5 January 2018
Wine, art, vintage cars, . . . How good an investment are they really?
In a low interest rate environment, alternative investments take on a certain attractiveness.
At the financial breakfast organised by La Libre Belgique and the MoneyStore blog, Peter Vanden Houte, Chief Economist at ING Belgium and Jean-François van Houtte, art expert and managing director of Arthès, analysed the opportunities and risks of alternative investments. "Some people don't like talking about money and art in the same breath. However, art and money are very much linked. We can talk about an investment from such time as there is hope of a capital gain," points out Jean-François van Houtte.
Brexit and safe havens"Can these commodities be considered genuine safe havens?"
The art market is influenced by many factors and fads have a significant impact on prices. Catalogues, media and trends also exert significant pressure on price curves.
"Nor should we lose sight of the influence of geopolitical elements. For example, a hard Brexit could change the position of the UK in this market if imports become more complicated. This could open up a huge opportunity for the French market," warns van Houtte. It should also be remembered that there is no Schengen area for these commodities and that certain works are banned from leaving some countries.
Beyond these factors specific to art markets, economic factors must also be taken into account. "These passion-driven investments are also dependent on the size of global wealth. The price of vintage wines is noticeably linked to the GDP of emerging markets and more broadly to global GDP. The rise in the exchange rate of the dollar will trigger an increase in prices of wines and vintage cars. The evolution of the stock market will also impact these markets. If it climbs, the wealth effect that it induces will boost sales," explains Peter Vanden Houte. This potential combined with the current low interest rates is prompting investors to consider alternative investments.
However, can these commodities be considered genuine safe havens? In some cases, collections can be considered as such. When inflation is high and there is a hike in art prices, they can be seen as a protection against inflation. Some old grandmasters will always remain safe investments and the capital gains can sometimes be impressive. "But beware, all works are not equal! One of the main purchasing criteria must be the acquisition of an intellectual innovation via a medium such as canvas, paper or video. Today, a plethora of artists are inspired by pop art and reproduce it. Those who acquire this kind of work think that they are buying art, but they are wrong! On the other hand, an artist like Basquiat is a purchase for posterity," believes Jean-François van Houtte. Buying a work of art is all well and good, but it must also have the potential to be sold and the liquidity of these acquisitions is not always guaranteed. A work's reputation can be quickly destroyed if it is put up for sale and fails to find a buyer.
High volatility"Works can lose more than 15% of their value in a few years"
It should be noted that these markets are also significantly volatile and works can lose more than 15% of their value in a few years. Nor must the purchaser forget all the costs associated with holding such commodities: purchase and resale costs, insurance, security or conservation costs. Finally, can these commodities really be considered as investments? "They can certainly be part of a person's assets but care must be taken not to confuse passion and investment," notes Peter Vanden Houte. "With this type of commodity, capital gains can only be achieved in sometimes narrow markets. It is also important to remember that, in this case, the best dividend is the pleasure of contemplating the work of art itself." In other words, the acquisition of a work of art can be considered as an investment if its holder has a long-term vision and is aware that it is necessary to approach this area with certain expertise given the narrow and sometimes illiquid nature of the art market.
What are the factors that affect prices on the art market? Video (FR)
Article published in LA LIBRE BELGIQUE and on MoneyStore.be
Isabelle de Laminne