money away on a mere trinket, consider stern warnings and sound advice from Stefan Hundt, curator of the Sanlam Art Collection. By Robyn Daly.

Stefan Hundt lives in a world of bright colours and vivid expression tempered by dark thoughts, political and social satire and artistic idiosyncracies. He’s the curator of the Sanlam Art Collection, one of the great art collections in South Africa. Art is his passion, he’s made a study of the lives of artists from Michelangelo to Adriaan Boshoff and he knows many of them – whether long dead or still living – as though they were his personal friends. In spite of this romantic portrait, in the serious world of art collecting, Stefan is no loose canon. He has been responsible for building up the Sanlam Art Collection for the past 30 years and has watched its value double, triple, quadruple … today’s estimate – it’s worth a staggering R128 million. Stefan’s mantra: “Investment and passion should moderate each other.”

Here be dragons

Art is only worth what people will pay for it on the day, says Stefan. It’s true of any investment, whether you’re trading in equities or property, diamonds, art or fine wine. And, as a further word of warning, he adds: “About 90 per cent of all original artworks will probably de-value as fast as a new car as soon as it leaves the shop.”

Still more dragons lie in wait for the potential art investor: “The art world has lots of unscrupulous dealers largely because there’s no governing or regulatory body. A good dealer would probably be keen to develop a relationship with a client and be more inclined to give good advice even if it doesn’t translate into an immediate sale.” If you skip the dealer minefield and buy on auction rather, you’re left to your own devices as there’s the presumption that you’ve pre-checked the work and confirmed its authenticity.

On the bright side 

So with all these sinkholes ready to swallow your hard-earned cash, why would anyone other than the likes of the Ruperts and Oppenheimers buy art? Firstly, it’s an opportunity to diversify your investments. The assumption is, that by the time you’re starting to trawl auctions and galleries, you already have a fairly widely spread portfolio. Secondly there’s a nice tax incentive: art is a private item, consequently there’s no tax on the capital gain of art. So if you were the West Coast tannie who bought a Maggie Laubser umpteen years ago for a song and sold it recently for R2,2 million, you wouldn’t be taxed on that massive leap in value. “I think she got the surprise of her life. She knew it was worth something, but just didn’t realise it was that much,” Stefan chips in.

Thirdly, and probably the most compelling reason for anyone who loves art, unlike many investments, it’s tangible and has an aesthetic value. If you buy art purely as an investment, you could well be disappointed, but if you buy a work because you love it as well as for its investment potential, you’re guaranteed gratification – at least on one level.

Make an informed choice

Choosing your pièce de résistance is not at all easy if you don’t have millions to spend on the Blue Chip investment artists such as Stern, Pierneef or Loubser. “If you have R30 million in your pocket, you can justify R8 million on an Irma Stern,” Stefan points out. “But there’s also investment potential and quite a lot to choose from in the R5 000 to R25 000 range as we have many good contemporary emerging artists. If you prefer to go for a more acknowledged artist, you could pick up a drawing or original print within this price bracket.”

There’s a big difference between buying a pretty picture for your living room and buying a piece of art as an investment. “The stuff that many people put on their walls, that hack artists churn out en masse, that’s not art, and not an investment. It’s purely decorative.” The reality of good contemporary art might not be something you actually want on your wall, Stefan adds delicately: “The best artists are part of a bigger world that they comment on. And our world is full of violence, murder, rape … rather than rose farming.”

Having said this, there is still a market for collectibles, which is how Trechikov made his fortune. “There’s lots of interior decorating stuff: pleasant enough paintings that conform to everyone’s idea of what’s beautiful. There’s a whole market for that.” A serious art investor will know to make the distinction between collectibles and investments.

Many of Stefan’s words of caution may seem like a bucket of cold water dousing any passion you may have for art. But remember his mantra – investment and passion should moderate each other. “You can buy with your heart, but you must pay with your brain.” And, just as you wouldn’t throw money into equities without knowing something about the markets, knowledge in the art world is an essential part of succeeding. “There’s a difference between spending and investing. If you don’t know what you’re doing, you are basically gambling.”

Stefan’s ART investment tips

1. Ask yourself: Can I actually afford it?

2. See an art investment as another means of diversifying your portfolio. You should already have fairly diverse investments.

3. Work out how much you can spend, then stick to it. Don’t go to an auction with R5 000 to spend and end up blowing double that.

4. Do your own research – go to the local library and read up on artists who interest you.

5. Good dealers will give good advice regardless of the stock in their own galleries. In other words, they won’t try to palm off any old thing to you to make a quick buck.

6. Don’t buy art from somebody who doesn’t have a fixed address, such as the smous in the Kombi. It’s not going to be an investment no matter what story they tell you.

7. Don’t try to compare art to equities, they are completely different types of assets.

8. Just because you pay a lot of money for something, doesn’t mean it is worth a lot or that it will hold its value or grow in value.

9. Buy the artwork, not the artist. An artist’s name is only an indication of potential. Great artists have also produced dud works.

What to consider

Keep in mind these pointers to help sort the wheat from the chaff:

• Artists with an established reputation are more likely to be better investments. Look at their exhibition record, how often and where they exhibited. A reputable gallery is a gold star, but having a stall at the local school fair doesn’t count as an exhibition. On the flip side, many young talents have one show and you never see them again, so it’s important to consider the frequency of an artist’s exhibitions too.

• Many people enjoy speculating in art – buying a youngster’s work and hoping they make it. While there may be merit in this, it’s not been the strategy in building the Sanlam Art Collection: “We prefer to wait a decade or so to see if an artist makes it, then to buy special works and pay a premium,” says Stefan.

• Artists six feet under are not going to produce any more work. The limited supply may increase the value of their art.

• You’re unlikely to make a great investment find on a back-road art route. Don’t be fooled by artists disappearing into the country to find inspiration. On the whole, Stefan reckons, after a few years most become repetitive and lose their edge.

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