What I talked about in my last post (&, with apologies, it has been a while – sometimes life gets in the way of art) was really only part of the discussion around the collecting journey. The next discussion should be about the secondary market, that is, buying (or selling for that matter) second hand works.
Whilst there are many markets in the art business, the 2 essential ones to understand are the (1) primary and (2) secondary markets.
The primary market is just that – where an artwork is sold for the first time. An artist’s work is more commonly sold for the first time by an intermediary – hence the many galleries around town. Mostly, when you buy on the primary market, you can have confidence that you are directly supporting an artist’ creative career. For some collectors, this is key to their collecting criteria. They will only look to the secondary market to affirm their savvy choices.
The secondary market… This is a far more layered and diverse world which requires experience and knowledge to navigate well. Secondary market is basically second hand. That does not mean second best or less. It doesn’t mean the discards or the unwanted (though all of that is readily available). The secondary market is merely what is being re-sold.
Generally speaking, the significance of an artist and value of their artworks increases with their critical and exhibition histories, as well as their collecting histories. This history, or provenance of the work becomes the artwork’s personal story is central to determining its value.
The secondary market is the place where this value of the artwork is really tested. What cannot be assumed is that the work you bought on the primary market, say 5 years ago, has increased in value. But potentially, over time (it may be a generation), if the work is by a well-respected artist, was bought from a respected dealer, authentication is proven, the condition is good,whose style is on trend and the state of the economy is buoyant, then yes, an increase in value can be anticipated.
The more the work and its provenance can be substantiated, the more likely it can be sold well. The auction houses, dealers and consultants rely on provenance to ensure authenticity and a fair market price. Look for the artist’s signature – back or front; check the back of the work for the stickers of the agents/handlers who have previously sold the work. If the work has been reframed, then the labels/stickers on the back should have been kept and restuck to the new back. Ask for documentation. It could be something simple like an exhibition catalogue/ room sheet. Keep it all on file, ready to pull out when you want to talk turkey with your selling agent.
Take care with what you buy and from whom. Do your homework or hire someone to do it for you. Research and knowledge are crucial for buying or selling well on the secondary market. Integrity, reputation and good manners go a long way too.
Depending on what you are looking for, how much you want to spend and your timeframe, you have a pretty wide choice with whom you wish to work. Just looking at Australian art , the prestigious leading auction houses generally hold 2 auctions a year of major painting, works on paper and sculpture. Sothebys which yes, still operates in Australia; Bonhams; Deutscher& Hackett or Mossgreen (which has recently merged with Charles Leski auctions – philatelics and cricket).
Shapiro’s is a boutique auction house, in Sydney only, which has a broader, more idiosyncratic approach to fine and decorative arts. They hosted the sale of the Royal Bank of Scotland’s emerging artists collection – a collection built from a highly anticipated and respected annual prize.
The Shapiro auction was a great opportunity to pick up some exceptional, very recent contemporary art. The visionary and generous Prize unfortunately has come to an end, a disappointing loss to the contemporary art scene in general.
Davidson’s deals in the next tier of works which are not necessarily blue chip, or fashionable, but nonetheless of interest and worthwhile keeping tabs on.
The prestigious auctions are great entertainment. It is always interesting to see who is waving their bidding paddle (you have to register to bid these days) and when. Just remember, the hammer price is the final bid accepted by the auctioneer; whereas the total due is the hammer + the buyer’s premium + GST. So that’s the hammer price + 22% (Deutscher& Hackett), or almost 25% Sotheby’s. The buyer’s premium is not a hidden fee and should not come as an unfortunate surprise. So work out your budget and do your calculations before you bid as you won’t have time during the auction. Bidding can move pretty quickly, coming from many directions: the room, the phones or absentee bids left with the auctioneer.
There is nothing like the excitement generated by the sale of a prominent private collection. The recent success of the sale of a (small) portion of the Laverty Collection through Bonhams is a case in point. The MCA was the venue for both viewing and auction – a coup which ensured exceptionally strong attendance and therefore sales. The event was a great opportunity to see close up some of the fabulous pieces in the collection and if you were quick, and lucky, to own something from it.
Colin and Liz Laverty were rare in their collecting habits. They were focussed, passionate and committed and, over the years, developed a collection of significant and high quality Aboriginal and contemporary abstract Australian art.
The number of sales was high and prices obtained were good. As expected, everyone was keen to be a part of the story – and the story is a good one: “This work was bought originally by the Lavertys …”.
The same quiet frenzy was seen at the Ann Lewis Collection auction, hosted by Mossgreen at The Art Gallery of NSW a couple of years ago. It was a marathon and required athletic stamina to take in the entire auction …. it went for hours (not enough seats, no catering). Some prices were more indicative of an emotional response rather than the benchmark for true market value. What the prices did represent generally though was (again) the demand for works previously owned by such a renowned collector.
That is buying. Selling at auction is just as public and heart thumping. A fee of about15% is paid by the vendor to the auction house, to cover advertising, photography and admin fees (no doubt this is negotiable depending on your relationship with the auction house). Whilst you may baulk at this, think about the value you get from placing your artwork in the optimum arena, in which to reach the optimum clientele, to achieve the optimum price. Ever tried selling a quality artwork on your own?
If this public action packed scenario is not for you, then consider a private dealer. You’ll enter a world of knowledge, specialty and passion and access to some fabulous pieces.
Annette Larkin cut her teeth at Newcastle Region Art Gallery and then at Christies, before starting her own business Annette Larkin Fine Art. She specialises in selling and valuing top end modern and contemporary Australian art and knows the market particularly well. Whilst Annette doesn’t have a specific list of artists whose works she resells, she does have her preferences which indicate a finely honed and clear understanding of what Australian modern and contemporary art history will be.
