Investing In Lifestyle When Buying Oriental Rugs
Sydney Morning Herald
Tuesday August 6, 1991
INVESTMENT and lifestyle are the two goals of discretionary income. Few targets satisfy both requirements.
Fewer are both useful and decorative, and even fewer relatively portable and internationally negotiable.
Well-chosen Oriental rugs satisfy all these criteria. But you will have to pay high prices to get really good quality.
But how and what to choose?
For those with real money to spend, and who see their oriental rugs as investments, there is usually little point in taking any notice of "closing down" sales, a flood of which recently hit the market.
At such sales the "80 per cent discount" on offer is more likely to bring the rugs in question down to their real value rather than to give the buyer a genuine saving. Certainly, you wouldn't expect a coarsely woven, unselvedged Indian pastel wool hurried at a giveaway price to be collectable, and you'd be right.
Some experts suggest that no "modern" rugs are good investments, but in my view any labour-intensive quality product is sure to appreciate over time. So a good contemporary Kashan, Qum, Nain, Tabriz or Isfahan could be investable -at the right price.
Such rugs can be bought at Frank's Persian Bazaar, Cadry's, Faeghi's or Bruce Granger's auctions. But be sure to get a certificate of authentication describing your purchase in the sort of detail set out above.
To be sure of buying an investment rug, look for something which is "old, rare, beautiful and in good condition". This can be a problem, as another criterion of collectability for tribal material is "made for personal use rather than immediate sale" and, despite the remarkable sturdiness of a well-made rug, it's hard to find an old floor covering, saddlebag, etc, in good condition.
The first quotation comes from Mr Bill Evans of Paddington's Caspian Gallery and Chatswood's Caspian Studios. He and Mr Ross Langlands, of Pyrmont's Nomadic Rug Traders, are Australia's acknowledged experts in antique and semi-antique rugs which, apart from their rarity value, benefit like other antiques from being free of import duties and sales tax.
Mr Evans says he's "a proponent of something not in good condition, if beautiful and rare" and has for sale at $5,000 a mid-19th century eight foot by four foot (a measurement form still followed by most export rugmakers) star Kazak rug in poor condition and somewhat smaller than, but otherwise similar to, the rug sold by Sotheby's in 1990 for $US286,000 (including buyer's premium of 10 per cent).
According to his guidelines, despite this price differential his rug may not be a good investment. But he recommends unreservedly an 1890 five foot by three foot Baluchi nomadic rug in natural colours and fine condition for$1,800, an 1880 12 foot by 3.5 foot Southern Caucasian runner for $5,200, and a 1900 18 foot by 10 foot Agra star lattice rug for $18,000.
The last recommendation also defies conventional wisdom, taste and fashion, at least till very recently. Before then, "Indian" suggested to most people either a 1930s "Axminster" or a 1980s "Persian". But a 1700 Moghul star lattice, probably from Sringigar, recently attracted a world-record rug price of $US718,700 (including buyer's premium of 16 per cent) at Wiesbaden.
Mr Langlands says rugs make excellent investments if chosen well in virtually all price ranges.
Up to $10,000 he recommends 19th-century tribal and village rugs in natural dyes from Iran, Turkestan, Turkey and the Caucasus. He also likes rare embroideries and has for sale at $2,000 an Uzbek Lakai saddle cover embroidered in silk on wool felt in the early 20th century.
In the range of $10,000 to $25,000 he recommends the best of the tribal rugs, and has for $12,000 an 1880 Khamseh pile ceremonial saddle cover.
For $25,000 to $100,000 he says you could get a 19th-century Bidjar rug up to 30 foot by 15 foot.
He has for sale an 1880 15 foot by 10 foot Bidjar Gerus for $50,000.
Are there any problems looking after Oriental rugs? Yes, but manageable. Mr Langlands warns that kilims, especially the original slit-tapes-try kilim, are less robust than pile rugs and shouldn't be put under dining tables or in high-traffic areas. They should be displayed in quiet corners or on walls.
Rugs should not be exposed to direct sunlight or their colours will fade. Particularly if wool, they should be kept free of damp. Regular vacuum-cleaning will remove grit and insects, and stains should be attended to immediately. If the floor is uneven or highly polished an underlay should be used.
If you keep your rug for some years and then decide to sell, where should you go to make a profit? Many dealers will buy rugs back at the price paid or at a premium; but don't expect this too soon after purchase as overheads and retail mark-ups on such items are high. You could, of course, offer your rug at auction, where you might obtain considerably more from a private buyer (but have to pay commission).
Instead of buying a rug outright for an executive office, you could obtain one through a finance lease. If you can demonstrate that it helps to create an ambience which increases your taxable income, then the annual rental will be tax-deductible. For that to occur, the lease doesn't give you an automatic right to keep the rug by paying the "residual" on expiry of the lease. The lessor may sell it on the open market and debit or credit you. Usually, however, you can keep it and perhaps even negotiate the residual if the market is depressed. From a tax view, the catch is that the residual, and not the original price, becomes your cost base for capital gains.
© 1991 Sydney Morning Herald