Investing in art can be both aesthetically pleasing and financially rewarding.
By James Cockington
By any standards it has been a remarkable year for Australian art. But the real drama has taken place in the auction room, not in the gallery. At the end of August, Brett Whiteley's Hummingbird and Frangipani fetched $2.04 million at a Sotheby's auction, a record price for the late artist's work and a result that was deemed worthy of mainstream television news coverage.
The four-metre-long painting was first sold in 1988 when it was snapped up for $100,000. In other words, this single work has appreciated more than 20-fold in less than 20 years.
The Whiteley painting is claimed as the third-best result for an Australian painting. In April this year The Bar by Melbourne artist John Brack achieved the absolute record of $3.12 million when it sold to a private collector, also through Sotheby's. The day before, Christie's (since pulled out of the Australian scene) sold Upwey Landscape by Fred Williams for $1.9 million, more than three times the previous record for a Williams painting.
The latest Sotheby's auction fetched a total of $7.7 million. And it isn't only the established stars of the art world that are making headlines. The other highlight of the Sotheby's auction was Craig Ruddy's 2004 Archibald Prize-winning portrait of actor David Gulpilil. This painting fetched $312,000, about double the estimate. Naturally, it was a record for Ruddy's work.
All this is happening at a time when there is unprecedented interest in investing in art, especially that of local artists. But given that Whiteley's work has really only hit stratospheric heights in the last 10 years, a lot of beginner investors are now wondering, who will be the next Brett Whiteley?
One man who should know is Richard Martin. In 2002, after 15 years as a private collector, Martin decided to leave his career in the reinsurance industry to devote himself full-time to the art world. Last year he set up his space on the site of the historic Holdsworth Gallery in Woollahra and has already established himself as a dealer and exhibitor of Australian painting and sculpture, with an emphasis on rising new talent.
He specialises in art investment, advising those who want get into this area for financial as well as artistic motives. With his background in finance he is able to compare the various means of investing assets.
"Over the past 20 years," he says, "if you look at the property index, the share index and the art index, there's a close correlation between the three. They are slightly ajar from each other and they don't always peak and trough at the same time. Art is best seen as an alternate asset class.
"It should be considered the same as any share portfolio, with a mix of established and emerging artists. There are certainly blue-chip performers in the art world, with a proven track record. There are also emerging artists and the risk is obviously higher. But whatever you buy, you should do it totally because you love the image of the work."
One difference to consider is that art is more costly to sell than shares or property. A painting may have a market value of $10,000 but, after the auctioneer's commission, you may get back only $7000 to $8000.
Finding the right time to sell is another skill. Artists and their work have a peak of popularity, in the same way that recording artists do. Take the Melbourne artist Howard Arkley, whose 1988 painting Oyo Flats was listed by Sotheby's at a 1994 Contemporary Art auction with an estimate of $6000 to $10,000. That was a real bargain. Prices for Arkley soared after his death in 1999 and the same work would have been valued at about $150,000 shortly afterwards. That was the time to sell. Today prices for Arkley have dropped slightly.
In many ways the art world behaves in a similar way to the ASX. External market forces, even industry gossip, drive prices up and down. Craig Ruddy is a perfect case study. Virtually unknown before he won the 2004 Archibald, he became a household name when another artist, Tony Johansen, launched a NSW Supreme Court challenge, claiming Ruddy's portrait was predominantly created with charcoal, was not a painting and therefore ineligible for the prize.
The two-year legal challenge was quashed in June. As much as Ruddy must have hated the experience, it was the best publicity he, and the painting, could have hoped for and inevitably pushed up the value of this work at auction.
"I think the controversy etched it in the collective memory and it became a very recognisable piece," says Geoff Cassidy, the head of Australian paintings at Sotheby's. "There's no such thing as bad publicity," he says. "I suppose it made it iconic, or more iconic than it would have been otherwise."
The publicity made Ruddy an art celebrity and Martin, who represents the artist, says he grew to accept this role with grace and humour. "He had no experience in public speaking before but he's taken to it, he's now very media savvy."
Ruddy is now a hot property. He has already sold two or three more paintings in the weeks following the court decision. The artist is a celebrity, just as actors and pop stars are, but Martin warns investors against buying an artist's work just because he or she is the flavour of the month.
A practice known as ramping could be at work in which the value
of an artist's work is artificially inflated, often by the gallery who represents them. Those who buy at this peak may find that they later sell during a trough.
The best time to buy a painting is when the artist is just becoming noticed. This requires a bit of research into the notoriously fickle art world.
The experts agree that the boom is set to continue. Mark Fraser, the managing director of Sotheby's Australia, predicts that there will be many more surprises in the Australian market over the next few years.
"It's not fully priced - one could argue the whole market is undervalued," he said after the August sales.
"Once new benchmarks are set, new, exciting and important work emerges on the market. We are very optimistic that there'll be more where that came from."
Not everyone approves of the art investment boom. Euan MacLeod, who won this year's Blake Prize for Religious Art, lamented that art is now appreciated more for its financial worth than for its ability to move the spirit.
"The idea of a painting or an artwork moving you is long gone," he said on receiving his $15,000 prize. "Yet a lot of people would respond to it for what it's worth and that's sad."
HOW TO BUY ART
* Buy the best of the artists work in the style that is the most popular. This applies to emerging artists as well as established performers.
* Pick an artist who is appreciating in value. Do some research. Is the artist represented in the collections of state or national galleries?
* If buying at auction, you'll have to do some legwork. Make sure the provenance is right. Does the work have a traceable history?
* There are financial incentives to buying art but talk to your accountant first. Is it possible to borrow to invest, buy through a private company or as a percentage of your super? This is a tricky area and you'll most likely need professional advice.
* The Golden Rule. Only buy work that you personally love.
WILL THIS $5000 PORTRAIT BE WORTH $5 MILLION IN 2050?
Even Richard Martin wouldn't be bold enough to make this claim.
But the unknown artist, Mia Oatley, holding her first exhibition at the Richard Martin gallery from October 14 to 25, has as much chance as any other rising star. Maybe more. She is highly promotable and has a good story to tell.
She compiled her first exhibition, Paris Metro, while living in Paris according to the bohemian tradition, working for a year in a studio without electricity.
Her work is bold, edgy and confrontational. Unlike some, she's happy to be the public face of her personal art. Martin, for one, expects her work to sell well here.
Artists get noticed for a number of reasons, including sheer luck. Adelaide artist Michael Jeffrey is the subject of a feature article in the current issue of Belle magazine. He was spotted when the editor just happened to turn up to his exhibition, loved his work and bought a few.
Some artists can't help but be noticed for reasons well beyond their control. Take the Sydney artist Martine Emdur. She's Larry's sister.