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What Nobody Wants to Admit About Investing in Art – Bloomberg

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Updated on October 2, 5:30 AM EDT

What You Need To Know

Everyone stuck at home is tired of looking at the same stuff.

Online art sales, it turns out, have surged during the pandemic. Auction house Sotheby’s sold $285 million worth of fine art and decorative objects this year through July 31 — triple the value for all of 2019. In that time, 13,000 lots sold compared with 4,000 during the same period the year before. The online portal for art and furniture dealers, 1stdibs, says that between March 1 and Aug. 31 it facilitated the sale of a staggering 8,000 artworks, a 65% jump year over year.

Here’s hoping these new art collectors love whatever they bought. Just how far their money goes comes down to a combination of taste, financial priorities and personal preference. If they try to resell their new acquisitions, they’ll soon discover that beauty is in the eye of the beholder, but value is in the hands of someone else.

Key Coverage

By The Numbers

  • 40.5 million Estimated number of total art transactions in 2019.
  • $10,000 Estimated median price of an artwork sold by dealers last year.
  • 310,810 The approximate number of businesses selling art and antiques worldwide.

Why It Matters

If the value of a piece of art ever goes up, it usually does so through a small number of traditional, surprisingly predictable channels: art dealers who persuade their wealthy clients to spend more; auction houses that entice wealthy collectors to bid higher; wealthy collectors themselves buying and selling art to each another; and finally through an ecosystem of curators, scholars, critics and tastemakers who contribute, in whatever elliptical way, to perceptions of worth.

The rest of us are left to buy art that will almost certainly lose value — and never gain it back — the second we hang it on the wall.

In other words, don’t stress out about buying art as an investment, because it’s generally a bad one. That said, there are approaches you can take to art buying. You can consider the acquisition as you would a chair or lamp, something to be used and enjoyed but not resold. Or you can approach it as a financial decision, after first acknowledging that even the best-laid plans still don’t guarantee a return on investment.

Either way, you can use the following as a guide. And remember! If you don’t want to live with it, it’s not worth buying at any price.

1. There Are Hundreds of Art Markets

Just because one artwork costs less than another doesn’t mean it’s a good deal. It could be that one work is subject to very different market forces than the other. The demand for Ming vases, for instance, is not the same as the market for mid-century sculpture, and the ways in which value is created in the Old Masters market is worlds apart from that of French Impressionism. So before you look at an object and decide it’s a “deal,” make sure you’re basing that assumption on the sales of other, similar objects.

In general, new collectors tend to gravitate toward paintings, for the simple reason that they’re the most obvious, accessible choice. But you shouldn’t overlook excellent photographs, prints, watercolors and etchings, too. Similarly, galleries tend to focus on 20th and 21st century artworks. The reality is you can choose from a 7,000-year span of art history.

2. For Once, Put Faith in Middlemen

Art galleries take a cut of about 50% on each sale. It’s reasonable, then, to wonder whether you can save money by buying direct from the artist. But you have to remember that when a gallery adds an artist to its “stable,” it’s often committing to partner with that artist, fronting her money to make artworks, investing heavily to promote her shows, and even helping pay to get her work shown in museums. The artist, in turn, is often committed to that gallery for the same reasons. If she has a good relationship with her dealers, she probably won’t be open to the idea of selling behind her dealer’s back.

The good news is that if the dealer has an established reputation and a vested interest in the artist she’s selling — and better yet, has a proven record of buying and reselling work after she’s sold it the first time — there’s a much higher likelihood you’ll be able to eventually resell your own art, too. Small galleries like James Fuentes on New York’s Lower East Side, to mid-size galleries like Gallery Hyundai in Seoul, to mega international galleries like Hauser & Wirth are all, at least in theory, places where you can go to both buy and sell artworks. In sum, dealers are an artwork’s ambassador and advocate, and when it comes to sustaining (or increasing!) value, you’ll often need their clout to make it happen.

3. Think of the Cost of Labor

When you buy a freshly made artwork, chances are it was created by a person who’s doing their best to live off the proceeds of their art. As a result, the cost of that creator’s quality of life (not to mention cost of materials) is baked into the price, which is why even paintings on coffee shop walls can have thousand-dollar price tags.

The easy way around it? Buy a painting that has been bought and sold before, eliminating at least some of the markup. Look at smaller auction houses, which you can find through sites like Invaluable.com and LiveAuctioneers.com; you’ll still be paying a buyer’s premium, but the art itself will often be comparatively cheap.

