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Thu May 31, 2012
Is Art A Good Investment?
This week in the New York Times Magazine, Adam Davidson looks at what's driving art prices higher and higher. The trend raises a simple question: Is art a good investment?
Michael Moses, an economist at NYU, decided to crunch the numbers. He gathered auction prices for fine works of art from 1875 to the present. By tracking jumps in their sale and resale price, he could calculate the return. For instance, a painting by J.M.W. Turner sold for $35,000 in 1897, and resold for $35.8 million in 2006, giving the owner a six percent return every year for over a century. But that's just one painting.
Much to the surprise of the art world, Moses found that "the more expensive the purchase price, the lower the returns." In other words, those old masterpieces that sell for astronomical sums are not very good investments.
While it would be sacrilege in art circles to question the value of old masters like Peter Paul Rubens and Gustave Courbet, Moses points out that from a purely profit-making perspective, they are "big name underachievers."
Of course, most art collectors don't buy a multi-million dollar painting with the intent to flip it for a profit. But a few are trying, as Davidson writes in his column. Read the full column here to find out if they have any chance of succeeding.