Art is big business and growing steadily despite financial world crashs

There has been an unprecedented growth in the value of art globally and South Africa is keeping pace, said Nicola Danby, director of Artinsure – formerly head of BASA.

She was speaking at a recent event held by Artinsure and Hollard in Johannesburg to discuss the ‘value of art in the South African context’ with leaders in the field who gathered to hear art insurance expert, Gordon Massie and well-known collector Dr Fred Scott talk on the subject.

“Latest annual figures of global art sales are $25 billion with a 19% increase in value last year, particularly in contemporary pieces created from 1960 onwards,” MD of Artinsure, Gordon Massie, said. He pointed out that the last time the financial world crashed in the 80s the value of art crashed with it.

“But this time the development has been different with the art world being bolstered by investors from Middle East Royal Families and BRIC countries: Brazil, Russia, India and China who have been buying high value works in spite of the shaky situation in the financial world.” An example of this, he said, was the fact that Damien Hirst opened his solo show the day after the Lehman Brothers crash and AIG rescue plan and netted himself a profit of $200 million. “Whilst there is evidence of a correction taking place, Art continues to sell as evidenced in recent sales. At a major sale I was at in early November an investor said to me ‘You would not believe there is a credit crunch going on out there!’”

Massie says good news for local investors is that well known South African artists are also becoming international brands and the local market is experiencing significant increases in values.

As an example, he explained that if a South African investor in art had spent 100 Euros on an Irma Stern work in 1997, today it would be worth 1500 Euros. “As art develops into a truly attractive investment, owners need to be sure that their insurer appreciates the true value of their art works. There have been recent examples where claims were inexpertly handled. For instance in one specific example, a R12 million painting by a well known South African artist was stolen and due to lack of expertise, the insurer offered to replace this premier painting with another painting by the same art
ist. The trouble was the intended replacement painting only had a market value of R500 000. Underwriting and evaluating art is a specialist area and collectors need to be sure they are protected effectively against loss by people who understand the art world and true market values.”
Massie also demonstrated by using true examples that fire is the biggest risk to artwork followed by accidental damage and then water damage. “Whilst theft is a risk the probability of a theft is lower than these three risks,” Massie said.