4. Look for the Blind Spots

The art market has biases that have nothing to do with pure artistic merit. Paintings by Flemish Baroque artist Peter Paul Rubens can sell for tens of millions; his drawings often sell for a fraction of that. A bronze sculpture by 20th century Swiss artist Alberto Giacometti sold for more than $140 million, whereas his paintings sell for much less. Last year a portrait of his brother Diego, for contrast, sold for $1.6 million. Chump change!

What’s important to remember is that those biases are not set in stone and often change as quickly as fashion. So if an artist’s early work is currently selling at a premium, consider her later work instead; more broadly, if a certain artistic period is suddenly undesirable (I wrote that Victorian paintings were out of style three years ago, and that’s still the case), there’s a good chance they might come back in vogue in a few years.

Also, just because something is very old doesn’t mean it’s out of reach. A 2,600-year-old Etruscan figure of a lion sold for 10,000 British pounds ($12,700) at an auction at Sotheby’s last year. In the same sale, a 2,300-year-old gold torque (a stiff necklace) sold for 11,250 pounds, or about $1,000 less than a new 18 karat gold “Maker’s” chain necklace at Tiffany’s. A gold figurine that’s thousands of years old sometimes costs less than it would if it were melted down and sold as an ingot.

5. Art Never Comes With A Guarantee

Even art-world insiders strike out just as often as they strike gold. No artist, whatever their buzz, is a sure thing. Not if their work is in a prestigious collector’s living room, not if it’s in all the best museum collections, not if there’s a stack of glowing reviews.

Have you heard of Robert Yarber, whose work the late New York Times critic John Russell called “undeniably compelling,” and whose art is in the permanent collection of the Whitney Museum? Would you have been able to predict that Ferdinand Botero — the second most successful living artist at auction in 1993 — would soon be eclipsed by Jeff Koons? Or that Jeff Koons’s market would subsequently stall out too?

6. Then There’s Fractional Art Investing

Recently, a new way to buy art has emerged in the form of “fractional investing.” The basic premise is that very expensive artworks appreciate more (and faster) than cheap artworks, and when a lot of people pool their money, they can participate in these outsize returns. Aside from that highly dubious logic (see above) there are some unavoidable downsides to fractional art investing, the most important of which is that investors never take physical possession of the art. That alone obviates the primary draw of art collecting, namely looking at, and enjoying, the thing you own.

    Just figure out what sells for peanuts today and will command a fortune in 30 years or so.

    Timeline


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    Calvin Lucyshyn: Vancouver Island Art Dealer Faces Fraud Charges After Police Seize Millions in Artwork

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    In a case that has sent shockwaves through the Vancouver Island art community, a local art dealer has been charged with one count of fraud over $5,000. Calvin Lucyshyn, the former operator of the now-closed Winchester Galleries in Oak Bay, faces the charge after police seized hundreds of artworks, valued in the tens of millions of dollars, from various storage sites in the Greater Victoria area.

    Alleged Fraud Scheme

    Police allege that Lucyshyn had been taking valuable art from members of the public under the guise of appraising or consigning the pieces for sale, only to cut off all communication with the owners. This investigation began in April 2022, when police received a complaint from an individual who had provided four paintings to Lucyshyn, including three works by renowned British Columbia artist Emily Carr, and had not received any updates on their sale.

    Further investigation by the Saanich Police Department revealed that this was not an isolated incident. Detectives found other alleged victims who had similar experiences with Winchester Galleries, leading police to execute search warrants at three separate storage locations across Greater Victoria.

    Massive Seizure of Artworks

    In what has become one of the largest art fraud investigations in recent Canadian history, authorities seized approximately 1,100 pieces of art, including more than 600 pieces from a storage site in Saanich, over 300 in Langford, and more than 100 in Oak Bay. Some of the more valuable pieces, according to police, were estimated to be worth $85,000 each.

    Lucyshyn was arrested on April 21, 2022, but was later released from custody. In May 2024, a fraud charge was formally laid against him.

    Artwork Returned, but Some Remain Unclaimed

    In a statement released on Monday, the Saanich Police Department confirmed that 1,050 of the seized artworks have been returned to their rightful owners. However, several pieces remain unclaimed, and police continue their efforts to track down the owners of these works.

