When shares are painted black, investors take art

Beauty is in the eye of the speculator as more and more people appreciate the value of antiques and fine art. Melanie Bien reports

With shares in the doldrums and the property market showing signs of a slowdown, a watercolour by Constable or a George III side table might be the answer to investors' prayers.

"There has been a move away from investing in equities, with people pumping money into art and antiques instead," says Kris Coombes, client manager at insurer Zurich.

To illustrate this interest, there are six fairs taking place in London this month. This week it's the turn of the Grosvenor House art and antiques fair, where a range of furniture, modern prints, rare books, sculptures, jewellery, porcelain and glass will go on sale.

According to Zurich, which is sponsoring the fair, there are real gains to be made if you pick wisely. A Damien Hirst original is usually a fairly safe bet, for example, with certain categories of the contemporary art market increasing in value by over 26 per cent in the past year. And while the old masters may be out of your range, some modern art can be picked up relatively cheaply.

At the Grosvenor House fair, prices will start at £200, although they rise to several hundred thousand pounds for some of the items on sale.

While contemporary art continues to do well, the real growth in prices over the past three months has been in English watercolours, from Turner and Constable to lesser-known artists.

According to the Zurich-AMR Art and Antiques Index, English watercolours showed the highest increase in value last quarter, rising by 7.9 per cent. This was compared with 5.7 per cent for contemporary art, 2.4 per cent for general books and 2 per cent for French 18th-century furniture.

The biggest decreases in the last quarter were in English sporting paintings (down 20.2 per cent); European and North American photographs (12 per cent); and European and Oriental rugs and carpets (down 4 per cent).

Such "fashions" show you must choose carefully and be prepared to invest for the long term. "Buy what you like and what you are prepared to live with for a number of years," advises Mr Coombes. "The market in art and antiques can be very volatile and trends change, just like in everything else."

Antique furniture has fallen out of fashion recently, for example, with younger buyers opting instead for contemporary art to hang on their minimalist walls. However, antiques are likely to come back into vogue as the growth in their value has outstripped both the stock market and house prices over the past 30 years in the UK, according to the Antique Collectors' Club Index. For example, a piece of Regency furniture bought in 1968 for £100 would be worth £3,842 today.

The only problem is that prices are high now, so you will need more money to get started. It is also advisable to get expert advice before you buy, and to ascertain the provenance of an item and whether work has been done on it.

If you are buying art and antiques, check your insurance. If they aren't covered under your existing policy, ask about extending it. You could also get a quote from a specialist firm such as Hiscox or Zurich. These tend to provide broader cover than high-street insurers.

Drawing power: how to be a collector

* If you are thinking about starting a collection, make sure you like the works. Don't just buy them because you think they will make money; you may have to live with them for a long time.

* Stick within your budget.

* Keep an eye on the property market because the art market usually follows close behind.

* Do your research. Visit fairs and galleries, go to auctions, read books and surf the web.

* Provenance and certificates of authentication are important, especially when buying on the internet.

* Never buy jewellery or ceramics unless they are in perfect condition.

* The value of art and antiques can change dramatically even within relatively short periods, so have your assets valued every four to five years, if only to ensure you have appropriate insurance cover.

* It is worth using a specialist insurer, who can also offer advice on positioning, temperature and humidity levels.

* Buy from fairs and galleries where you can tap into the expertise of the dealers.

* Don't write off modern or contemporary art, which is fashionable at the moment.

Source: Zurich