Friends who have bought artworks often ask us, has this work I bought gone up? How will it rise in the future? These are very interesting questions, and they are also questions we want to clarify. These friends bought works in galleries or art fairs, admired the art, and cultivated their temperament, but more for the purpose of investment and financial management. Therefore, the trend of art in the secondary market will be an important factor affecting the overall size of the art market.
New art collectors always buy works for certain reasons. Partly out of intuition, partly out of an incomplete understanding of the art world, and burying in my heart the idea that this work will appreciate. Many collectors are overconfident in their artistic judgment. At the same time, when you go to the art fair, every gallery staff will do their best to tell you that the artists they represent are the most marketable. Of course their words are not always so credible. As a collector, or more generally, an investor, how should one make judgment?
Collectors buy works in galleries, art fairs, the Internet and even the studios of artists. This is called the primary market. The primary market for artworks is large and difficult to estimate. Because as long as the buyer and seller determine the price, the transaction is completed. For example, a collector bought a 200,000 work in a gallery in 2018, but in 2020 he saw the same artist, a similar work, or a work in the same series at a price of 250,000. Can I steal the appreciation of the works I bought? We should not be so naive, because this matter may be operated behind the same institution!
On this issue, we have disputes with some collectors. Our opinion is that to check the real price of the art you buy, you can go to the art auction house to auction the work. Here, the art auction house is the secondary market for artworks. Because in theory, the auction house is just an intermediary platform to extract commissions. The auction house is naturally beneficial to buyers who want to sell their works, because it hopes that all the auctioned items can be sold, and the higher the auction, the better. Only if the shot is higher, it can draw more commission. Therefore, the secondary market is the touchstone of the true price of artworks.
But the problem is that in practice, there are many artworks that cannot be obtained from the auction house for auction. Especially for new collectors, all kinds of contemporary works of art they send to the auction house will be rejected by the auction house with a high probability. Because the auction house believes that the probability of the auction of the artwork you send is very high, it can’t really be sold because it occupies the auction resources. In other words, the auction house thinks that the work you bought does not have “circulation”, Especially for new collectors and new artists.
Of course, the circulation of artworks is a delicate concept that has been changing. Some works may need to be released for several years. As the artist slowly became famous, his works began to become circulated. But the opposite is also true. The artist became famous when he was young, and he gained market recognition. But he slowly stopped creating, and even left the art circle, so he was gradually forgotten, and the circulation of his early works disappeared with the passage of time. Therefore, in various types of art fairs, a considerable number of non-circulating works are sold by eloquence and connections. Whether these works can be circulated in a general sense in the future requires a big question mark.
Some friends also care about, If I buy art directly on the secondary market, can it reduce the overall risk of investment? Neither is it. It is also the old saying in the investment community, “Investment is risky, so be cautious when entering the market.”
There are three main aspects of investment risk.
First, choose the right person. In the course of researching the Chinese contemporary art market in the past 20 years, we have found that the overall price of the secondary market does have a trend of constantly rising, but there are also many of them. Moreover, the overall index does not reflect the trends of individual artists, and individual case studies must be done. If you do n’t choose the right person, you ca n’t talk about investment appreciation.
Second, we must choose the right work. Because no two works of art are exactly the same. Even for the same artist, in the artist’s long life, his creations may change dramatically in key dimensions such as materials, techniques, themes, and artistic styles. These changes will have a huge impact on the sales prices and price changes of artworks. There were some old artists who wanted to “decay the old age”, but family members worry that once the artist changes the style and others are not easy to recognize, it will affect the value, thus preventing the old artist from changing the law. Therefore, after selecting a person, the collector needs to further select works.
Second, we must choose the right work. Because no two works of art are exactly the same. Even for the same artist, in the artist’s long life, his creations may change dramatically in key dimensions such as materials, techniques, themes, and artistic styles. These changes will have a huge impact on the sales prices and price changes of artworks. There were some old artists who wanted to “decay the old age”, but family members worry that once the artist changes the style and others are not easy to recognize, it will affect the value, thus preventing the old artist from changing the law. Therefore, after selecting a person, the collector needs to further select works.
For example, there are some very famous Chinese video artists whose well-known works are all video works. The characteristics of video works are large investment and long cycle. It is impossible to mass-produce and the quantity is scarce, but it is difficult to sell. These artists may enjoy a high reputation both domestically and internationally, but they cannot sell his video works at will. At this time, we found that a small amount of oil paintings that they occasionally created when they were young were auctioned at a very high price in the secondary market.Forcing a line of oil painting artists. We need to realize that the high price of their oil paintings is more affirmation of them overall, and considering that they rarely have a premium on the market for their works. They are completely incomparable with those artists who have been working on oil painting.
Third, you need to choose the right timing, including the timing of artwork creation and the timing of art purchase. Many people believe that artistic value is long-term or even eternal, but the market does not see it that way. Except for a few artists like Picasso who may gain market recognition for a long time, the value of most artists’ works will be affected by the taste of the times. In many cases, the artistic taste of the market and collectors is not consistent with the artist himself.
