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Knowledgeable investments in works of art have yielded wonderful results since last year - much better than the JSE all-share index could produce. Welz, a well-known art critic and auctioneer, cites the example of a work by Gerard Sekoto that had been sold 18 months earlier for R242 000 and was auctioned for R792 000 - an increase of 227%.
It's not only in SA that the market for top art works is flourishing. It's an international phenomenon. Figures released in New York show that the autumn auctions of modern art and Impressionist and contemporary works passed the US$1bn mark (about R7,2bn). A Picasso painting reached $130m (R936m). Similar sums were paid for a portrait by Gustav Klimt and a large drip painting by abstract expressionist Jackson Pollock.
However, while investors and others were prepared to pay record prices for the big names, the most interesting occurrence was the performance by, especially, Chinese art works. The turnover in contemporary Asian works by Christie's and Sotheby's yielded a record $190m (R1,37bn). Most of the works sold were of Chinese origin, where the growing prosperity of an emerging middle class is expected to ensure that values will increase steadily over the mid to long term.
A name that has attracted international attention is that of Liu Ziadong, after one of his paintings fetched $2,7m (R19,4m) at an auction in Beijing in November - the highest amount ever for a work by a contemporary Chinese artist. He belongs to the school of the so-called cynical realists.
International art dealers and auctioneers are rapidly discovering China, since the country's growing wealth has brought many potential investors in art works to the fore. Prosperity and high values for works of art are closely related and with an expected economic growth rate of around 10% this year there will be thousands of new Chinese buyers in the market.
International auctioneering group Phillips de Pury will offer a large number of contemporary Chinese works in London on 6 February. That will give especially Western investors the opportunity to buy works of popular Chinese artists.
There are undoubtedly risks involved in investing in art, except in the case of the great masters, where the demand outstrips supply so much that good prices can be achieved even in bad times. Partly because, as banker Karl Schweiser, head of the UBS art division, puts it, the rich get richer all the time. Their perception is that the work of the great masters can only improve in value over the long term.
However, the extent to which a setback on the stock market can affect prices negatively is shown by the 60% fall in the Mei Moses index of art prices in the five years after Wall Street crashed in 1990. The index is compiled by Michael Moses and Jianping Mei, of the University of New York, and shows that the increase in prices of art works far outstripped the Standard & Poor's 500 index over the past 10 years. The index reflects the stock exchange prices of the 500 top companies in the US.
However, China isn't the only source of new buyers. In Russia, traditionally a country that appreciates good art, the prosperity brought about by high world oil prices is also enabling people to increasingly buy quality works of art at relatively high prices. In Latin America, where a country like Brazil is recording healthy growth rates, there's also a lively interest in buying art.
The general opinion is that the prices of quality art pieces will continue rising, unless there's a serious setback on the New York and other stock exchanges. Welz believes that the higher prices are simply doing justice to quality works of art and points out that the scarcity factor - provided the investment is made in the right pieces - will always work in the investor's favour.
However, the compilers of the Mei Moses index are becoming cautious. They feel that the art market is overheated and prices can't maintain the 20% plus compound growth rate of the past five years indefinitely. They don't expect prices to collapse, but they do think there will be a slowdown.
Luckily, Welz says, a work of art that you like will give you many years of pleasure, no matter what happens to its price. And over the long term value is added, as the record prices for the Maggie Laubser and Pierneefs in November confirm.
