There is no [such a thing as an] art market: demystifying the concept of the “art market”
Santiago Montoya, The New Black, 2015. Source: https://santiagomontoya.com/
The term “art market” feels like an oxymoron or at the very least an error in semantics. Despite popular belief and common use of the term, there is no such thing as an “art market”. The underlying commonality of the commodities traded in that market and the reason they are grouped in one asset class is no other than for their binding characteristic of being considered as ...pieces of art. But the similarity stops there.
The art market is the name given to an aggregation of several unique submarkets that move independently from one another. These submarkets have their own characteristics and specificities and consequently perform in different ways. They can be segmented by period (antiquities, old masters, post-war, contemporary, etc.), movements (abstract expressionism, minimalism, futurism, constructivism, etc.), mediums (paintings, drawings, photographs, sculptures, textiles, etc.), and so forth. As pointed out by Clare McAndrew in her book High Art and High Finance, “each underlying segment of the market has its own artists, experts, academics, dedicated collectors, specialist dealers, sometimes auction houses”. Even an artist can have more than one market, depending on her or his period of activity and the styles of artworks she or he created.
These art market segments have different moving price trajectories, risks and return characteristics. Understanding this is fundamental when it comes to investing in art.
Let’s illustrate this with an example. Let’s suppose you want to invest in art, and have a budget of £5000 to £8000. Assuming you will purchase the artworks at an auction house, you will need to account for the buyer’s premium on the hammer price (25%), the artist’s resale price and the shipping costs, if needed. So your maximum bid will be around £6,500.
Now let’s assume that you always wanted to possess a Picasso and wonder if it represents a good investment opportunity. Picasso was a very prolific artist. He created works using different mediums (paintings, drawings, ceramics, prints, sculptures and collages, etc.) and went through different periods (realist, cubist, blue, rose, etc). He is one of the highest grossing artists at auction today. Picasso’s market is very well documented and has a generous turnover.
With a budget of under £8000 and with a quick search, you set your eyes on a print and a ceramic:
Work # 1: Sans titre (Autoportrait), by Pablo Picasso (1881-1973)
Source: Christie’s.
Artwork Description: Signed and dated 'Picasso Le 22.12.71.' (upper left) collage and felt-tip pen on paper 4 ¼ x 5 7/8 in. Executed on 22 December 1971
Estimated price: 5,000 - 7,000 EUR (approx. 4,350 - 6,085 GDP).
This unique collage is coming up for auction at Christie’s, and is estimated to fetch between €5000 and €7000 euros (approx. £4,350 - £6,085). This is an interesting piece, as Picasso was one of the first artists to use the technique of collage in the beginning of the 20th century. He returned to it here, in 1971, one year before he stopped making prints. He also gave himself hair, a beard and a mustache (needless to say that in real-life, his scalp was leaning more towards the smooth side). You can learn more about Picasso’s work on paper here and here.
Work #2: Pichet Espagnol (A. R. 244), by Pablo Picasso (1881-1973)
Source: Sotheby’s.
Artwork description: Terre de faïence pitcher, 1954, numbered 13/300, incised 'Edition Picasso' and 'Madoura', partially glazed and painted, with the Edition Picasso and Madoura stamps, height: 209mm 9in.
Estimated price: 4,000 - 6,000 GBP
Picasso designed hundreds of ceramics and produced an estimated 3,500 editions between 1947 and 1971. The market of Picasso ceramics itselfs is divided into different sub-categories ranging from vases, plates, pitchers, tiles and dishes, on which you can learn more on here and here.
The artworks fit your criteria, but you remain unsure of their respective potential return. One way to help in your decision is to look at the historical performance of the artist and his submarkets. Using Artprice’s decision support tools, we get the following:
Picasso Prints - Price index:
Source: ArtPrice.
This graph shows Picasso’s print market historical performance against the artist’s general market and against the S&P 500 index. While the artist outperformed the S&P 500, his prints market has been fairly stable since 2015.
Picasso Prints - Chronological Progression: Auction Records
Source: ArtPrice.
The chronological progression shows the different auction records fetched by Picasso’s prints. There is clearly an increase in demand starting 2009. We also note a large difference between the average price and the record price (ex. 2019), which suggests a lot of disparity in the market.
Let’s look at the ceramics’ market:
Picasso Ceramics - Price Index:
Source: ArtPrice.
Picasso’s ceramic price index chart indicates a progression between 2011 and 2017 and a short stabilisation period between 2018 and 2020. The ceramic market outperformed both the artist’s general market and the S&P 500 index starting 2011.
Picasso Ceramics - Chronological Progression: Auction Records
Source: ArtPrice.
The chronological progression shows the different auction records fetched by Picasso’s ceramics since 2000. There is an increase in demand starting 2007 and a progression of records reached at auction. In the case of ceramics, we also note a large difference between the average price and the record price (ex. 2018), which suggests a lot of disparity in the market.
You now have data and information on both Picasso’s prints and ceramics markets, which could help you make a decision. But before you do so, let’s add another artist in the mix. What if you got a Banksy instead?
Work #3: Trolleys (2007), Banksy
Source: Sotheby’s.
Description: Screenprint in colours, 2007, numbered 329/500, with the publisher's blindstamp, Pictures on Walls, London, on Arches wove paper, unframed sheet: 572 by 766mm 22½ by 30⅛in.
Estimated price: 6,000 - 8,000 GBP
Banksy - Price Index against Picasso and the S&P 500
Source: ArtPrice.
At first glance, Banksy’s market appears much more appealing as it has and continues to significantly outperform Picasso’s market and the S&P 500 index.
Source: ArtPrice.
Source: ArtPrice.
Additional data suggests that Banksy’s market increased by 7.2% in 2019, while Picasso’s dropped by 10.1%. On the other hand, Picasso ranks number 1, has a bigger turnover and numbers of lots sold. This is understandable since he has been active for a longer period and has more artworks on the market than Banksy. Based on the above data, what will be your decision?
Spoiler alert!
Picasso’s Pichet Espagnol ceramic fetched £20,000 at auction (from an estimate of 4,000 - 6,000 GBP), while Banksy’s Trolleys sold for £15,000 (from an estimate of 6,000 - 8,000 GBP). Of course, these numbers are just indicative and in order to compare the real performance and return, we would need information regarding the holding period. As for Picasso’s collage, it will be up for auction in June, and you can make your predictions and follow its journey here.
What these results tell us, aside from the fact that we would have lost the bid, is that there are additional criteria to consider and to factor in when it comes to determining the value and the potential price an artwork will fetch on the secondary market.
Provenance, authenticity, condition, rarity, medium, size, quality, the trends of the moment, where it is offered and how...All these elements play a significant role in determining the value of an artwork and can cause a considerable price disparity between two similar pieces of art from the same artist.
General art market trends can be used for guidance. Still, when it comes to making specific investment decisions, (a lot of) research remains the key to (potential) success.
Unless you are buying for love. In that case, a coup de coeur is always a win and the return on investment n’a pas de prix.
Ahlem Baccouche
Head of Art Business & Markets, MADE IN BED