Art Market Beats Stock Market Once Again

Art gave 11 per cent return to investors in 2011, making art a better investment than stocks for second year in a row

Despite apparently all pervasive economic gloom elsewhere, the art market has given an incredible 11 % return to investors in 2011 – making art a better investment than stocks for a second year in a row. This was aided by strong growth in Chinese demand and enduringly high prices for the work of big-name artists.

Creator of the Mei Moses All Art Index – a leading barometer of art returns –, Michael Moses, explained: ‘Art prices are not correlated to sudden swings in stock markets but their prices tend to match changes in wealth creation and destruction. I’m not surprised by this growth as we are not seeing the wealth damage of 2008-2009’.

China has been a key player in the strength of the art market. In particular, traditional Chinese works saw a dramatic increase in value, rising 20.6 per cent during 2011, as Chinese investors sought to repatriate cultural assets previously sold to western investors.

‘With China there is massive wealth’, said Philip Hoffman, chief executive of the Fine Art Fund Group, an investment manager specialising in art with about $100m under management; ‘The new wealthy want to show off their prized works to friends. [And] It doesn’t take many to cause a surge in prices’.

The year, furthermore, there have been a number of record sales for works by big-name artists. Roy Lichtenstein’s I Can See the Whole Room . . . and There’s Nobody in It!, for example, made gains in excess of $40m for its seller, who bought it for a poxy $2m in 1988. Similarly, Andy Warhol’s Dollar Sign  sold for twice its estimate at $698,500 in 2011, having been bought for as little as $27,000, 2 decades ago.

But investors have been warned that this period of relative buoyancy may not be undermined if the general economic downturn persists, with the art market being far from untouched by global trends. Michael Moses explained how ‘Recent economic conditions have made art investors much more cautious and thus have tempered their enthusiasm, resulting in somewhat lower growth’: ‘If the economy continues to stagnate we could see darker days for art collectors.’

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