When it comes to purchasing art for investment purposes, provided you know enough about the value and marketability of works of art to make profitable choices, typically in the long-term, this can represent a very lucrative way of making money.
The following guide on ‘how to invest in art UK’ looks at both the “why” and “how” to do this. We cover the key reasons why investing in art in the UK can make sense from a financial point of view, as well as the process of identifying and buying pieces of art for sale, from where to look for the best finds to how to go about making a purchase. Finally, we touch upon the tax considerations when buying and selling capital assets in the UK, including pieces of art, and provide some top tips when making this type of investment.
Why invest in art in the UK?
If you are an aspiring art collector, the UK’s capital is home to some of the best auction houses in the world, offering a wealth of art and collectables for sale. Whether you are interested in classic paintings or modern prints, you will certainly be spoilt for choice, with a plethora of pieces from both British and overseas artists being auctioned for sale.
Importantly, investing in art is not just for the super rich, where it is possible for anyone with available cash to purchase pieces of classic or contemporary art to subsequently sell on, from investments of just a few hundred pounds to purchases running into seven figures. For the lucky few, a relatively low-value purchase can translate into a very high-value sale several years down the line, especially in respect of collections from emerging artists who have since built up a reputation and established credibility in the eyes of the art world.
Historical artworks are often seen as the most valuable, with works by famous masters from centuries gone by attracting bids of millions of pounds. However, modern artwork from up-and-coming artists has become an increasingly attractive investment option. As such, it is not impossible to pick up pieces of art at affordable prices and, provided you are able to hold on to your art collection for a number of years, possibly ten or more, this type of long-term investment can prove to be a profitable way of generating large sums of capital.
Since the mid 1980s, contemporary art is said to have delivered an annualised return in the region of 7.5% to investors where, with the exception of artwork by big names such as Hirst and Hockney, contemporary works of art are usually more affordable, making them a more attractive investment option for the novice collector. In some cases, contemporary art investments can generate double, or even triple, their valuations in just two to three years.
Where is the best place to invest in art UK?
While investing in a larger, more well-known piece of art in the knowledge that it will almost certainly appreciate in value moving forward, these types of safer investments are usually out of the reach of most collector’s budgets. As such, if you are looking to start investing in art, it is worth paying close attention to what the art world is saying and observing some of the up-and-coming artists whose work could be growing in value.
With the right knowledge, there are definitely bargains and good investment buys to be had. There are also plenty of places in the UK where these can be found, from the large auction houses in the UK’s capital to the many city-based and smaller sale rooms situated right across the UK, each with its own busy annual auction calendar.
London’s auction houses are some of the most prestigious in the world, where the capital’s auction house industry alone sells billions of pounds worth of art on an annual basis, providing a clear indication of the growing popularity of art as a form of investment in the UK. The trend also seems to be that art prices as a whole are consistently increasing, which not only benefits artists and auction houses, but art collectors too.
UK auction houses
For many years, London has been the centre of the art market, where names like Sotheby’s, Christie’s, Bonhams and Phillips are now synonymous with both historical pieces and contemporary works of art. However, each auction house has its own speciality and clientele, some catering to the super rich and others directly to the public:
Sotheby’s: founded in 1744, Sotheby’s is one of the world’s largest, oldest and most trusted marketplaces for art and luxury, with several locations in the UK and Ireland alone. Boasting a global network of specialists across a range of different art disciplines, its 44 departments include contemporary art, modern and impressionist art, old masters, jewellery, watches, wine and spirits, as well as interiors. This auction house hosts over 600 auctions annually and offers a cross-category selection of items available for purchase through both digital and physical shopping experiences, as well as via private sales.
Christie’s: founded in 1766, Christie’s is a world-leading art and luxury auction house, spanning more than 80 art and luxury categories. Christie’s has sold 8 of the 10 most important single-owner collections in history. It has also achieved the world record price for an artwork at auction (by Leonardo da Vinci), for a 20th century artwork (by Andy Warhol) and for a work by a living artist (by Jeff Koons). With two locations in London, art collectors can choose from a range of fine art, furniture, jewellery and wine, together with some of the most exciting and innovative artwork available on today’s market.
Bonhams: founded in 1793, Bonhams is one of the world’s largest and most renowned auctioneers of fine art, antiques, jewellery, motor cars and collectables. It holds more than 400 specialist sales a year in 60 different categories, and is the sole remaining privately-owned international auction house and in British hands. With two locations in London, Bonhams offers unrivalled choices for art collectors in a wide variety of specialist areas.
