Ever thought of investing in the $60 billion (Dh220 billion) art market amid volatile stock markets and a low interest rate environment?
The Art Price Global Index has outperformed other leading stock market indices in the past decade.
The Artnet C50 Index, which combines performance data of top 50 post-war and contemporary artists, rose 170 per cent from 2004 to 2014. This compares with 85 per cent gains on the S&P500 index.
Based on auction revenues, the UAE ranked 15th in the world with revenues of more than $3.2 million.
“The idea of art as an asset class has been going for some years now and Middle Eastern art is no exception. The Gulf region is certainly picking up on this trend and has come a long way,” Antonia Carver, Fair Director at Art Dubai.
In a span of seven years, galleries of Art Dubai have grown to 92 from 40 in 2007. This year alone, Art Dubai had around $45 million worth of goods available, and recorded “healthy” sales at the end, Antonia said.
Another official at Opera Gallery agreed with Antonia’s view.
About demand and supply
Unlike the stock market, which is governed by the regulated forces of market demand and supply, the Art market is believed to defy all financial logic. So how can we determine the tentative price of a piece of art without falling victim to the arbitrary whim of its seller?
“There are tools whereby you can graph the performance of an artist using various financial indices and analysis by S&P500, DAX 40 and CAC 40 among others. One must rely on the previous track record when dealing in the secondary market. But like they say in the financial world, past results are no guarantee of future results. Again, in any speculative market, one must be willing to take risks to yield prospective gains,” Sylvain Gaillard, the gallery manager at Opera Gallery in DIFC, said.
“Like anything else, it’s all about supply and demand, but there is an infrastructure that exists around the art market, which includes museum shows, biennials, prizes, critique and media attention, which can highly influence the standing [and price] of an artist in market terms,” Antonia said.
The Art market, like any other, is not impervious to external factors and prevalent global sociopolitical and economic scenarios.
“No market is immune to its environment. Art sits on the top of the Maslow’s hierarchy of need. It isn’t a necessity and hence when the pocket pinches, art purchases will be on top for cut backs. I had a few big sells pending that got cancelled owing to the oil price slump in recent times. Interest rates also effect the sales of art pieces. Only if an economy is doing well will people budget to make investments,” Gaillard said.
Gaillard added that sales in the black and grey market are marginal and only involve selective pieces, so those transactions have little impact on gallery sales.
Institutional presence
In January 2011, Emirates NBD entered into a partnership with the Fine Art Fund Group (FAFG) to launch an advisory service on art investment and art collecting.
“Fund managers, investors and financial advisers, around the world, are realising the importance of investing in art as an asset class. Major banks like HSBC or Citi Bank are [urging] their clients to consider art as a potential cultural investment,” said Archana RD, managing partner of Henosis, an art advisory and service provider.
“Not just banks and investment firms but companies are also realising the gains from art purchases and are indulging in art financing for their clients,” Gaillard said.
Legislative support
There needs to be legislative support and a creative infrastructure to support the growth and sustainability of the art community in the UAE, according to Vilma Jurkute, director at Alserkal Avenue, an arts and culture destination located in the industrial area of Al Quoz.
“There is an increased international interest in what is happening locally here, and it is only over the past few years that the systems have been put in place to provide the support needed to bring the local scene into the international spotlight, garnering interest and acquisitions from main art institutions abroad, such as Peggy Guggenheim, British Museum, the MET, to mention a few,” Jurkute said.
By Mannat Jaspal
