April 16, 2012

Skittish Hong Kong Investors Flock To Art

Sales Of Chinese Modern Art At Christie’s Hong Kong Reached HK$650m In 2011

Fang Lijun's “1993 No. 4” sold last month in Hong Kong for US$3.67 million

Along with its status as the world’s largest wine auction market, recent years have seen Hong Kong become a key art market as new mainland Chinese collectors and skittish local investors have turned to art as a relative safe haven. Stocking up on everything from traditional Chinese ink paintings to contemporary pieces by blue-chip artists like Zhang Xiaogang, Fang Lijun and Liu Wei, demand from local Hong Kong and mainland Chinese buyers saw revenue surge for the Asian outposts of global auction houses like Christie’s and Sotheby’s in 2011. Last year, Christie’s achieved total sales of HK$7.04 billion (US$907.3 million) in Hong Kong from its red-hot spring sales and more muted auction series, while Hong Kong sales generated 20 percent of Sotheby’s revenue in 2011, up from just five percent in 2004. Domestic Chines auction houses have also been buoyed by the country’s demand for art and antiques, with China Guardian and Beijing Poly achieving respective turnover of 11.23 billion yuan (US$1.8 billion) and 12.1 billion yuan ($1.9 billion) last year.

In addition to growing interest in art appreciation among aspiring Chinese aficionados, collectors and aspiring private museum owners, recent years have seen growing numbers of investors and speculators looking to top-quality and historical art as a hedge against inflation and uncertain stock and real estate markets. While this has been good on the whole for auction houses, this growth hasn’t been without its problems. While many Chinese speculators were shaken out of the market in 2010-2011, with ArtTactic’s recent Chinese contemporary art Risk Barometer suggesting that the current recovery is “growing at a healthy speed without strong elements of speculation,” issues like excess hot money, the proliferation of upstart, unproven auction houses, and nonpayment of winning bids remain concerns among auction houses operating in Hong Kong. In addition to auction houses, global galleries have looked to tap growing demand for art among wealthy Chinese buyers. Over the past few years, many international galleries, including White Cube, Gagosian, Ben Brown Fine Arts and Hanart TZ, have made it easier than ever for monied Hong Kongers and mainland Chinese to get their hands on world-class art.

As the AFP writes on Hong Kong’s art-collecting boom:

Art brokerage The Art Futures group says its client base has grown in step with Hong Kong’s burgeoning reputation as the heart of Asia’s art market.

Art investment has become a relative “safe haven” in stormy markets, says AFG’s Jonathan Macey, adding that the fundamentals of artists’ work can be analysed in much the same way as a stock, with “mid-career” artists favoured over total newcomers or the top-priced favourites.

“It is also enjoyable for people in a way that buying property for purely investment purposes isn’t,” said Macey.

“We explain who the artists are and most people very quickly start to enjoy gaining that knowledge. The process is recreational and they carry on deepening their knowledge and enjoyment of art.”

While Macey stresses art is not a “get-rich-quick” scheme he says clients can expect 12-18 percent gains over a three to five year period.

In the interim they can lease their paintings to hang in company and hotels lobbies providing a dividend of around seven percent that outstrips most bank interest rates.

 

Art / Auction / Business & Finance / Features / Investment
Tag: Art, art collector, auction market, chinese contemporary art... , More
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