    Court Proceedings Ongoing

    The criminal charge against Lucyshyn has not yet been tested in court, and he has publicly stated his intention to defend himself against any pending allegations. His next court appearance is scheduled for September 10, 2024.

    Impact on the Local Art Community

    The news of Lucyshyn’s alleged fraud has deeply affected Vancouver Island’s art community, particularly collectors, galleries, and artists who may have been impacted by the gallery’s operations. With high-value pieces from artists like Emily Carr involved, the case underscores the vulnerabilities that can exist in art transactions.

    For many art collectors, the investigation has raised concerns about the potential for fraud in the art world, particularly when it comes to dealing with private galleries and dealers. The seizure of such a vast collection of artworks has also led to questions about the management and oversight of valuable art pieces, as well as the importance of transparency and trust in the industry.

    As the case continues to unfold in court, it will likely serve as a cautionary tale for collectors and galleries alike, highlighting the need for due diligence in the sale and appraisal of high-value artworks.

    While much of the seized artwork has been returned, the full scale of the alleged fraud is still being unraveled. Lucyshyn’s upcoming court appearances will be closely watched, not only by the legal community but also by the wider art world, as it navigates the fallout from one of Canada’s most significant art fraud cases in recent memory.

    Art collectors and individuals who believe they may have been affected by this case are encouraged to contact the Saanich Police Department to inquire about any unclaimed pieces. Additionally, the case serves as a reminder for anyone involved in high-value art transactions to work with reputable dealers and to keep thorough documentation of all transactions.

    As with any investment, whether in art or other ventures, it is crucial to be cautious and informed. Art fraud can devastate personal collections and finances, but by taking steps to verify authenticity, provenance, and the reputation of dealers, collectors can help safeguard their valuable pieces.

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    Ukrainian sells art in Essex while stuck in a warzone – BBC.com

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    Ukrainian sells art in Essex while stuck in a warzone  BBC.com



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    Somerset House Fire: Courtauld Gallery Reopens, Rest of Landmark Closed

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    The Courtauld Gallery at Somerset House has reopened its doors to the public after a fire swept through the historic building in central London. While the gallery has resumed operations, the rest of the iconic site remains closed “until further notice.”

    On Saturday, approximately 125 firefighters were called to the scene to battle the blaze, which sent smoke billowing across the city. Fortunately, the fire occurred in a part of the building not housing valuable artworks, and no injuries were reported. Authorities are still investigating the cause of the fire.

    Despite the disruption, art lovers queued outside the gallery before it reopened at 10:00 BST on Sunday. One visitor expressed his relief, saying, “I was sad to see the fire, but I’m relieved the art is safe.”

    The Clark family, visiting London from Washington state, USA, had a unique perspective on the incident. While sightseeing on the London Eye, they watched as firefighters tackled the flames. Paul Clark, accompanied by his wife Jiorgia and their four children, shared their concern for the safety of the artwork inside Somerset House. “It was sad to see,” Mr. Clark told the BBC. As a fan of Vincent Van Gogh, he was particularly relieved to learn that the painter’s famous Self-Portrait with Bandaged Ear had not been affected by the fire.

    Blaze in the West Wing

    The fire broke out around midday on Saturday in the west wing of Somerset House, a section of the building primarily used for offices and storage. Jonathan Reekie, director of Somerset House Trust, assured the public that “no valuable artefacts or artworks” were located in that part of the building. By Sunday, fire engines were still stationed outside as investigations into the fire’s origin continued.

    About Somerset House

    Located on the Strand in central London, Somerset House is a prominent arts venue with a rich history dating back to the Georgian era. Built on the site of a former Tudor palace, the complex is known for its iconic courtyard and is home to the Courtauld Gallery. The gallery houses a prestigious collection from the Samuel Courtauld Trust, showcasing masterpieces from the Middle Ages to the 20th century. Among the notable works are pieces by impressionist legends such as Edouard Manet, Claude Monet, Paul Cézanne, and Vincent Van Gogh.

    Somerset House regularly hosts cultural exhibitions and public events, including its popular winter ice skating sessions in the courtyard. However, for now, the venue remains partially closed as authorities ensure the safety of the site following the fire.

    Art lovers and the Somerset House community can take solace in knowing that the invaluable collection remains unharmed, and the Courtauld Gallery continues to welcome visitors, offering a reprieve amid the disruption.

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