IT'S a rare find when you come across a serious collector who buys artworks purely to make a profit.
Art is mainly an intellectual or aesthetic pursuit, and thoughts of the balance sheet are often quite remote from the minds of aficionados.
Yet, no serious collector - however high-minded - would object to making a profit if some is to be had.
And art is increasingly being seen as a viable alternative investment because some art assets have generated spectacular gains, outperforming equities and property. At the least, art rarely falls prey to market downturns though, sometimes, changing fashions can take a toll.
'The upside of investing in art can be very enticing... If you invest in works you like, you will be able to enjoy them at the same time,' said Dr Alvin Koh, the director of Collectors Contemporary in Singapore.
Mega deals
IN SINGAPORE, nearly US$2 million (S$2.9 million) worth of Andy Warhol prints were sold last month at a preview of an exhibition of the late American pop artist's works.
Some of the works cost only US$500 when they were made. At the preview, a single print of the famous Campbell Soup can image was going for at least US$55,000.
Recently, actor Hugh Grant made a cool $20 million in profit when he sold his Andy Warhol piece - 'Liz', a portrait of Elizabeth Taylor - for US$23.6 million. He bought it six years previously for US$3.6 million.
While such eye-catching deals are rare, smaller deals are common. In the past four years, Sotheby's Singapore sold $8 million to $11.7 million worth of artworks a year.
Not a millionaire's market
CONTRARY to popular belief, you don't need to spend a fortune to enter the world of art ownership.
'It is absolutely possible for people with a lower budget to buy something,' said Dr Karl Schweizer, the head of art banking, gold and numismatics at UBS Wealth Management. 'But if you want to play in the premier league, you will need money.'
About 80 per cent of all public art deals in the world are closed at a price of between one euro and 10,000 euros (S$2.11 and $21,086), he said.
About 16 per cent of such deals close at between 10,000 and 99,000 euros. Just 3.6 per cent are done between 100,000 and 999,000 euros, and a mere 0.25 per cent go for more than a million euros, said Dr Schweizer.
Entering the art market can be intimidating to some. But it need not be so, if you do some homework first. 'The best thing to do is to participate, learn and observe,' said Sotheby's Singapore-based specialist on South-east Asian paintings, Mr Mok Kim Chuan.
A potential investor can check out galleries and their websites or talk to art experts, for example.
Art fairs are great places to do some research, as you get to see a lot of art under one roof. They also give you the chance to meet dealers in person; you may not get to see them in their galleries.
Auction houses are a good place to glean information, as their experts can help potential buyers to understand the art market. If you buy your art at auctions, the process is transparent and fairly straightforward.
Beware of hype
CHINESE contemporary art is the latest thing to hit the art world. But there is a lot of copying of famous works, said Dr Schweizer.
'That alone is not enough to write art history,' he pointed out.
And what is fashionable might not always be the best. 'Buyers have to check whether the piece of art can be sustained over time,' Dr Schweizer said.
Said Mr Mok: 'You have to look for art pieces that you yourself find truly appealing. Of course, their condition, provenance and rarity also count.' Provenance refers to the records or documents that authenticate the pieces or their ownership.
Works by established artists such as Andy Warhol, Roy Lichtenstein and Damien Hirst are attractive because of the rate at which their prices have risen in the past three years.
However, buying such works would naturally require a larger outlay, said Dr Koh.
When picking out an art piece, go for quality, he advised. 'Every artist would have works of varying standards and significance at different points in his career.'
Note that a key aspect of quality is the condition of the artwork. If it is not well-preserved, its value can drop significantly, said Dr Koh.
Watch out - Risks can be high
AS WITH any other investment, buying art comes with risks. Bubbles, if any, could burst.
'Every investment in art is pure speculation,' warned Dr Schweizer.
While there have been attempts to establish art market research, he stressed that it is not possible to give meaningful advice on how art will fare in monetary terms.
'It is impossible to forecast the prices of art,' he said.
Even if valuations go up, they remain estimates only, until a sale is made at the valued price.
Dr Schweizer offered this insight into the often perplexing art world: 'The art market will never ever pay the same price again. So, if people have to liquidate, the market will never ever pay the same price again. Prices can go up or down.'
Potential buyers also need to take note of the opportunity cost and the cost of reselling pieces.
If you plan to sell your pieces at an auction, keep in mind that commissions paid to the auctioneer can be substantial, said Dr Schweizer.
Also, there might be insurance and transport costs, other experts said.
The bottom line is that you should never spend more than you can afford - however eye-catching that Andy Warhol print may look, in your mind's eye, hanging on the wall in your lounge.
