Picture This

Art can be exciting, glamorous and a good investment, but these three characteristics are not always aligned in the same work:

It takes time for an artwork to establish its credentials - a place in history or an increasing value in the auction market (these are two different things - when they align, the masterpiece is worth millions); remember fashion and focus change just as artists' careers may wax and wane, an auction market may give short term returns while works that contribute and form part of our visual history slowly gain momentum.

In starting a collection (a collection implies a systematic approach) the first question you should ask is 'Why’? Is the primary aim of the exercise for enjoyment or profit?

The second question you must answer is 'How much do you want to spend?' Remember that the best collections are put together over time so how long do you intend to keep the collection?

The third question is how many works do you want and where are you going to hang them? Home, work or possibly in storage (if bought through a superannuation scheme). Remember if you divide the number of works you want into your budget it will give you your unit price - this will designate the area in which you will collect - paintings, works on paper, photography or decorative arts.

Having than realised and accepted that good art is never cheap; we come to the two essential parts of the process.

1. Do not buy anything for the first year, just look.

You need to develop your eye and your appreciation and this takes time: the term 'a good eye' is just about knowledge and experience, i.e. Y was another example of X and this is better because?

2. Know your subject.

Why are certain artists considered good? Certain artists are known for certain characteristics i.e. subject matter or the way or style in which they paint. Get to know why other people think an artist is good. It is often said that 'a good ear' is the first step towards a good eye.

BECOMING EXPERT

You become expert in your chosen area by reading up on the artist and looking at the support mechanism behind them (friends, galleries, patrons). Through visiting galleries and museums, by going to auctions, recording and watching the results of artists you like and by asking questions of professionals in the field.

An artist's CV or biographical notes are a key signal of the artist's stature in the investment community. Remember: an artist showing with a major gallery has greater chance of success.

Some defining elements in a CV are: the number of years the artist has been active (as an indication of the presence of strong commitment and inspiration), the number of exhibitions both solo and group (museums shows give bonus points and help establish a place in art history (the long term market), also note the presence of good reviews and articles and who wrote them.

Reputation is based on consensus: no one person or critic makes a reputation.

CHOOSE A SIDE

The 'great divide' among art investors is often characterised by the tension between those who follow 'gold frame' investing and those who put their money into 'white cube' collecting.

Gold frame investing is solid investment in established artists while cube investing means putting money into exciting new art and a direct involvement in the creation of the future cultural history of Australia.

Remember: contemporary 'white cube' art is best suited to long term buying, while gold frames come with credibility already established and a bigger price tag. Moreover, the work of an established artist will invariably be easier to sell.
A guiding principle of art investment is that good art is never cheap and a minor work (it doesn't matter how cheap) always remains a minor work.

FIRST AND SECONDARY MARKETS

Inside the art market you should also be aware of the difference between the 'first' and the 'secondary' art markets: and get to understand how they work.

The first market is the commercial gallery market:

In this market, works of art come directly from the artist to the gallery.

It is the role of the commercial gallery to develop a market for that particular artist and art. This takes time - thus new art tends to be less expensive but with time, the reputation of the artist and the dollar value of the work may increase.

It is in every gallery's interest to communicate the virtues of their artists to their clients (get on their mailing list and visit and talk to the gallery directors).

The secondary market is the auction market.

GOING... GOING... GONE!

The two principle auction houses in Australia are Sotheby's and Deutscher Menzies, the Christies group recently closed it Australian offices. Outside of the major names, there will also be occasional buying opportunities for experienced collectors in smaller houses such as Bonham's, Shapiro and Leonard Joel.

If you want to get a very good idea of the art market get on their mailing list and visit their auction, talk to their advisers and ask why certain works are valued at particular prices.

Auctions results are often used to establish values of works and to build markets for future works by the same artist. However, you must always remember- the value of a work is only what somebody is prepared to pay for it.

The art market functions on precedents and conventions, often these 'rules' are unspoken and implied, but they can be learnt over time.

There are a lot of well-informed and knowledgeable people who populate the art world and generally speaking, they know what they are doing.

Try to understand why certain works achieve specific values, understand those reasons before you begin to purchase art. There are good reasons why people are prepared to pay top prices.

When thinking about a purchase, it always pays to go back to the basic question; why am I buying this work of art? Is it for investment or passion - for the short or long term? Where will it be displayed and when and why will I sell it?

You can purchase and hold on to Art as a part of your DIY super fund. However the rules regulating this are very stringent and do not allow you to hang your favourite artists on your walls. Keep an eye out for the next feature in our series on art where we will take you through this process step-by-step.