Flipping is an investment strategy that works as such: an investor purchases a revenue-generating asset and, not long after, sells it for a profit (and a marked one at that too). The quick turnaround from acquisition to release is where the term comes from.
There is a lot of discussion about this tactic in the art world at present, as it seems to be a growing trend. It seems to be more applicable with the works of emerging artists, but even more established icons are being flipped.
However, the former segment is better suited to this process. As Bloomberg noted earlier this year, up-and-coming artists like Oscar Murillo and Lucien Smith, both still in their 20s, are hot property at the moment. Work by both has respectively shot up by as much as 3,000 per cent in the last two years alone.
It’s about picking your artists, which can be difficult. However, names that constantly crop up in conversations and in magazines, like the two listed above, are a good indicator of potential.
Consider the late Jean Michel Basquiat, who is experiencing both critical and commercial success as of late. While not historic or contemporary in an extremely immediate sense, he is an artist whose work is much sought after.
There is good money to be made, as demonstrated by the triple resale of his painting Warrior between 2005 and 2012. Between those years the value of the work rose by an astonishing 450 per cent to nearly $9 million (approximately £5.5 million). Needless to say, that kind of appreciation in such a short timeframe is remarkable.
Many argue that flipping of this ilk is an unfortunate modern-day development that the art industry could do without. However, the market has, since the calamitous financial crash of 2008, proved to be a resilient, lucrative and exciting place. Traditional investors have accordingly flocked, bringing with them their time-honoured strategies.
However, the New York Times begs to differ that the phenomenon is new. It recently commissioned two companies that specialise in evaluating art market data to conduct independent studies. The unanimous conclusion is that “reselling may be just the latest iteration of a historical cycle, not a lasting change”.
Tutela Capital and Beautiful Asset Advisors examined art market data from 1995 through 2013 to assess whether there had been an obvious reduction in the time that investors and collectors held onto art.
With a focus on post-war and contemporary art, which has been reselling at auction faster than it was a decade ago, both determined that flipping was not “a new phenomenon”. Compared to what the pace of growth was like during the mid-nineties, for example, the suggestion seems to be that history is repeating itself.
“Contemporary works appearing at auction within three years of their creation are not coming to auction faster than in the past, and that such flipping remains very much the exception, not the rule,” the newspaper stated.
“Though more works come up for sale each year, the percentage of these works was essentially the same last year, less than two percent, as in 2007, Tutela Capital found.”
Cadogan Tate can ship works of art from the US to most destinations around the world.