The pandemic saw a surge in people making purchases with a view on what they might be worth in the future.
Why now and what are the risks? Eleanor Pringle investigates
When people think of investments, they tend to think stock and shares.
They think pension pots and tables flashing in red and green.
They don’t think of an extraordinarily expensive handbag or a piece of art.
And yet during the pandemic people have switched from consumers to investors and are spending with the intent to generate some cash further down the line, according to experts.
Art saw a boom during lockdown – online marketplace Rise Art saw customer order values increase 65pc at the onset of the pandemic compared to the year before.
Meanwhile, in the luxury goods market after a blip in the early stages of the pandemic, spending has returned and is set to grow.
Data-crunchers Statista say Gen-Z and Millennials, particularly in the Chinese market, will see the sector grow from $309.6 billion in 2021 to $382.6 billion by 2025.
“There has been a shift from shopper to investor,” said Richard Ross, director of Norwich-based financial planner Chadwicks.
“People jump on trends like bags and trainers because they see other people doing it and we do behave like a herd and tend to follow what other people do.
“The problem is when you’re joining the market at its peak it’s already too late – you need to be looking at what’s coming next.”
There are also three issues to be wary of when buying items like designer watches, handbags, and art, he added.
“The first is that the price will take commission into consideration. If you’re buying an amazing bottle of wine from a dealer a large percentage of that price will be their commission, so as soon as you’ve bought it you can’t sell it for as much.
“The second is that you’re not buying in an open market. What works about the stock market is that the price reflects everyone’s opinion at that time: the buyers and the sellers.
“Auctions work the same way but on a smaller sale – you still have that supply and demand working its way to a price in front of you so you know when you buy it that it’s a fair price.
“Now that might change over time, but you know it’s fair when you’re buying it. You don’t know what when you’re walking into a shop and purchasing something because the entire value of that product is based on the seller’s estimation,” he said.
He added: “The third thing to be considered is liquidity. I know that if I sell my shares I’ll have the cash in a week. I don’t know that about a classic car or a piece of art because they may take months to sell.
“I’d say that when making purchases like this you really need to do your research, and you need to accept that some of the value of this piece isn’t financial, it’s in your personal enjoyment of them.
“At the end of the day money isn’t about making more of it, it’s about allowing you to live the way you’d like to.”
He was echoed by gallery owner and Banksy expert John Brandler.
The founder of Brandler Galleries in north Essex said: “Investing in art requires heart. You need to invest with your eyes – not with what you hear is good.
“I have definitely seen a rise in people buying art as an ‘investment’ and they’re hunting down the brands they think tick that box.
“I really don’t like that – that’s not how I want to sell art and that’s not how I run my business. The people who have made money out of art are the ones who bought it decades ago when they had no cash to spare.
“I know one couple from Bristol who spent all of their student loan on Banksy pieces – now they’ve paid off their mortgage. But they risked everything when they were young because it was art they truly loved and wanted to have in their homes.”
And he added that the art world works outside of the normal rules of supply and demand.
He explained: “If an artist creates more pieces it can actually drive the prices up because it creates more of a frenzy – we’re seeing this with Banksy.
“There’s also a phenomenon of demand only kicking in after a certain price. I see it with people only getting interested in a piece if it goes over a million.
“They feel like they can’t have a multi-million pound hotel with a piece in the lobby worth £25, so they only become interested when it goes over a certain figure. It creates this artificial inflation of prices which people think is genuine.”
But for an auction house outside the ‘hype’ market genuine increments in value are being recorded.
Tim Blyth is the managing director of Keys Fine Art Auctioneers, who said he saw a big rise in people buying antiques as investment pieces in lockdown.
He explained: “This was initially due to buyers being at home and finding things to bid on online, but as everyone has slowly been returning to work demand has stayed high and the trends we are seeing point very strongly to a strong investment-driven market.”
He echoed Mr Brandler in that art was also seeing huge increases in demand: “The growth in modern art shows no sign of abating, as recent local interest in Banksy’s activities has shown.
“There are some very undervalued late 20th century and contemporary artists which could well leap – although as ever the tricky part is judging which ones.
“20th century designer furniture also continues in its ascendancy, as do ‘modern’ collectables such as toys and even the first and second generation of video games and home computers – as the generation which grew up with them develop interests in collecting items they remember from their younger years.”
He added: “Jewellery has traditionally been a good long-term investment, in-part due to the intrinsic metal value which continues to rise due to increasing demand.
“Top quality will always maintain its value over time but there are some areas which we consider may still be undervalued; price trends in traditional brown furniture
are beginning to turn back upwards, and some of the more traditional paintings represent good value for money in the present market.
“As always, though, the advice remains – buy things which you like and you will enjoy.”
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