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Splashing Out - Antoinette Murphy quoted in Kate Holmquist feature in The Irish Times

As the economy booms, people are eager to invest in art, but with many young artists being hyped beyond their value, the bubble may soon burst, writes Kate Holmquist After the opening of the Royal Hibernian Academy and Ashford Gallery Christmas show on Thursday night, artists gathered in the snug in Toner's while the main bar was crammed five deep with business types. "All the bankers are talking about art and all the artists are talking about money," observed James Hanley, secretary of the RHA.

The hype that has everyone wanting to buy art has exploded in the last month, says Antoinette Murphy of the Peppercanister Gallery. "This week was phenomenal. I knew the owner of the collection that sold at Adam's this week and he was a committed art buyer who bought from the heart. Now people are buying art because they have money. They have houses, boats and airplanes, so what else is there?"

For the well-to-do, investing in art has replaced property development as the subject of dinner party conversation. Painter Jacqueline Stanley says: "Buyers go around with little lists of artists' names that someone has given them. It's like dealing in stocks and shares." And the profits can be astronomical. A Le Brocquy that was sold at Sothebys in 2001 for €360,000 was sold at the James Adam & Sons auction for €820,000 on Tuesday. A Paul Henry with a guide price of €60,000 sold for €220,000. Less dramatically, but far more profitably, Le Brocquy's The Fantail Pigeon sold for €280,000 - nine times its value of €30,000 a mere five years ago.

James O'Halloran, of James Adam & Sons,says that "prices are at their highest point ever - it's a massive spike". This week's total sale was worth €5.9 million - twice the previous best of an Adam's "ordinary" art sale.

On the purchasing end are the many consumers new to the art scene, who may never have set foot in a gallery and may know little about what they are buying. As David Beckham famously put it: "Me and Victoria really like art." Some buyers want no more than to own a name they've heard is "hot" - in much the same way as they buy BMWs and clothes with designer labels, says acclaimed batik artist Bernadette Madden, who is also art buyer for AXA insurance.

"Buyers are investing in paintings the way people invest in pork bellies and hedge funds. It makes my stomach turn," says Madden. "Mediocre young painters are hyped up and sold to people who have no idea. Give a painting the title ' Ballyconneally ' and you could sell 100 of them because a certain southside set all have houses in Ballyconneally and play golf in Ballyconneally. If a painting has a metaphysical title it hasn't a hope."

Having an original artwork hanging in the sitting-room is a key signifier of social status if it has the right signature, adds Ian Whyte of Whyte's Art Auctioneers.

As Adam's chairman Brian Coyle commented about the nouveau collector: "If they could hang them on their front gates they would."

Names such as Shinnors and Teskey are selling for six to 10 times their value a few years ago, putting them out of reach of middle-class collectors and into the hands of wealthy investors.

Whyte says that some buyers have only one question about a le Brocquy: "Is this a good investment?" Whyte responds by asking, "do you like it?" and if such a prospective bidder replies, "I can't stand it", he answers, "Only buy it if you like it - if it's a pleasure to see on the wall".

BUYERS DON'T ALWAYS listen, though: "I'm sure there are people who buy things they can't stand and put them in vaults or lend them to institutions since there are tax breaks for lending paintings for 10 years and you save money because the institution pays for the insurance," says Whyte. "After 10 years, you pay no tax on the profit when you resell it." Such a cold attitude to buying art would have appalled Hugh Lane and Gordon Lambert, Irish collectors without whom many fine Irish artists may have been forgotten. Both men of taste, they supported artists and engaged with their work - which is a far cry from investors acquiring paintings they don't even like.

The Davids and Victorias are buying up "art" at a ferocious rate, transforming the once-staid Irish art scene in which galleries traditionally fostered artists for many years as their work gradually grew in esteem and price. Unfortunately for committed gallery owners, some are coaxing the careers of promising young painters only to see them enticed away by auction rooms that reap the benefits. At auction, painters can become "hot" overnight, which is tempting compared to the long-term slog of selling through a gallery, no matter how supportive the gallery is. And while galleries take 50 per cent, auction rooms take only 15 per cent.

Most buyers are far from naive, asserts Tara Murphy, director of the Solomon Gallery, who says: "There is a substantial number of 30 and 40-year olds moving back to Ireland having worked in the financial capitals and have garnered plenty of cultural knowledge . . . in the current economic climate of very low interest rates, we are finding that people (especially those with financial backgrounds) have realised that the Irish art market is outperforming alternative investment options (such as property, savings, etc). Art also has the added benefit in that you can hang your investment on the wall and enjoy it for many years to come, unlike shares, for example."

TALENTED ABSTRACT PAINTER Willie Evasson (46) had the amazing experience last week of putting one of his own paintings in a James Adam auction with a reserve price of €1,200. In the feeding frenzy that followed, the painting sold for 10 times its value - €11,500.

You'd think that artists would be only too delighted to see a seller's market - but some fear that in the long-term high prices could harm careers.

"If a contemporary work by a living painter gets 10 times the reserve price at auction it's not good for young artists," says painter Una Sealy. "It's not good for buyers either, even if they don't know it. It's the 'I don't know anything about art but I know what I like' attitude. It's democratic but the art is not necessarily any good if a bad gallery gets hold of a young artist and hypes them up beyond their realistic value," she adds.

