The art of outperforming the market one piece at a time
A global art price increase of 30 per cent in just a year puts the asset class on top of Knight Frank’s luxury investment index, followed by watches and jewellery.
As a luxury investment, art earns top marks.
In fact, art is now the best-performing “investment of passion” in property consultancy Knight Frank’s ranking of luxury collectable assets, following a 30 per cent rise in global art prices over the past year.
Yet, investment is not what drives most art collectors.
It has more to do with what art consultant David Hulme likens to a “mild addiction”.
“It really is a base instinct, it’s the excitement and also the chase,” the Banziger Hulme Fine Art Consultants managing director explains.
“Building a collection, for many people, is a really pleasurable experience, and that’s really hard to beat.”
At the top levels of the market, the wealthy Australians collecting museum-quality art do not view it as an investment per se, Hulme says.
Like any other purchase, they like to believe they have paid a fair price and could resell the artwork for a higher price, should they choose.
But in Hulme’s experience, collectors maintain they are buying something they like, something special that they can hand down to their children.
“People are building what is effectively their own art museum at home, with high-quality museum artworks.”
Damian Hackett, Sydney executive director of art auction house Deutscher and Hackett, agrees the investment factor is a secondary consideration.
“At every level, even with the very high end into the $1m or $2m range, the investment angle is often secondary to the desire to own this marvellous thing,” Hackett says.
Defying initial fears, the local art market experienced strong growth during the Covid pandemic, driven by demand from a “captive audience” of stay-at-home collectors as online sales in auction houses and galleries took off.
“Over the Covid period we saw a surge in interest and certainly in the results being achieved,” Hackett says.
The $121m in annual art auction sales in 2021 marked the best year since 2017’s $142m, according to Australian Art Sales Digest data.
Turnover reached $145m in 2022, still short of the boom year of 2007’s $175m result.
Deutscher and Hackett itself achieved $53m in turnover, the first time since 2007 that an Australian fine art auction house has surpassed $50m in annual sales.
Hackett notes the appreciation in prices has not been across the board, with some artists and parts of the art market growing strongly with some more moderately.
“There are some areas of the art market that have seen substantial growth, including areas like modern women artists,” he says.
He says most of those artists, such as Clarice Beckett and Cressida Campbell, already featured in major collections, but the market and collectors have turned their focus towards them following major exhibitions.
Nine of the top 10 sales last year were above $1m, the highest being Fred Williams’ Lysterfield Landscape (1968-69) which sold for $2.33m, including buyer’s fees.
Two paintings have surpassed the $2m mark this year: Brett Whiteley’s The Paddock – Early Morning (1979) for $2.147m and Russell Drysdale’s Children Dancing (1950) for $2.025m.
Total fine art sales so far in 2023 sit at $57m.
“Competition is pretty fierce at the moment, it just shows there are more collectors in the market,” Hulme says.
“You don’t have to be wealthy to be an art collector, but it helps, especially when buying some of the best art to ever come on the Australian market.
Building an art collection can take 10 or 20 years, or longer.
“You’re locking that money away for quite some time. It’s not something that people will be able to realistically sell quickly because overexposure of art to the market is not a good thing, and people like art that’s been held in collections for quite a long time.
“The value often in art is not just one picture but it can be the value of an entire collection that somebody’s built up over many years.”
Later this month Bonhams has another auction of works from the Fred and Elinor Wrobel Collection, which the late Sydney curators amassed over almost four decades.
“That will be very well sought after because that’s a collection that’s been built up over a very long time,” Hulme says.
Smith & Singer, and Deutscher and Hackett have major auctions this month, which Hulme notes include major paintings worth well over $1m that are usually rare-to-market items.
With a $2m to $3m estimate, Fred Williams’ Masons Falls (1981) is the most expensive artwork in the Smith & Singer auction.
Actor Cate Blanchett and her playwright and director husband Andrew Upton are selling a piece from their art collection in the Smith & Singer auction. They have owned sculptor Rosalie Gascoigne’s Marmalade (1989-1990), an artwork made from road signs that has a $600,000 to $800,000 price estimate, since 1999.
Hackett says half a dozen works could sell for more than $1m in his firm’s auction, which has a total estimated value of $11m to $15m.
They include John Peter Russell’s Souvenir de Belle-Ile (1897), which the artist gave to his friend Dr William Maloney in 1897 and has since remained in the Melbourne-based Maloney family. It has a $1.5m to $2.5m price estimate and “is stopping traffic”, Hackett says.
Brett Whiteley’s South Coast After The Rain (1984), a Wynne Prize winner that has been part of the collection of Joan and Peter Clemenger since 1985, and Sidney Nolan’s Early Morning Township (1955), part of the Krongold collection, each have $1.5m-$2m estimates.
The 30 per cent rise in global art prices in the year to June puts the asset class in the clear lead in Knight Frank’s luxury investment index, followed by watches and jewellery, both with 10 per cent growth.
The index, which tracks a weighted basket of 10 luxury collectibles, managed a 7 per cent rise – its weakest annual performance since the June quarter in 2021.
Knight Frank Australia head of residential research Michelle Ciesielski describes it as a credible performance compared to a 9.7 per cent rise in the S&P/ASX 200, a 5 per cent rise in gold and a 1.7 per cent gain in prime luxury home prices across Australia.
Ciesielski says the slowdown in the wine and classic car markets tempered the index’s overall performance, given previous double-digit gains in those asset classes fell to 5 per cent.
“Despite the investible car market being up 5 per cent on an annual basis, it has fallen seven per cent so far this year off the back of the mixed performance in classic cars,” she says.
“We may experience a similar trajectory with the performance of art collections over the coming year given the slower auction results in 2023, challenging the asset class topping the luxury index.”
