The art of outperforming the market

Megan Neil, The Australian, 12 August 2023

As a luxury investment, art earns top marks.

In fact, art is now the best-performing “investment of passion” in property consultancy Knight Frank’s ranking of luxury collectable assets, following a 30 per cent rise in global art prices over the past year.

Yet, investment is not what drives most art collectors.

It has more to do with what art consultant David Hulme likens to a “mild addiction”.

“It really is a base instinct, it’s the excitement and also the chase,” the Banziger Hulme Fine Art Consultants managing director explains.

“Building a collection, for many people, is a really pleasurable experience, and that’s really hard to beat.”

At the top levels of the market, the wealthy Australians collecting museum-quality art do not view it as an investment per se, Hulme says.

Like any other purchase, they like to believe they have paid a fair price and could resell the artwork for a higher price, should they choose.

But in Hulme’s experience, collectors maintain they are buying something they like, something special that they can hand down to their children.

“People are building what is effectively their own art museum at home, with high-quality museum artworks.”

Damian Hackett, Sydney executive director of art auction house Deutscher and Hackett, agrees the investment factor is a secondary consideration.

“At every level, even with the very high end into the $1m or $2m range, the investment angle is often secondary to the desire to own this marvellous thing,” Hackett says.

Defying initial fears, the local art market experienced strong growth during the Covid pandemic, driven by demand from a “captive audience” of stay-at-home collectors as online sales in auction houses and galleries took off.

“Over the Covid period we saw a surge in interest and certainly in the results being achieved,” Hackett says.

The $121m in annual art auction sales in 2021 marked the best year since 2017’s $142m, according to Australian Art Sales Digest data.

Turnover reached $145m in 2022, still short of the boom year of 2007’s $175m result.

Deutscher and Hackett itself achieved $53m in turnover, the first time since 2007 that an Australian fine art auction house has surpassed $50m in annual sales.

Hackett notes the appreciation in prices has not been across the board, with some artists and parts of the art market growing strongly with some more moderately.

“There are some areas of the art market that have seen substantial growth, including areas like modern women artists,” he says.

He says most of those artists, such as Clarice Beckett and Cressida Campbell, already featured in major collections, but the market and collectors have turned their focus towards them following major exhibitions.

Nine of the top 10 sales last year were above $1m, the highest being Fred Williams’ Lysterfield Landscape (1968-69) which sold for $2.33m, including buyer’s fees.

Two paintings have surpassed the $2m mark this year: Brett Whiteley’s The Paddock – Early Morning (1979) for $2.147m and Russell Drysdale’s Children Dancing (1950) for $2.025m.

Total fine art sales so far in 2023 sit at $57m.

“Competition is pretty fierce at the moment, it just shows there are more collectors in the market,” Hulme says.

“You don’t have to be wealthy to be an art collector, but it helps, especially when buying some of the best art to ever come on the Australian market.

Building an art collection can take 10 or 20 years, or longer.

“You’re locking that money away for quite some time. It’s not something that people will be able to realistically sell quickly because overexposure of art to the market is not a good thing, and people like art that’s been held in collections for quite a long time.

“The value often in art is not just one picture but it can be the value of an entire collection that somebody’s built up over many years.”