Art investments better than equities over 12 years

By John Daly-Peoples

Friday 12th September 2003

New research shows top-ranking New Zealand artists' works out-performed the NZSE40 over the past 12 years by about 45% and 10-year bonds by more than 150%.

The research also shows massive growth in art sales at auction, which have grown from $278,000 in 1990 to $9.7 million last year.

Over that period there has been a major shift away from traditional to contemporary works.

In 1990 traditional art works accounted for 94% ($261,000) of the total market ($278,000) but that had dropped to 49% ($4.77 million) by 2002. Over the same period contemporary art increased from 6% ($18,000) to 51% ($4.96 million) of the total market of $9.7 million.

Fuelled by dramatic increases in the prices for Colin McCahon, Ralph Hotere, Gordon Walters and other leading artists over the past three or four years, the art market out-performed other forms of investment.

The research figures come from former Black Cap Adam Parore, who is turning his interest in art to work as he sets up New Zealand's first art financing firm, Index Group.

Mr Parore, formerly of JB Were, where he worked in the capital markets with a particular interest in the debt market, managing institutional bonds and fixed-interest portfolios, has created his own set of indexed art values using 1990 as a base.

Mr Parore's research confirmed what was known anecdotally but he has quantified and clarified the general sales figures, the performance of various areas of the art market as well as the performance of individual artists.

Had he gone back another decade or so and included the early prices for McCahons and Hoteres, even greater increases would have registered. Twenty-five years ago most Hotere and McCahon works sold for about $500. They are now selling for up to $500,000.

The index also highlights some of the more interesting changes occurring in the market. Drawings and prints, once considered to be of minor value, have escalated in price as paintings by big-name artists move out of the buying range of most investors.

Mr Parore is a director of Index Group, which is establishing a service to provide finance for the purchase of art works costing over $10,000 at leading galleries and auction houses. The finance is provided by a number of private investors. Buyers are required to have a 25% deposit and the art work has to be insured, with the Index Group noted as having an interest. Security for the loan will be the art work itself.

Mr Parore said the art market had changed dramatically in the past few years. "If you think of buying a work of art by one of our leading artists as roughly equivalent to buying a small building [and given the market's recent performance this is now certainly the case], then the idea of providing finance for that purchase is a logical progression in the development of the market."

"In selecting those major artists we are choosing about 80% of the total turnover of the market, which fits nicely with traditional mathematical theory on the construction of indices and subjectively it appears to capture what can be loosely termed "investment artists."

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