The 'art' of investing in paintings

Chagall's Joie de Vivre: Paysage de Vence avec des Fleurs will be offered for sale in just more than a fortnight by Stephan Welz & Co in Johannesburg, where it is expected to fetch between R2.2m and R2.5m.

Imre Lamprecht, head of the paintings department at the auction house, said: "There have only been a few Chagalls sourced or sold from within South Africa and all these sales have been handled by New York or London auction houses."

Fred Scott, managing director of Stephan Welz & Co, said the seller wanted to remain anonymous. The work has been in the same South African family since 1965, when it was bought from a gallery in Paris about 20 years before Chagall's death.

Scott said that similar works cost between R5,000 and R10,000 in 1965 - representing a considerable return on investment.

"South Africa has a very prestigious community collecting art, especially from the older days, starting with the Randlords. Generally in South Africa [there are people who are] very sophisticated in respect of collecting art. And because art cuts through all cultures, it makes sense that people who have developed an eye for great paintings went overseas, bought top works and came back to South Africa with them."

Pick something pleasing

With works by some artists steadily increasing in value, there has been a lot of attention paid to art as a possible investment or alternative asset class.

But, said Scott, the most aesthetically pleasing art was not necessarily the most valuable - yet.

The key when buying art for investment is to choose something beautiful, because the monetary value of aesthetically pleasing works has the greatest potential to increase in price.

Not all art is a good investment

"However, a lot of good art would never really be a worthwhile financial investment," Scott said.

"The most important thing is if your buy a work of art, you should actually like it. There are quite a lot of people who invest in art and they detest the work they buy. But they know there is value and they speculate," he said.

George Herman, investment strategist at financial planning firm Citadel, warned that someone who entered the art market primarily for investment could be in for a beating - unless they were a professional art dealer who knew exactly what they wanted and had the right contacts for selling it.

"Art is not an investment product. But, just like a lot of other 'passion' assets, artworks can be very successful investments. But we do not suggest that one should view the asset class primarily as an investment vehicle," Herman said.

Scott said the art market was entering a more bullish phase. "The top names in art were not really affected by the contraction in the economy that started in 2007 and 2008. They continued to sell well," Scott said.

"Art in the lower and middle price range had struggled at the height of the financial crisis," Herman said, adding that only the most expensive works of art still enjoy strong support.

"There were some magnificent new prices being paid for works by several artists and we saw artworks reaching multiples of what they were expected to fetch in the top segment of the art market," Herman said.

"But, unfortunately, this was not reflected in the total art market," he added.

Recent records

Two of the most notable records set recently were the R119m paid for Edvard Munch's The Scream last year and, for South Africans, the R31-million fetched for Irma Stern's Arab Priest in 2011.

The Stephan Welz & Co auction on 23 and 24 April will include another work by Stern, Woman Wearing a Mantilla from 1950, which is expected to earn more than the Chagall - between R4m and R6m.

Also on offer will be the Fruit Seller by Vladimir Tretchikoff, valued at between R800,000 and R1.2m.

The South African-based Russian was dubbed the king of kitsch in his lifetime but there has been a sudden revival of interest in his paintings.

Last month, for example, Tretchikoff's Chinese Girl sold for almost R14m in London.

Stephan Welz & Co will auction off more than 1,000 works, valued at R30-million.

Source: Business Times via I-Net Bridge