While record art auctions may have attracted huge media attention last week, it is the lower end of the market where the profits are being made.
The $142m sale of Francis Bacon's Three Studies of Lucien Freud at Christie's on November 12 set a new world record for any artwork ever sold at auction. Yet it seems that those investors with a more modest budget are actually seeing the best returns.
According to the Mei Moses Art Index, at last week's post-war and contemporary art sales, those that originally bought their works for more than $1m saw an average return of 8.5%, while sellers who had originally spent less than $100,000 made gains of 9.3%.
The same rule applies for the November impressionist and modern art sales in New York, where works under $100,000 made a 6% return for their owners, and those over $1m returned just 2.5%.
"Post-war and contemporary is different to any of our other databases because expensive works do better than the mid-price works," Michael Moses told Forbes. "However, the expensive works still under perform the low price works."
That's not to say that record-breaking works don't make a profit - just rarely. The Bacon piece was reportedly bought by its seller less than eight months ago for an undisclosed sum, however Toronto-based economist Don Thompson told Bloomberg Businessweek:
"It's not only the most expensive auction item of all time; it's also the most profitable flip of all time. It's the only painting ever purchased for more than $40 million dollars that's been sold at a profit."
But Moses urges caution to those attempting to replicate the speedy sale, saying that risk increases with art sales over a short period.
"It's difficult, particularly when you factor in transaction costs, to make money on a work that you've bought recently. It's possible, but it's hard," he says.
"Our results show that if you sell after a short holding period, you can make a big gain or a big loss. Over a longer period, the volatility drops dramatically and you get to defray the transaction and other holding costs."
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