Third, you need to choose the right timing, including the timing of artwork creation and the timing of art purchase. Many people believe that artistic value is long-term or even eternal, but the market does not see it that way. Except for a few artists like Picasso who may gain market recognition for a long time, the value of most artists’ works will be affected by the taste of the times. In many cases, the artistic taste of the market and collectors is not consistent with the artist himself.
And the timing of the purchase is very important, and collectors need to have a reliable estimate of the intrinsic value of the work. All financial investment products have a standard unit as the unit of measurement, but in the field of contemporary art, the choice of this unit is very difficult. The easy way you can think of is to find in the recent auction records works that are roughly the same as the material, size, and creation age of your collection as a reference. But in practice, this approach is often not feasible because no similar works can be found. This is the necessity of constructing a systematic art price index.
Below we will combine some examples to analyze. Let ’s first look at the situation of Liu Ye . Liu Ye is a very influential artist in China, and may be the most expensive contemporary artist in China. The figure below is a trend chart of the unit price of Liu Ye’s works in the past 20 years.
As you can see from the picture, Liu Ye ’s works have entered the art market since the mid-1990s. In the first ten years, the Chinese contemporary art market is still brewing. The price of Liu Ye ’s works No change. Since 2003, the price of Liu Ye’s works has risen all the way, and 2019 is the highest point in history, which may be ten times more than in 2003. In the process, Liu Ye’s works also experienced two troughs, around 2009 and 2015 respectively. But his work quickly got rid of the trough and hit a new high. Overall, this is a very encouraging trend chart.
As you can see from the picture, Liu Ye ’s works have entered the art market since the mid-1990s. In the first ten years, the Chinese contemporary art market is still brewing. The price of Liu Ye ’s works No change. Since 2003, the price of Liu Ye’s works has risen all the way, and 2019 is the highest point in history, which may be ten times more than in 2003. In the process, Liu Ye’s works also experienced two troughs, around 2009 and 2015 respectively. But his work quickly got rid of the trough and hit a new high. Overall, this is a very encouraging trend chart.
Let ’s not be too happy. The general trend of Liu Ye’s works is undoubtedly appreciation, but this does not mean that every painting of Liu Ye is appreciation. It is not that a piece of work has entered the auction house, so it has full circulation. There is an important factor that needs to be constantly mentioned. The auction house also has the probability of being auctioned off. Floating auction means that the auction price of the work does not reach the psychological bottom line of the collector, and there may not even be anyone bidding at all. Therefore, the auction rate is an important indicator to test the market’s attitude towards the value of artists.
Liu Ye ’s works on the secondary market are undoubtedly the works that collectors and auction houses are optimistic about and believe it can shoot at reasonable prices. But in fact, Liu Ye’s works are sold every year. The figure below is the number of Liu Ye’s works in the past years.
As can be seen from the above picture, since 2003, Liu Ye ’s works have been recorded in the auction every year. He sold a small part of the work, but it is also a part that cannot be eliminated. Therefore, if you invest in Liu Ye, but do not choose the right work, you may miss the opportunity for a steady price increase.
As can be seen from the above picture, since 2003, Liu Ye ’s works have been recorded in the auction every year. He sold a small part of the work, but it is also a part that cannot be eliminated. Therefore, if you invest in Liu Ye, but do not choose the right work, you may miss the opportunity for a steady price increase.
Liu Ye ’s creative style is relatively stable, and no major transformation has occurred. Below we will select another artist to discuss. Zhao Bandi is another very important contemporary Chinese artist. In the late 1980s, when he was very young, he was famous for his oil paintings. He claimed that this was his “classical period”. However, Zhao Bandi was not satisfied with this, and resolutely cut off the road, completely abandoning the oil painting, and using video and other media to create, claiming to have entered the “panda period.” Now let’s take a look at the price index of Zhao Bandi’s works in these two periods.
As can be seen from the above picture, most of Zhao Bandi’s works circulating in the second-hand market are his works from the late 1980s to the early 1990s, especially the price index of works in 1990 was the highest. His subsequent works are not recognized by the market. After 2000, Zhao Bandi’s art became more mature, but only one 2009 work passed through the market, and the price was significantly lower than that of earlier works. The artist himself may disdain this, but this is how the market judges.
As can be seen from the above picture, most of Zhao Bandi’s works circulating in the second-hand market are his works from the late 1980s to the early 1990s, especially the price index of works in 1990 was the highest. His subsequent works are not recognized by the market. After 2000, Zhao Bandi’s art became more mature, but only one 2009 work passed through the market, and the price was significantly lower than that of earlier works. The artist himself may disdain this, but this is how the market judges.
So, “Is the work I bought increased?” There may not be a concise answer. The secondary art market is a test for artists and collectors.
(Author Liang Jie is a teacher at the School of Economics, Shanghai University of Finance and Economics, and Xu Jie is a worker in the art industry)