Calculating the Cost of Art Ownership

The Financial Times did a non scientific valuation based upon purchase price, opportunity costs (in this case, if invested and earned the UK base rate over the period of ownership), insurance and fees on an upcoming John Constable painting.

The painting was purchased in 1990 for GBPs 10.8 million, and based upon the calculations, it would need to sell for nearly GBPs 60 million.

The Financial Times Reports

It is important to stress that this exercise is a light-hearted one; we have chosen this iconic picture as an exemplar not just for its art-historical importance, but also because of its status as a price record-holder. We often read (and, at the FT, often write) stories about art as an alternative investment, so this seemed an interesting case to investigate.

It is also important to stress that many of the figures on which our results are based are, necessarily, only estimates. We do not know the details of insurance costs, for instance, or the details of the buyer’s premium in 1990 and (future) seller’s commission. However, the details of inflation rates, opportunity costs such as loss of potential interest and other elements are solid.

This graphic shows the results of our calculations. And the short answer, for those who want to cut to the chase, is that for the vendors to recoup the investment of £10.8m made in 1990, the hammer in July 2012 needs to fall at a mighty £59.8m.

Source: The Financial Times