It’s hard to plan for one’s financial future these days. Interest rates for ordinary savings and time deposits are so low. Earnings from sovereign bonds—unless you have a gadzillion pesos—are not that much. The stock market is up today, down tomorrow, driven by momentum rather than fundamentals.
Nowadays, affordable residential land is outside the city. Urbanites make do with condo and rowhouse units which will not really go up in value because an endless number of new and better buildings are being built.
As for jewelry, investment-grade diamonds remain a good store of value. But your money is not really growing, Gold at US$1,800 or so per ounce as of this writing, is still priced less than the US$2,163 it was worth—in real terms—in 1980.
More and more, savvy Filipinos have been investing in art. Local auctions have done quite well. The ManilArt 2011 fair this week will attract not only the curious, but many serious buyers.
Charting the relative value of various cultural property over time, paintings in particular have shown strong and consistent increments. One can invest, that is, put money or capital into art, with the purpose of getting a profitable return in the future. However, it’s also very possible to lose money.
Price of art
How are art works priced? One factor is the cost of the material, or medium. The second factor is labor. The longer it takes to do something, and the more skill required, the higher the cost.
The lifestyle and cultural perspective of both the artist and his patrons impacts on the prices an artist asks and what his buyers pay for his works.
Production volume and market distribution are key factors. Prices stay low if there is simply too much of a commodity. It is useful to keep track of auction and gallery exhibition prices. One should take also into consideration institutional recognition for the artist’s work such the CCP Thirteen Artists, the Ateneo Art, the Philip Morris and other awards.
One way to determine resale price is by factoring in opportunity cost. Let’s consider a Zobel painting worth P150 in the early 1950s. At that time, the peso was worth P2 to a $1, so P150 was equivalent to $75, or P3,200 today. If you had put the P150 in a bank, assuming a 10-percent annual interest, over 50 years that translates roughly into P6,800. That is equivalent to $160 (better than the $75).
Another base comparison would be minimum wage. In the 1950s, a young government employee would have gotten around P25 a month; P150 then would have been equivalent to the pay of six employees, who today would take home around P10,000 each. That painting comparatively should then be worth P60,000.
In real estate terms: one square meter of land in Forbes Park in the early 1950s was worth P15; that is, P150 then would have bought you 10 sq m in Forbes Park. Today, at P100,000 per sq m, that patch of land would be worth a million pesos.
On the other hand, what might the Zobel fetch today? At least P2.5 million. The same thing happened to the value of the works of Magsaysay-Ho, Arturo Luz and some other contemporaries of Zobel.
The most expensive work by a Philippine master is still Juan Luna’s “Interior de Un Café,” (also titled “Parisian Life”) purchased some years ago from Christie’s for P42 million with GSIS funds. Was it a good investment? It is, in the sense that that money might instead have been lent to someone with connections, ending up as a non-performing statistic.
Over the long (really looong) term, prices will catch up with the GSIS Luna; someone’s recent assessment of that painting’s present value at P200 million was met with amused leers by Manila’s art community.
A work by young artist Ronald Ventura put on the block in Hong Kong last year achieved a hammer price of a million US dollars (the buyer was reportedly an Indonesian). Ventura’s subsequent offers have kept pace; his are now the most expensive works by a living Filipino artist.
Those of us without a million US dollars to spare have to be more circumspect. Significant works by National Artists ought to be good investments over the long term. For the short term, it might be more profitable to bet on new artists. “Bet” however, is the operative word, with no sure rates of return.
Artworks by young Filipinos (born ca. 1960) already regarded as bluechip are those by Manuel Ocampo, Ventura, Geraldine Javier, Nona Garcia, Jose (Jon) Santos III, Elmer Borlongan, Alfredo Esquillo Jr.
Considered established artists are Charlie Co, Louie Cordero, Marina Cruz, Leslie de Chavez, Kiko Escora, Emmanuel Garibay, Kawayan de Guia, Mark Justiniani, Annie Kabigting, Robert Langenegger, Jose (Jojo) Legaspi, Yasmin Sison, Rodel Tapaya, Wire Tuazon, Liv Vinluan.
But the price of art can also be manipulated by hype. Artists and dealers establish presence with “exhibitit” even in restaurants or car showrooms, getting into the mass media by wooing journalists. They try to achieve importance by having their works documented and written, even if they have to pay for it. Some dealers go to the extent of putting certain artworks in auctions, where they set up the bidding, to feign demand.
There are many young buyers today who are called “flippers” because they buy a work and “flip it” or sell it in less than a year. However, the true value of artwork should be viewed over a longer period of time. The wise investor sticks to fundamentals: That is, how good is an artwork? Not the artist, because one is not buying a signature but the artwork itself.
Who and what
An investor should keep track of the mindset and tastes of those who are buying, and those who are selling, at any given time. Collectors who own many artworks do not necessarily have good taste.
Age does not figure that much in the profile of an art investor. A young professional may be as passionate about buying art as a big-time businessmen with money running out of his ears. The only difference would be in the capacity to pay, and the experience and prudence that an older hand would exercise. The main consideration is really lifestyle and knowledge.
“Investment” comes from investire, to go into. Going into any area of investment requires you to know (conocer) as much as you can about it, become a connoisseur. You should be able to tell the real thing from the look-alike. You must know what is investment-grade and what is basura or trash. Be familiar with the standards of rating and pricing art. You cannot think that all this information is just a mouse click away. You have to live art, have it around you.
How and where
A good place to start is the art section of newspapers, which carries articles on current cultural concerns. Go to art openings, and get yourself into the mailing list of galleries. Look into young artists’ websites.
As with any area of business, not all art dealers are above board. Not all “experts” will tell you the truth. Artists’ relatives will not necessarily authenticate only the real stuff.
In the end the investor has to look out for himself.
Know Philippine art in particular. The following are comprehensive reads: Art Philippines, Filipino Heritage, the CCP Encyclopedia, Kasaysayan: History of the Filipino People, the 1970s Archipelago magazines. These can help you find your particular area of interest. Build up your own library.
The right timing
But as with any learning process, there are “matriculation fees.” Some people try to learn as much as they can first, before buying. Some people initially buy on the lower end, just to get their feet wet.
When is it time to buy? Ideally, you buy low, and sell high. But “low” and “high” are relative. In the late 1970s, a 30 x 40 painting by National Artist Ang Kiu Kok fetched P15,000. Today, that same painting is priced at a couple of million. With your same P5,000, you might also have bought a Legaspi, or a Zalameda, which would not fetch as much today.
It is true that given a holding period, all art works increase in value. But the thing is to put your money in the ones that increase most in value, in the shortest time.
Ultimately, at some point, you must cash in. Profit is only realized when you sell. The best is to sell at the height of an artist’s popularity. However, you may also target a retirement date, say when you reach 60 years old. The problem with waiting that long is that by then, it might be too late for you to correct your portfolio.
In any case, it’s a good idea not to hold on to everything till the day you die, because if you won’t sell those art pieces and enjoy the money, your heirs will.
Why invest in art?
If done properly, an art investor can reap profit over the short term, or even constitute a retirement fund over the long term. Even the most artistically challenged financial consultant will have to admit that there is no point in wallpapering your office walls with PLDT or Ayala Land shares or Swiss notes.
Artworks, on the other hand, would speak of higher intellectual standards; the leisure to engage in cultural pursuits; enough travel for you to have found your own identity; friends and visitors who recognize good art when they see it.
And that is the ultimate benefit of investing in art: It is not only in the profit your pieces could fetch tomorrow. It is about enjoying the finer things in life today.