Her showroom at Danks St is moving, albeit down the hall, which means more hanging space to display more fabulous work.
Josef Lebovic knows more about prints and works on paper than most of us ever will. His knowledge is deep and his passion focussed. There’s always an interesting body of work, spanning the full spectrum of printmaking. Currently it is seriously groovy Australian travel posters which are sensational.
Charles Nodrum in Melbourne has a stockroom that takes you back in time. Again, his is a career that spans many years, many exhibitions and individual artworks.
He is the go-to gallery, for instance, for some of the lesser known, but still sensational, pieces from the mid 60s (Australian abstract expressionist).
Or hire yourself an independent consultant who’ll do the legwork and negotiations on your behalf.
All these dealers closely watch the market and invariably know who owns what. They follow what comes up and ends up with whom, who is interested to quietly offload one thing, to buy another. Check out their websites, start a conversation and see what may be possible to view privately. It is a differently paced world from the frenzied turnover of an auction and it may require more patience to find that particular work, but it also means, you have a little more time to consider your choice and make a decision.
What you will pay on any secondary market (second resale), be it privately or in the public sphere, is droit de suite. Essentially what has been legislated in Australia not so long ago, is that 5% of the sale price of the second resale (for works above $1,000) of a one-off work goes back to the artist or the artist’s estate. Basically the premise is that an artist should be entitled to a percentage of the gains on the resale of their works. It is standard practice in many countries (though not necessarily enforced), having begun in France during WWI, when it was seen as a way on ensuring the widows (mostly) of artists were compensated for, should their artist husbands die at war.
The rationale is somewhat different in contemporary Australia, as the idea is that visual artists, who are generally not highly paid, should be able to earn an income in a way that is akin to that of musicians, who are rewarded each time their song is played publicly or writers, whose income is based on the number of books sold or actors, being paid for every performance. The major difference though, is that the visual artist tends to create the one-off artwork, the others, what can be defined as a series of multiples.
Where this payment really counts is with Indigenous artists, a handful of whom sold work in the early days for peanuts to have them re-sell at auctions for record prices without reaping the financial benefit. Just a couple I’m thinking of are Rover Thomas (almost $800,000 in 2001), Emily Kngwarreye ($1m in 2007), Clifford Possum Tjapaltjarri ($2.4m in 2007), Mick Namarari Tjapaltjarri (just shy of $220,000 in 2013). (Prices quoted are those gained at auction and courtesy AASD.).
Just anecdotally, what I understand happened previously was that the vendor would be encouraged by the middle-man (auction house/ dealer) to contribute a portion of the profit voluntarily to the artist/ artist’s family. I gather, again anecdotally, that this was done. Informal, unregulated but generally effective.
This scenario however is the exception to the rule and many artists’ works do not sell for amounts way and above the original price. Not everything keeps going up in value. What a resale should do is enhance an artist’s reputation and collectability, to ensure that the price of their works on both the primary and secondary markets increases and thereby, ensures a better income. What I haven’t worked out is how the resale scheme accommodates a loss in value on the second resale – is the artist automatically entitled to a percentage of a work which has lost, rather than gained value?
An agency CAL administers the artist scheme, collecting the money, then dishing it back out less, of course, the 5% administration charge. Sometimes that admin charge is line ball with the 5% payment. Some artists have objected to the scheme and have asked to opt out, but it is not optional. It is mandatory and legally enforceable.
It will be interesting to see what happens when the secondary market is overwhelmed with artworks being sold out of self managed superannuation funds (SMSF), as a result of the recent changes to super laws. The contemporary art market was greatly bolstered in recent times by SMSF, with available funds being directed to buying art. If you have work in a SMSF and either don’t wish to or cannot afford to buy back your ‘super’ artworks from your fund, then it’s to the market place. And it may not be at a time or place which works for you. Everyone is getting a little concerned about how this potential “flooding” of the market may have an impact on the art market in general and individual artists’ prices in particular.
But the gallerist from whom you recently bought the work is not really interested in taking it back to re-sell it. That is not the focus of their business. They rely on the auctions houses/ private dealers to resell the work, though are obviously keen to ensure the final price meets their expectations.
Only recently there was a bit of set-to between Martin Browne, representing several artists including Giles Alexander, and auction house Mossgreen, with the sale of a couple’s’s SMSF collection. To be expected, the auction house offered low estimates to ensure interest and potential sales – their’s and the vendor’s aims – and the gallerist was not happy. The prices did not reflect what he is aiming for in his primary market. Martin Browne used his authority as Alexander’s copyright holder to withdraw permission for the artworks by Alexander to be reprinted in the catalogue or online. As a result the works were pulled from the auction altogether. He (Martin Browne) believes contemporary works should be held for a minimum of 10 years, then sold judiciously ….. in an ideal world, of course.
Mossgreen’s response was that the auction is the place where the market decides the value. It just may be however that the market might need a little more encouragement and guiding ….
What this spat does highlight is the discrepancy between prices on the primary and secondary markets when artworks are being sold and resold within short periods of time. (see the article by Brooke Turner, AFR 1.11.2012) It will get curlier as more SMSF collections are forcibly brought to market.
How best to resolve this? Run a campaign to re-educate the ATO which mandates that it is really only shares and property portfolios that are valid as collectables for super funds. Given what has been revealed over the past few years about share trading and property portfolios this can be exposed as a very misguided and narrow view of the world. Some of us know more about coins, artworks and rock music memorabilia than we do about company share prices – perhaps that knowledge should be acknowledged respected and valued.
If you’re still with me, thanks. It’s been a bit heavy going this time. Next time I’ll get back to pictures, artists and their stories….