Nov 28, 2022
The art market is big, unpredictable, and endlessly fascinating, not just to potential buyers and sellers but to art lovers the world over. The art market is also big business. One estimate put the sales number for 2021, the third-best year for sales on record, at $65.1 billion. Here to paint us a picture of the intersection between art and commerce is Kathryn Tully, who’s been covering the art market for 15 years.
Listen in to learn about the
fascinating art market and how you can be involved in
it.
Key Takeaways:
[:21] Patricia O’Connell introduces Kathryn Tully, freelance journalist, and welcomes her to This is Capitalism.
[1:14] Kathryn has been a financial writer since she graduated from college. Fifteen years ago, Kathryn started writing about the art market, around the time when she started freelancing.
[1:30] Kathryn holds that too much of the press coverage is about big auctions of multi-million-dollar artworks sold in New York. It suggests prices always go up, which is not the case. The art market is a pretty difficult investment market.
[2:02] Kathryn felt that writing about the art market enabled her to put non-nonsense articles out there that aren’t being written otherwise.
[2:20] The multi-million dollar works that sell for high prices comprise a tiny sliver of the art market. There is incredible art being produced all the time that you would love to have in your home. Most art produced is not going to be sold for a profit. The art you buy devalues by 90% when you take it out the door, so you will not resell it at a profit.
[3:03] You read about Basquiats, Warhols, and art that’s sold at a profit between high-net-worth individuals at auction, for transparency. You would have to spend $500 thousand or more to get a good shot at reselling art for a profit. Most art doesn’t have a release value. For the art that does, the art market is not brilliant, considering the risks.
[4:40] Commercially-valuable art can take months or longer to sell through a dealer or an auction house. You’re not guaranteed to find a buyer. It’s not just an illiquid market, it’s a tiny market. In 2021, the third-best year for the art market, the overall sales were $65.1 billion. Compared to the daily trading volume of stocks, that’s tiny.
[5:18] There are holding costs in owning art. You have to pay for insurance and storage and there are buying and selling fees. Art is a good investment if you buy something you love and you find that it’s gone up in value. Kathryn’s friend bought a signed Banksy screenprint in 2003 for £150. In 2020, a dealer estimated its worth at £150K.
[6:55] Kathryn’s friend didn’t buy the print because she thought it was going to go up in value. She fought it as a gift for her husband. Pricing in the art market is very subjective. No two artworks are the same, except for prints and multiples. Artworks are unique objects. Artworks from the same artist can sell for different prices. Pricing is subjective.
[7:54] Artists go in and out of favor. The Banksy print market goes up and down. There’s a very thin part of the market, with a very small amount of transactions, that generates the most value. Are you going to find a buyer? There may only be ten people in the world that are interested in buying your expensive Warhol or Basquiat at a certain price.
[8:49] The print market is an area where you can acquire artwork by those artists at a cheaper price point. There is a bit more data about prints and multiples because of their higher volume, and because they aren’t unique; they are one of an edition. You can see what they are selling for. You can get a sense of what the resale price may be.
[9:34] The art market is opaque, besides art indices that show the records of public art sales at auction. Auctions are the most successful part of the art market. The majority of global art sales don’t take place at auction houses but through galleries and dealers but through galleries or dealers who don’t reveal their transaction information at all.
[10:16] Artworks sold through galleries or dealers are not revealed publicly. The art market can be a vehicle for pricing fraud because they are no public records of gallery and dealer transactions.
[11:44] Contemporary art is in vogue at the moment. The old masters and the impressionists don’t necessarily stay in favor because the generation of art buyers that did buy them is dying out.
[12:52] Art value is driven by subjective factors, not just supply and demand. You can’t see the demand a lot of the time because so many of the transactions are not disclosed. It’s different from a stock or a commodity that you can sell on any day at the price listed. In the art market, you can’t see the price or the fundamentals driving the price.
[13:40] During the pandemic, a lot of the art fairs started going online with virtual viewing rooms. Dealers at art fairs started revealing more of their prices, creating transparency.
[14:42] As a prank, a Banksy piece at auction was shredded the minute it was purchased. The piece is said to have increased in value, though, after the prank.
[15:27] Kathryn’s suggestions for investing in the art market: 90% of art sold does not have a resale value. For prints and multiples, an accessible part of the art market, you can get a sense of resale value through price indices. You’ve got to buy art because you enjoy owning it. You don’t know if or when you can sell it for a profit.
[16:36] Kathryn has not sold any of the art she has bought because she loves it. There is so much art she would have loved to have bought that got away. She buys artwork she loves that her friends have produced or that was created in her neighborhood, to support their market. The internet has opened up the market for new original art.
[17:40] Kathryn’s dream artwork would be any Basquiat work. She would be over the moon to own even one of his sketchbook drawings. She would never sell it!
[18:07] Kathryn’s newsletter, Priceless, is linked below.
[18:37] Patricia thanks Kathryn and the listeners for joining us today on This Is Capitalism.
Mentioned in This Episode:
“Banksy Artwork Shredded After Auction May Have Increased Its Value”