Which Is Better? A Good Rate of Return on Art or the Actual Return on Art?

Kathryn Tully spoke to Michael Moses to get his famous matched pair data for last week’s sales:

The average compound annual return on the repeat sales during these auctions was 10.4%. ‘This was a really strong set of sales,” says Moses. “They don’t get much stronger than this. Nor were there any really outsized returns that would skew the results.” […]

It’s also worth noting that repeat sales information was only available for 130 or 12% of the total number of lots offered in these auctions. To put that in perspective, a total of 241 art works or 22% of the lots offered in these sales didn’t sell at all.

Of course, there’s s difference between the overall return and the rate of return as illustrated by the lot that had the highest percentage return but didn’t account for much in the way of money:

The art work that generated the best compound annual return for its owner of 64% was Alexander Calder’s work on paper, Cap d’Antibes, which also sold during Christie’s day sale last week. That was purchased in September 2011 at Sotheby’s for $53,000, above the estimate of $25,000 to $30,000. It sold again at Christie’s last week for $111,000, plus buyer’s premium, again way over the estimate.

Moses says that the fact that the Calder sold for way over its high estimate twice in a row is very unusual. “Our data shows that the higher you pay above the estimate, the more likely you are to make lower returns,” he says. […] According to Moses, sellers of art works during the New York’s contemporary sales last week that had spent over $1 million on those purchases initially achieved a lower return. “The average compound annual return for works with a purchase price of greater than $1 million was 7.1%, while for those with a purchase prices of less than $1 million it was 10.9%. Again, masterpieces under perform,” says Moses.