For the artist, the long-term consequence of a short-term windfall can be devastating. When the artist returns to selling in a gallery, the artist must charge at least the auction price for each painting since it's a fact of the market that an artist must never go down in value. To do so is a death knell - as Sandro Chia and other young painters discovered when a restructuring Charles Saatchi sold them at a knock-down price on the international market.

"There's too much money flying around the place," says painter Conor Walton. "The art market is going the way of investing in property and stocks and shares . . . the rich are getting richer . . . but they don't necessarily trust their own judgment about art, which makes them vulnerable to hype."

James Hanley explains: "This is a complex story of interwoven tales of greed in which some artists and some galleries engage in hype in order to get the highest price. I think buyers are being influenced and being told that certain artists are good investments. The only victim is the consumer who lacks the education and experience to have the discernment about what they are buying."

Pat Taylor of the Taylor Gallery says that there are buyers at auction who like to "flex their financial muscles". The result is "hyped" artists who are "overvalued" and "don't deserve their name".

Believing that they are buying an artist's work years before its value reaches its peak, some consumers are being exploited by some dealers and galleries who create a hype around a painter, so that buyers think they're getting in on the ground floor.

Dealers and agents can hype an artist's reputation by buying up a lot of his or her paintings, presenting them at auction, then encouraging a buyer to pick up the lot at a good price. At a later date, the buyer returns the paintings to auction, by which time the hype has spread and the paintings sell for a dramatically higher figure.

James O'Halloran says: "It's happening, people putting paintings into auctions and buying them back themselves to inflate the price. Some artists are being pushed in a particular way. I think it's highly unfair. It's manipulating the market by creating a false sense of an artist's worth. The price is nothing whatsoever to do with the artist and it's being done by people who see art as a commodity and it's most unfortunate. It's a pity but it's part of the art market and it's difficult for anyone to regulate it."

Painter Campbell Bruce says: "The new trend for selling at auction makes the painting a commodity. The auction houses are benefiting from the galleries' hard work in developing young artists. Auctions also mean that some work is overvalued by auctioneers who are making artists the top flavour of the month, and that is not necessarily the best for artists. I think it's terrible for the art scene here."

Painter Stephen Lawlor says : "I can't understand why people will spend inflated prices on paintings. When you think of the serious art you could buy in London or New York for the same money, it's strange."

Una Sealy doubts that the auction prices being paid for some emerging contemporary artists will pay off for investors in the long term. "There are some artists whose prices at auction may not be in anyway commensurate with the quality of their work."

ONE RELATIVELY YOUNG artist who has skyrocketed in value is Mark O'Neill, whose painterly yet comfortable, gentle paintings are unchallenging to the senses and reflect the tastes of the aspirational lifestyle of the Celtic Tiger suburbanite. In 1999, two of his paintings sold for €3,000. The same two sold for €33,000 this year. His show and auction at Adam's in June raised nearly €500,000 when his paintings sold for double their reserve prices.

But Ian Whyte warns: "I would think O'Neill's works are fully priced at the moment . . . I would be surprised if they were worth four times that price in five years."

Meanwhile, Barbara Warren, a highly regarded senior member of the RHA who is in her 80s, is still selling for €2,000 per painting. Bernadette Madden bought one for AXA recently and predicts that Warren's work will prove a good investment in the future.

For the art buyer who is serious about long-term investment in art, there is no choice but to learn about art, engage with artists and visit galleries. Says James O'Halloran: "The best investments are bought by people who loved the paintings, kept them for 40 or 50 years and who read about art and understood the workings of the artist. There's no harm having a look at the investment potential of an artist, but don't buy a painting unless you really like it and are prepared to live with it." Buying a painting because the artist has "a certain notoriety" is risky, because if fashions change that investment could be wiped out overnight, he adds.

Dan O'Neill died 30 years ago, but suddenly his work has rocketed from €30,000 for a painting five years ago to €170,000 for a painting now. "It's very attractive. A girl with soulful eyes holding a cat - like an Irish Modigliani," says O'Halloran, although an art critic may not like it, he adds.

The provincial bubble of the Irish art market is another danger, since Irish art usually has value only in the Irish art market no matter how famous the name. "The value within Ireland bears no relation to the value internationally," warns James Hanley, "so there's a bubble that is about to burst."

Hot art: top 12 investments

Yeats, Osbourne, Orpen and Lavery were the golden quartet for investors in the late 1990s but have levelled off in price as buyers seek out contemporary paintings. The following are estimated prices in 2001 compared to 2006 sales:

Louis Le Brocquy   2001: €50-€70,000   2006: €440,000 to €1 million plus

Paul Henry:   2001: €50,000   2006: up to €175,000

John Shinnors   2001: under €10,000   2006: €20,000-€34,000

Mary Swanzy   2001: €40,000-€50,000   2006: €100,000-€180,000

Peter Curling   2001: €25,000   2006: €82,000

Norah McGuinness   2001: €25,000-€35,000   2006: €200,000-€400,000

Thomas Moynan   2001: €60,000   2006: €270,000

Daniel O'Neill   2001: €20,000   2006: €185,000

Sean O'Sullivan   2001: €5,000   2006: €120,000

Gerard Dillon   2001: €20,000-€30,000   2006: €115,000

Colin Middleton   2001: €30,000-€50,000   2006: €170,000

Donald Teskey   2001; €5,000   2006: €30,000

Source: James Adam and Sons