Investing in the art market

After losing more than 50 per cent of its value during the recent economic downturn, the global art market saw a robust recovery in 2010.

In the last couple of years, the art market has been enjoying a revival as investors begin to realise the importance of art as an alternative investment to diffuse risk. Auction houses around the world are reporting record sales and investors are showing more knowledge and interest in art pieces. As part of this revival, the Middle Eastern art market has also been steadily attracting interest from collectors and investors worldwide.

"Investing in tangible assets such as gold or jewellery has always been very popular in the region. In the recent past, we witnessed a new trend that started at the beginning of the 21st century and accelerated after the 2008 financial crisis: ‘art investing'. The new concept comes from the fact that on top of being an aesthetic pleasure, art can be a financial asset. Indeed in the past 10 years, art has outperformed equity and bonds giving an average return of close to 8 per cent per annum," said Douglas Azar, investment adviser of wealth management at Liechtensteinische Landesbank.

This renewed interest comes hand in hand with a higher demand for Middle Eastern art.

"There is definitely an increased global attention in Middle Eastern art right now. I think part of that is because of what is happening politically but it's also because globally the price of Middle Eastern art is still quite undervalued when compared to other countries. The other thing is the art that comes out of our region is so different from what collectors are used to so it is exciting for them," said Minna Joseph, gallery director at Ayyam Gallery.

Estimates in a Middle Eastern art sales catalogue can begin as low as $1,500 (Dh5,508) and can range up to $20,000 for a prominent piece of work from a promising artist.

"There are people who have invested earlier on in artist communities [and] have seen the price of their work go up dramatically. There was a boom time and increase in prices particularly for Iranian art. There is also a wave of interest in artists who are from the modern school who are being reappraised," said Antonia Carver, fair director of Art Dubai.

Middle Eastern influence is being seen in major galleries across the world. The London Gallery recently did an exhibition, Unveiled, which exhibited new art from the Middle East featuring 21 new artists from Lebanon, Syria, Iraq, Iran and Palestine. The Jameel Gallery of Islamic Art in London's Victoria and Albert museum was also recently opened under the patronage of the Saudi royal family.

According to Michael Jeha, managing director of Christie's Middle East, as the supply of works by the great modern Arab and Iranian masters dwindles, collectors, old and new, are taking an increased interest in the rapidly growing young generation of regional artists.

Another area that is in demand is contemporary artwork from emerging markets in Asia. "China is now becoming the largest auction place in the world before New York and London. This is a major shift which will have a long lasting impact on the art market," said Azar.