Should You Invest In Art?

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Following the sale of a Leonardo da Vinci painting for $450 million, those readers who like to speculate might think that investing in art may be worth trying. This was a painting that sold for only £58 in 1958, perhaps because its authenticity was doubted and it had been “overpainted” in some areas. It’s now been restored but it’s far from perfect even so.

It is now the most expensive painting ever sold. Back in 1987, the most expensive painting ever sold was “Irises” by Van Gogh for $54 million (Wikipedia has a list of the most expensive paintings if you wish to follow how these blockbusters have gone up in value, but it is not a smooth progression). Potential buyers of these rare, or unique, paintings which will fetch stratospheric prices should however best leave this market to professional dealers.

But is investment in lower price paintings sensible? Fine art has steadily increased in value so in the long term you can probably expect to beat inflation. But particular genres can go in and out of fashion which could easily add or subtract 50% of the value. In addition you have high trading costs. Auction costs can add 30%, and the market is hopelessly illiquid. Making a sale even at an auction can be a hit or miss affair. If you buy paintings direct from a dealer and are paying “retail” prices then it may take you years to recover the value when you sell because of dealers’ high mark-ups (retail prices are typically higher than auction prices).

The best quote on this subject was probably this one from Lew Grade: “When a little girl asked me what two and two make, I’m supposed to have answered – it depends whether you’re buying or selling”.

In summary if you wish to buy art to hang on your living room wall, then OK. You may gain some tax advantages as it will be considered a “chattel” if you ever come to dispose of it. But as an investment, art is far from the best choice.

For more information on the valuation of paintings (written when Van Gogh’s Irises was the most expensive painting), see http://www.panvertu.com/valuation.htm

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

One comment
  1. Stephen Burke says:

    My guess would be that the price of top-level works will grow proportionally to the wealth of the richest people – but you probably need tens of millions to even start on that …

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