– Art Remains a Good Long-Term Investment

Art collecting has traditionally been the domain of wealthy individuals in search of rewards beyond the purely financial. Now many new players are entering the market in search of decent returns.

While the sharemarket and property prices have both taken a hit this year, one area of investment where highs are still being reached is art sales. The sales at Art Basel, in June, the world´s single most important fair, broke new records as collectors from regions such as Russia and the Middle East entered the art market. Here in the Czech Republic, investors are spending more on art than ever before. Art seems to have become a proof of a social rise, particularly for the nouveau riche.

For example, Russian billionaire Roman Abramovich bought Francis Bacon’s “Triptych 1976” and Lucian Freud’s “Benefits Supervisor Sleeping” this May for a total of USD120 million. The sales made Bacon’s painting the most expensive postwar work of art ever sold
at auction, and Freud’s the most expensive work by a living artist. Last year about this time, a painting by Czech artist Josef Čapek was sold at a local auction for a record CZK 9.3 million. The painting, “The Foot Bath,” was not alone; “Cirkus Simonette,” by Czech surrealist artist Jindřich Štyrský, went for CZK 8.6 million.

The art of investing in art

Many of those turning to Czech art are entrepreneurs and businessmen, not art aficionados, according to the official website of the Czech Republic. They often start out looking for a solid investment and gradually become passionate art lovers, buying only the
best examples they can find.

“After a marked recession, which took place at the beginning of this decade, the Czech Republic is now seeing the emergence of a new group of entrepreneurs who are beginning to buy art and demanding paintings of only the highest quality,” Vladimír Neubert, owner of Galerie Art, Prague, was quoted on the website. “Collectors today are not buying to make a profit in the future, but because they really enjoy art. They create collections of Czech art. Of course, they want it to have value, but it is more about prestige.”

But equally important is knowledge about the market: Which artists will be in demand in
the long term and which type of art will release the next trend?Just as on a stock exchange, art investors can have short term and long-term investment strategies. But the acquisition of contemporary art is more risky. As with stocks, the greatest opportunity for growth in art values comes when investors suddenly focus their attention on a hot new sector or name.

Often the artist seems to be more important as a brand than his product. The result: Newcomers suddenly sell their works for astronomical sums. However, quite a lot of artists that are traded as “hot” are “out” a short time later. The buyer carries the risk – quite similar to the principle of a stock exchange, only the underlying factors are even less predictable. Taste just cannot be prophesied. Some pieces become part of private collections and are never seen on the market again. It can take five years or more before the price of a particular work of art begins to appreciate. And a maze of paperwork awaits
investors who want to take artwork valued at CZK 50,000 or more out of the country.

The loft generation

Marc Spiegler, manager of Art Basel, notes another trend: artists are adapting to the taste of a new type of collector which Spiegler calls “the loft generation.” “There are more and more younger collectors who live in lofts,” he says.

“Pieces of art with a dimension of 3 to 4 square meters are no longer an exception.” They may be making room in the future for sculpture, too.

Getting started in art

Every May, Prague hosts Art Prague (www.artprague.cz), an annual exhibition of modern art. Interest in this event continues to grow as more visitors come to the event and more
galleries are represented. And buyers’ interest in the young generation of Czech artists seems to be heating up. The fair, held this year for the 7th time, offers the latest developments in the visual arts with thousands of originals in one location. Professional collectors are obviously much better acquainted with such an event, but for the amateur or even for someone who is getting in touch with the art market for the first time, a visit to Art Prague is definitely worthwhile.

–Mary Matz contributed to this article.