PLUNGING stock markets have pushed many investors into alternative assets such
as collectable items they hope will hold their value, but are they really
recession-busters?
The Royal Institution of Chartered Surveyors’ recent Art and Antiques Survey
showed a decline in low to mid-range art and antiques in the third quarter
of this year, although the super-rich continue to pay for high-end
contemporary and rare pieces.
The problem for investors seeking safety in collectables is that, unless they
have some degree of expertise, they may be vulnerable to fads, fakes and
fraudsters.
For instance, Mike Hall, chief executive of stamp dealer Stanley Gibbons, said
that during the boom years of 1975-80 “a lot of lower quality stamps were
mis-sold by unscrupulous dealers and their value subsequently collapsed”.
Remember that, unlike investments, there is no Financial Services Authority
through which to seek redress. Those who take time to look into their
markets can do well, though, on everything from books, wine and stamps to
jewellery and photography
ART
Rics spokesman Andrew Davies of AXA art insurance says: “There is an urban
myth that fine art and antiques are recession-proof. This is wrong. This
market lags behind the economic cycle by around a year to 18 months. So
people should not rely on it.
“The bottom end of the market is dead. I went to an contemporary art auction
last week where there were 283 lots and only 82 lots sold. That is
appalling. Those that did not sell were in the £1,000 to £5,000 range."
Jason Butler, a partner at advisers Bloomsbury Wealth Management, is also
sceptical, pointing to the knowledge you must attain or pay for to
participate in the art market.
He said: “These assets are illiquid and there is no mechanism for providing a
return, unlike the yield with bonds and dividends from equities. You may buy
at the wrong time and have to wait years to make a gain.”
BOOKS
“Many are looking for the next JK Rowling with potential for growth in value
in the future,” said Robert Harkins of bookseller Anderida Books (anderidabooks.co.uk).
An author’s signature can make all the difference. Harkins said: “JK Rowling
signed only 1,700 copies of The Deathly Hallows. First editions of that are
worth only the cover price but with a signature they go for upwards of
£1,000. For most other authors it does not attract a great deal of value.”
WINE
Fine wines have the advantage of enabling investors to drown their sorrows
should prices prove disappointing.
Joss Fowler at wine merchant Berry Bros & Rudd said: “The past 50 years
have seen the price for the top 20 Bordeaux chateaux rising around 10%-15% a
year.”
If you are thinking of collecting wine, Fowler said: “Stick to Bordeaux, the
top 20-30 chateaux and the best vintages at current prices.” Wine has to be
stored in the right conditions to preserve its value.
STAMPS
It is hard to scoff at some of the gains to be made from stamp collecting.
There are various stamp stock indexes, of which the GB 30 Rarities is the
most prominent. Hall at Stanley Gibbons said: “It rose by 38.6% in the past
year and that was during a period when other asset prices, such as houses,
were collapsing.”
He added: “I have made a study of stamp prices going back 50 years and rare
stamps in good condition have not gone down in price over that time.”
JEWELLERY
Diamonds may be an investor’s best friend — as well as a girl’s — according to
dealers who have seen rare vintage jewels surge in popularity.
Keith Penton, head of jewellery for auctioneer Christie’s in London, said
“quality, great design and workmanship” are key elements in value and a good
place to start would be with “a classic piece such as an art deco diamond
bracelet or diamond ear studs, which surpass the rise and fall of fashion
trends”.
A sale last Tuesday at South Kensington saw lots selling from £500 to £30,000,
including a Fabergé brooch for £3,800, Penton said.
GOLD, SILVER AND PLATINUM JEWELLERY
The Rics survey showed jewellery in general being only second after
contemporary art in terms of demand although, as with other categories,
there is greater strength at the top end of the market.
Precious metals such as gold, silver and platinum have risen in price, in part
because they are as a classic hedge against economic ills.
Jewellery using these metals has risen with that sentiment but collectors tend
to go for vintage or antique pieces up to the art nouveau and art deco
periods. Classic pieces from the 1930s with the signature of Tiffany,
Cartier or Van Cleef & Arpels are reckoned never to drop in value.
PHOTOGRAPHY
Photographic prints have been rising against other collectable assets for some
time. Francis Hodgson, head of photography at auctioneer Sotheby’s, said our
familiarity with the medium is part of its appeal.
“With ceramics, for instance, you will have to have a certain expertise. Any
one of us can appreciate a photograph,” he said. Of the market in general,
Hodgson said: “If you look at prices over many years they have held their
value spectacularly well.”
Evidence of this was shown in a sale at Sotheby’s in May. An album by Felice
Beato of 75 photos of the aftermath of the Indian Mutiny of 1857 went for
£96,500. It fetched £60,300 in 2000.
If you think that stamp 'indexes' bear any relationship to the actual price they can be sold at then you probably believed Soviet grain production figures. I have purchased good stamps at 10% of these figures for decades and know no-one who has ever sold at them. The indexes are to con teenagers.
Eric Skelton, Cardiff, Wales
Don't forget the high fees that buyers and sellers pay which affect net worth. Art prices rose with the massive increase in wealth of bankers and russian oligarchs. With wine how is a buyer going to know if the contents have been kept "in the right conditions" and is not vinegar if not consumed?
peterfieldman, paris, france
Nicholas - I think you will find that those companies have a 'target' return of 7-9% rather than a 'guaranteed' return. And I think you'll find that once existing leases either run out or are defaulted on as corporates who rent such art go bust that target will not be reached.
Mac, Birmingham, UK
Jason Butler's comment that with art investment there are no mechanisms for providing a return is incorrect. There are companies that rent out portfolios of art to the corporate sector that their clients have purchased giving their clients a guaranteed rental return in the region of 7-9%.
Nicholas Forrest, Sydney, Australia