Fine art of buying antiques

Collect to invest: Go for pleasure, not profit, says John Andrew

It is very strange, but most, if not all of the population think antiques are a good investment. However, when investors enter sale rooms, it invariably ends in tears.

In the 1970s, inflation was roaring and investment was all the rage. People were pouring their money into anything, with the objective of making a capital gain when they later sold their acquisitions.

There is no denying that many were successful. However, when the bubble inevitably burst, many individuals learnt the basics of supply and demand the hard way. Having fought to buy average material at above-average prices, they discovered when they queued to dispose of their treasures that more sellers than buyers meant lower prices.

But surely antiques have increased in value over the years? Of course they have. Indeed, there is a shortage of quality material at present. Invariably, when good items which are fresh to the market appear at auction, whether porcelain, silver, furniture or jewellery, the demand and consequently prices are strong.

Where people who regard antiques as an investment go wrong is that they treat the fine art market as if it were the Stock Exchange. Unlike shares, there is no clearly defined market for antiques and furthermore, only two buyers can influence prices. Also, whereas a certain class of share in a particular company is the same as any other, every antique is different.

Variations in condition and quality can result in apparently identical objects being worth quite different sums. Add the effects of restoration, repairs, alterations, copies and fakes to the pricing formula and a minefield appears.

The biggest trap to snare the unwary in the field of antiques is a lack of knowledge. The prudent individual who carefully researches before buying a consumer durable, or seeks professional advice when investing money, generally throws caution to the wind when buying antiques.

Even when a "perfect" buy is made at the right price, there is no guarantee that it will be a "good" investment. I confess to being an incorrigible collector. As my collecting interest has changed over the years I have sometimes parted with items that are no longer of interest.

Occasionally I do well, while at other times, had a good return been the original objective of my purchase, a conventional investment would have been far more beneficial.

Take the example of the four Charles II silver lockets which were purchased in the early 1980s. The price paid was pounds 905. They sold at auction in July 1995 for pounds l,960, giving a net return after the auctioneer's commission of pounds 1,764.

This represents an annual compound return of around 6.5 per cent. One cannot complain, but from January 1984 to July 1995, the FTSE 100 index increased by a multiple of around 3.4. To have kept pace with the index, the lockets would have had to have netted pounds 3,077.

The lockets are rare collectors' pieces. The mundane will not have compared so well. Take the quite ordinary silver salver made in Sheffield in 1895, secured in January 1983 for pounds 185 and sold last month for pounds 350. This represents a 5.5 per cent compounded annual return. However, from January 1983 to January 1997, the stock market has increased by a multiple of around five.

Then there have been the disasters. Way back in 1971 the first piece of silver I purchased was a 1787 Georgian inkstand with superb cut glass ink pot. Considered a "snip" at pounds 30, it is certainly elegant, as the picture shows.

As I later discovered, it was in fact converted from a pen tray in the early 1800s and the added silver rim made to hold the ink pot was not hallmarked.

The piece would be illegal to sell, as any addition to a piece of hallmarked silver, by law, also has to be hallmarked. It remains as a pertinent reminder that not everything is as it seems.

A brief flirtation with antique cuff links had its ups and downs. The cased pair presented by Boris III of Bulgaria, which featured his cipher in rubies and sapphires, three years later realised more than double the price originally paid. However, at the same time a pair of antique French examples in the form of tiger heads, their tongues rubies, lost 45 per cent of their value in four years.

We should put things in perspective. No one buys anything new with the hope of selling it at a profit at a later date. Purchases are made because they are needed and liked or simply for enjoyment.

Antiques should be viewed in the same way. Buy what you like, but do not regard the objects you buy as an investment. Rather, see them as items to give you pleasure. Regard the profit as a bonus.

Remember though, unless you have an eye for bargains, it will take a few years before you can even contemplate making a capital gain. This is because your objects will have had to increase sufficiently to absorb the selling and buying costs.