More than ART for art's sake...

The first eight paintings sold at Christie's Melbourne auction last month all went for double their estimates. On face value, it looked like the great art market boom was back and ready to challenge the heady days of the late eighties.

But those in the trade disagree, quick to point out that today's type of buyer is distinctly different and only certain artists that are attracting the dramatically rising prices.

Christie's managing director Roger McIlroy argues the market is strong but not in

The first eight paintings sold at Christie's Melbourne auction last month all went for double their estimates. On face value, it looked like the great art market boom was back and ready to challenge the heady days of the late eighties.

But those in the trade disagree, quick to point out that today's type of buyer is distinctly different and only certain artists that are attracting the dramatically rising prices.

Christie's managing director Roger McIlroy argues the market is strong but not in a boom period.

"The art markets are strong - as is real estate and shares, but the buyers are picking the eyes out of the art market and paying for the best works," he says.

This was obvious when the auction house Sotheby's sold a Sidney Nolan's Kelly painting for almost three times its estimate.

The Australian record price for the artist, $838,500, was due to the rarity of the work. It had been in the UK for many years, and it was a good example of Nolan's early series of paintings featuring Ned Kelly. Most of these works are now in public galleries and it is rare to find a good one still in private hands - although those completed later in Nolan's life are still plentiful.

Denis Savill of Savill Galleries says that while the recent auctions suggest a "marked improvement" since the bottom of the art recession in 1991, price gains have not been across the board.

He cites the various sales of Heidelberg school artist Frederick McCubbin's Hauling Timber, Macedon Heights (see panel above/below/right/left).

"Hauling Timber is a great barometer. The painting is in a virgin state and in the eighties was a major painting commanding great prices," he says.

Today, modern artists like Nolan and Arthur Boyd are selling for greater prices than the McCubbin, he says.

"Colonial paintings and the best of the Impressionists have certainly moved on from the low base they were at six years ago," Savill says.

"However, this pales into insignificance when compared to the early moderns which have appreciated in leaps and bounds."

Living modern artists like John Olsen have been rising in value at 100 per cent a year, says Savill.

McIlroy says Christie's has been tracking art values globally since 1952. Before the late eighties boom, art was averaging a return of 11 per cent after inflation. In the nineties this has dropped to 9 per cent.

C+BUS superannuation fund has a $2 million art investment which was started in the eighties. Fund secretary Helen Hewitt says art was the best-performing asset in the fund last year, with a return of about 20 per cent. C+BUS sold some paintings last year, achieving returns of 300 per cent, and is still looking to acquire a few more paintings before closing the collection and taking a medium to long-term in-vestment viewpoint.

For those investing in art, great care is needed to avoid losses. Un-fortunately for investors, there are no monthly stock reports showing who is on the rise and what is going down.

Sotheby's Melbourne paintings specialist Lara Nichols says knowledge is the key to investing in art.

"People need to visit galleries, attend auctions, read about artists and quiz staff to learn about the market and particular artists," she says.

McIlroy says he is amazed at how rarely people ask questions about the works offered for sale. Both Christie's and Sotheby's will give free information on the condition of the picture and the its impor-tance during the viewings of the auctions.

Australian art auction records have been compiled by Edward Craig in Sydney since 1972 and published in 10 volumes over that period. The early volumes are now out of print and are keenly sought-after by collectors, but the more recent ones are available and give a good indication of the prices being achieved. Unfortunately, there are no such records for gallery sales.

Nichols says that after a while, an investor will identify which art-ists or period interests them. "You need to build up a knowledge of the artist and their works before spending any money," she says.

Knowledge of the artist should include facts like what their typical works are and what medium they painted in.

For example, at the turn of the century, artist JJ Hilder painted soft watercolours on paper. An investor would be seeking these and not the oils painted by the artist. Investors would seek Arthur Boyd's Shoalhaven series painted in New South Wales up until his death last month. Paintings by Boyd completed in England, where he had a home, are not sought by Australian investors.

A decision would also need to be made as to whether to buy oil or acrylic paintings or works on paper. (Works on paper include water-colours and prints.)

Paintings are more resilient and, apart from cleaning, are generally easier to keep in good condition. Works on paper need more care as contact with the acids in papers can cause discolouring known as fox-ing. While mild foxing can be removed, if the work is too damaged it may be irreparable and its value plummets. Works like watercolours are also subject to fading if left in strong sunlight.

The auction rooms often have a work in poor condition which cannot be saved and it is sold for a few hundred of dollars to an unsuspecting buyer.

Interestingly, C+BUS buys very few works on paper because of the high maintenance required, Hewitt says.

The aim of serious investing in art is to buy the best picture you can for your budget.

Investors have been buying art for self-managed superannuation funds, however, this could cause problems later this year, warns MacQuarie Bank Technical Adviser Group divisional head Peter Hogan.

The Federal Government is proposing to introduce rules that allow only 5 per cent of assets in the fund to have a beneficial interest with the fund's beneficiaries.

The average self-managed fund is about $150,000 in size, so somebody buying an Arthur Boyd for $60,000 will run into trouble when they go and hang the picture on the wall at home, warns Hogan.

"For the superannuation fund to comply, the assets need to be ac-quired for retirement, not pleasure," he says.

"And the 5 per cent rule is going to make it harder. A $150,000 fund cannot buy major art works to comply."

Hogan sees two ways of meeting the new requirements and still allow a fund to buy more expensive works. Both cases involve removing the as-set from its beneficial status - by either putting the work in a vault or by leasing the work to the beneficiary or their business.

However, any leasing costs must be at a true market value and include the costs of insurance and maintaining the work.

Capital gains is also an issue when investing in art. Records of pur-chases and any expenditure such as maintenance on the work must be kept.

Sotheby's Nicols also recommends keeping this paperwork as it can en-hance the value of the picture. This includes copies of catalogues from where the work was bought and details of cleaning.

Investing in art is not for the faint-hearted, but if carefully con-ducted, the medium to long-term returns are as good as any of the more-traditional asset classes.

BREAK-OUT 1

To go with McCubbin picture

One of the best illustrations of the roller-coaster ride art prices have seen in the past 25 years is Hauling Timber, Macedon Heights, by Heidelberg school artist Frederick McCubbin

Painted in 1911, the painting was part of a private collection for many years. In October 1974, the painting was auctioned at a Christie's sale in Sydney for $40,000.

In 1981, Savill Galleries bought the McCubbin for $100,000 and subse-quently sold it for $300,000 to a private collector.

Sometime after 1989 the work was part of the Farrow Collection, bet-ter known as the Pyramid Building Society. Farrow paid $1.2 million for the painting, which was bought at the height of the art boom.

Both the boom and Pyramid went bust. When the collection was auc-tioned at Leonard Joel's in Melbourne in November 1991, the McCubbin was there. It had a reserve of b