If bought well, art is a tangible asset that not only provides aesthetic pleasure and beautifies its environment; good art is imbued with historical information, while the socio-political and economic conditions prevalent at the time of its creation are infused in it. For these reasons, art imparts knowledge and education to those who engage with it. It confers status and sophistication. All the more encouraging when, at the same time, your beautiful, interesting and didactic object – that has been part of your life, indeed part of your family, the starting point of countless interesting conversations, and imparted an ongoing educational journey – also accrues appreciable growth in value over the period.
How have savvy collectors achieved this in the past?
The first thing any self-respecting art consultant will tell you is to buy art that you love. That way, you hedge against the prospect of weak performance as, if you love the artwork and have enjoyed living with it, you mitigate the disappointment of a potential lack of performance. However, by arming yourself with the right knowledge and network, you increase your chance of achieving both – having art that you love and an appreciating asset.
To start with, it is important to understand the structure of the art market. Broadly speaking, it is divided into three branches, as follows:
First, is the STUDIO. This is where the artist works and produces their art. It is the less visible and most intimate part of the industry and is, indeed, genesis. It is where the whole enterprise begins, without which, there would be no art industry.
Once the art has been produced and is ready to be presented, it goes to the gallery or art dealer for exhibition and sale. This is known as the PRIMARY MARKET, and is tantamount to the retail platform for art. Within the primary market, there are a host of additional platforms, such as Art Fairs, Biennials and Triennials, amongst others, which are supported by the gallery system. The primary market deals directly with artists in the form of gallery representation and agency, providing the initial point of sale for an artist’s work.
The primary market is a dynamic, vibrant and important part of the market and merits a dedicated and detailed discussion. But, for the purpose of this article, we will focus on the third, and final, branch of the art market. Namely, the SECONDARY MARKET.
This is the point of sale for art that has been in a collection and returns to market after a period. It is the realm of the auctioneers and dealers. It follows that a contemporary art gallery is focused on selling an artist’s new work, such that when older work comes back to market, even a work that the same gallery sold historically, it is sometimes not best placed to re-sell it. A gallery’s primary focus is on presenting and selling an artist’s new work, and producing their next show, so offering older work to their client base can be at odds with presenting their artists’ new offerings to the same client base.
It is in this space that the auction industry exists and, indeed, flourishes. Auctioneers, by definition, consign their stock from collectors, whereas galleries get their stock directly from artists. As a rule, work that comes to auction is generally older and is usually by more established artists who have been around longer and had more time to develop their brand and market following.
While pricing in the primary market is generally kept confidential, pricing at auction is public information, and attendance at live auctions is open. Consequently, the transparency of this market provides an excellent place for collectors to acquaint themselves with the value systems of various artists, as well as for benchmarking what reasonable market-related prices are. At auction, ultimately, it is the market that decides on the value of an artwork by bidding the sale price up to a level that it deems appropriate. There is a transparency and truthfulness inherent in this system that appeals to many collectors.
For existing, new or aspiring collectors, there are some important things to know about the secondary market, as auctions can provide an excellent point of entry into the marketplace.
Auction salerooms are open to the public and are generally inviting and hospitable environments. All auctioneers welcome the public not only to their viewings, or exhibition previews, but to their auctions too. Certainly, new bidders are always welcome.
Many leading auction houses have been extremely innovative in developing digital platforms making it easy and intuitive to bid and buy online.
All good auction houses produce catalogues containing detailed descriptions of their offerings for each sale campaign. These are available digitally on their websites and, depending on the house and the particular auction – live or online-only – in hardcopy. There is a wealth of information in these catalogues and prospective bidders should familiarise themselves with the information relating to the works in which they’re interested to ensure they know and understand what they will be buying. This includes all salient information relating to the artwork, details about provenance (the history of ownership), exhibition history, literary references, condition and, most importantly, price.
Auction house specialists are also available to explain and elaborate on any of the cataloguing information, and to impart more information about the artist, the artwork, or the market in general. As a rule, the better the auction house, the better the specialists in its employ.
Whenever considering an acquisition from an auction house, contact the specialists, find one you prefer, and build a relationship with them as you grow your collection and knowledge. This can prove immensely valuable as a good specialist can assist you in honing your collection, improving your holdings and, most importantly, in making good decisions about what to buy, irrespective of where you are buying from.
It pays to know what you are buying. So, if you don’t not have the time or the inclination to do the homework and get to know the artist and artwork you intend to buy, rely on the knowledge and advice of a leading auction house specialist to provide that insight.
While galleries sell an artwork for a fixed price, an auction house has an estimate. This is a value range, from x–y, which is based on a combination of considerations, including precedent – i.e., the prices that comparable works by the same artist have previously achieved at auction – as well as quality, condition, rarity, historical importance, the importance of the artist from a historical and market-related point of view, and external market factors such as economic sentiment, all of which are used as a benchmark to gauge and predict a reasonable future selling value of an upcoming offering.
Finally, do not be intimated. It is a pervasive misconception that auctions are the restricted domain of the rich and elite. It is also a misconception that if you scratch your nose or raise your arm, or greet a friend in an auction room, the auctioneer will take that as a bid, and you may end up buying an expensive artwork you neither know or want. Good auctioneers are savvy professionals who know their market and, generally, their buyers. If there is any confusion, the auctioneer will clear it up by asking if that is indeed a bid. And, if you feel there is any misunderstanding, communicating with the auctioneer is welcomed.
Enjoy the journey as you concurrently grow knowledge and value. Building collections of value is rewarding and fun. ML/DM