How to spot a shrewd art investment opportunity

In the face of rising interest rates and financial uncertainty after Brexit, the British art market has remained in unexpectedly good health. March saw record sales at Sotheby’s to the tune of £48m, including Europe’s third most expensive auctioned artwork, “Bauerngarten” by Gustav Klimt.

But while these big ticket auction lots are still rare beasts, art remains a wise commodity to invest in. One art investment fund manager has noted that investing in contemporary art “is where the most liquidity is,” and indeed, only three of the world’s ten most expensive paintings come from before the 19th century. Yet, actually determining which works and artists are likely to yield the best return on investment can be difficult. What is it about certain paintings which makes them so lucrative in the long run?

The value of deceased artists

Most art dealers will be the first to admit that certain styles or artists come in and out of fashion; however, supply and demand is also a major factor. This is borne out by comparing the value of the priciest work by a modern artist sold at auction by the most expensive living artist and the most expensive dead one. While Gerhard Richter’s “Abstraktes” sold for a little under £30.5m at auction in 2015, that’s a mere 10% of what “Interchange”, a piece by Willem de Kooning, fetched in 1995.

Yet, the fact that an artist has died does not always mean that their work will consistently be valued at auction for a high price. The late German artist Josef Albers, for example, underwent a major renaissance of interest some four decades after his death, with retrospective shows leading to increased prices at auction. Yet, despite the finite resource (the artist passed away in 1976), the value of Albers’ work seems to have already plateaued.

Provocative art – as shocking at auction as it is in a gallery

The concept of provocative art can be a broad one; as tastes, and the accepted view of what is shocking, change over time, it is arguably harder in 2017 to create something that would have caused the same sort of Sensation as it would have two decades ago. A still-controversial piece such as Andres Serrano’s “Piss Christ”—a photograph of a crucifix suspended in the artist’s urine—went for $185,000 at auction in 2014, while Tracey Emin’s oft-vandalised “My Bed” was last sold for £2.2m in the same year.

Then again, as the shock fades, so too can its price; Marcel Duchamp’s “Fountain”, an infamous porcelain urinal which the Tate Gallery describes as “test[ing] beliefs about art and the role of taste in the art world,” sold for nearly $600,000 less in 2002 than it did five years previously. Consequently, the difference between types of work—be it painting, installation or sculpture—seems to have less impact than one would expect.

Ultimately, as with any investment, research is key; the only difference is how invested you are personally with the works you are buying. If you have a longer view of your investment, you should come armed with the facts about the artist and the work itself. If, on the other hand, you simply like a painting on an aesthetic level, external factors should not discourage you from putting in a bid.