What We Do
Eastern Cape
Citadel Launches First SA Art Price Index
In a pioneering move lauded by most but criticised by some, wealth management firm Citadel has launched the first SA art price index.
The index has been calculated back to 2000 using the hammer prices (that is, the prices at which lots are knocked down, before buyer’s premium, tax or any other charges) provided by Actionvault of sales at what Citadel considered the six most reputable local auction houses – 5th Avenue Auctioneers, Ashbey’s Galleries, Bernardi Auctioneers, Russell Kaplan Auctioneers, Strauss & Co and Stephan Welz & Co - and Bonhams in London. Gallery sales are excluded, as not enough reliable information is available about gallery prices and volumes, but the index does cover not only paintings but also photography, sculpture and graphics.
The index has been structured according to the advice of Citadel’s consultant, the economic advisory firm Econex. Because of the thinness of the local market, Econex considered that the methodology of probably the best known index, the Mei Moses index, of comparing prices when the same work is sold more than once, would not be appropriate. So-called naïve indices, which in effect track a basket of representative paintings, are also flawed.
Econex thus recommended a so-called hedonic index, which without going into some terrifying mathematical equations uses regression analysis to adjust for all these considerations.
On the basis of the number (not value) of works sold, Econex calculated the index for the 20, 50 and 100 top-selling artists over six-month periods (there wasn’t enough data for more frequent calculation, though Citadel hopes this may change) for that decade.
It found that the three lines corresponded almost exactly, though obviously the bigger the sample, the better. It also closely tracked the JSE all-share index, though with a lag of about six months, which Citadel fiduciary specialist Alfie Bester tells me is only to be expected: unlike share prices, which are forward-looking, activity in the art market tends to lag the general economic cycle.
Citadel says that many of its clients buy art, both for pleasure and as an investment class, and while the launch of the index is not meant as a recommendation to invest in art, for those who do, it will help determine the relative performance of art against other asset classes. It may also make timing decisions easier and – though Citadel does not stress the point – also allow art owners to gauge how specific artists have performed against the overall market.
It’s undeniable that art is increasingly treated as an investment, especially at times like the present, when interest rates are so low and markets so volatile that some traditional investment vehicles have lost their attraction. But one of the problems of promoting SA art as an investment class has been the lack of any yardstick to measure the progress of the market.
So it might be expected that the launch of an index that will help to fill this gap would be universally recommended. But not so: Mark Read, proprietor of the Everard Read Gallery, is particularly vocal, telling Business Day that the index “almost debases art…It can’t be reduced to the level of stocks and shares.”
From a purist point of view, of course he’s right. Trouble is that, for many monied people, who are the ones that drive the market, art has already largely been reduced to the level of stocks and shares, albeit still with an (illusory?) aura of culture and superiority.
Auction houses have certainly contributed to this, and it would be naïve to suggest that galleries have played no part. For these people, the index, which will be published gratis every six months, will be useful; the rest of the world is free to ignore it.
By Michael Coulson for The SA Art Times
Citadel Launches First SA Art Price Index