Phillips: founded in 1796, Phillips is another world-renowned auction house, with London headquarters in Mayfair, offering categories of artwork spanning 20th century and contemporary art, design, editions, photography, jewellery and watches. By focusing on the defining aesthetic movements of the last century, Phillips has set itself apart as one of the most dynamic and forward-thinking auction houses in the world.
More information on each auction house can be found online, each with its own comprehensive and colourful website providing dates for upcoming auctions, with fully-photographed catalogues available online, together with detailed buying and selling guides.
The services that an art collector can expect from each of these big auction houses include authentication, provenance and pricing. This is where specialist teams evaluate each item to ensure objects are authentic (authentication); review ownership history, supporting documentation and relevant databases to ensure a smooth title transfer (provenance); and expertly assess the market value for each item and assign an estimate range to give guidance to prospective buyers on what it is likely to sell for (pricing). Every item should also come with its own condition report, outlining its physical condition at the point of sale, although bidders are advised to view items in person, where at all possible.
In addition to the most prestigious London-based auction houses, there are other general auction houses in different towns and cities across the UK, most of which will allow you to register and bid through websites such as ‘The Salesroom’ or ‘Easy Live Auction’.
You can also find out about upcoming sales and view the online catalogues on the individual website for each auction house. As with the larger auction houses, you can create an online account, allowing you to track upcoming sales and lots, view online condition reports and record your interests so that you never miss a sale or item. Each website should provide instructions on how to register and bid. It should also explain how to ask for a condition report of any desirable item, where none otherwise exists.
In addition to the auction calendars and catalogues, the auction websites will also provide details of the auction charges and available shipping options. Most auction houses will offer in-house shipping, or you can independently arrange courier collection for larger items, where there are companies who offer specialist packing and international logistic services for purchases made at auction, with a range of insurance options to cover for safe transit.
When it comes to charges, all auction houses, large and small, make money by adding on both a seller’s and buyer’s premium to the hammer price, with the successful bidder being responsible for the latter. This commission will be calculated as a percentage of the hammer price, where this additional cost must be factored in when calculating your budget prior to bidding. For example, if the buyer’s premium is 15% including VAT and you win a lot for a hammer price of £1,000, the total that you will pay is £1,150, excluding any additional charges, such as storage or shipping fees. Most auction houses will advertise their buyer’s premium as inclusive of VAT, where applicable, but this is worth checking in advance.
Tax considerations when investing in art in the UK
When buying art in the UK, there may be all sorts of tax considerations, including VAT, import and export duties, as well as capital gains tax if sold at a later date.
If the purchase of art from the UK triggers a tax charge to ship overseas, it is essential to get advice on this in advance of making any investment. It is also important to factor in any other potential taxation considerations, including capital gains tax if you are UK-resident or domiciled, or the equivalent form of tax elsewhere. Tax issues can become especially complex as a non-UK resident, where expert advice should be sought, as there may be tax implications in any jurisdiction in which you reside or are classed as domiciled.
Tips for making UK art investments
It is important to bear in mind that, as with any form of investing, you will be taking a risk with your money. Investing in art is a long way from putting your cash in a savings account for it to sit safely earning interest where, instead of the security of a guaranteed return, you stand to lose as well as gain. The hope is that you will make a healthy profit, where some pieces of art can be sold on for vast sums of money, but there is always the possibility that you will end up making a loss, with investors facing the challenge of the value of artworks being driven by other consumers. In other words, a piece of art is really only worth what others believe it to be worth, without any guarantee of even making your money back.
With these potential risks in mind, it is essential to first do your homework around what type of artwork may become profitable, and which artists to look out for. Additionally, investing in art in the UK as a non-UK resident can be a daunting process, not least if there are any language barriers and/or you are unfamiliar with the different types of places to find potentially good investment pieces, not to mention the buying and selling procedures.
It is important to do your research on how each auction house works, as well as keeping abreast of the regular auction dates and different pieces listed to see how these fair on re-sale. It is possible not only to review the hammer prices achieved for different pieces up for auction, with archived records of the winning bid for each lot, it is also possible to watch an auction live online. By watching how an auction unfolds, with both internet or telephone bids, as well as bids in the room, this can help you to become familiar with how the process works. It can also help you to build a useful knowledge base of current market values.
Finally, for the investor looking to spend more than a few hundred pounds, the larger and more prestigious auction houses can provide individualised client services, providing tailored advice and guidance on the most up-to-date market trends and insights.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services - a Marketing & Content Agency for the Professional Services Sector.
