The rich are shunning paintings while prices for photographs are soaring, but is it an investment that works for everyone?

The Art Institute of Chicago is one of the world’s great galleries. Visitors flock to see Edward Hopper’s Nighthawks and Grant Wood’s American Gothic, two of the most recognisable images in modern American art. But what has stunned art collectors is that a photograph of visitors to the Art Institute, taken in 1990 by Thomas Struth, fetched more at auction than any other photograph last year, selling for $777,088. And it’s not even the only one in existence – Struth produced 10 prints.

As bankers to the wealthy Coutts revealed in a recent report, Old Masters have fallen from favour, with prices down 40% from their peak a decade ago. Oriental carpets and rugs are completely out of fashion, with prices back to where they were in 2005. Even the boom in classic cars has stalled, with Ferrari prices in reverse by 10% last year. But Coutts said photography has emerged as the hottest new investment for the very well-off. Photos by Gilbert and George, Robert Mapplethorpe and Andreas Gursky all fetched more than $400,000 at auctions in 2016.

Photography has until now had an ambivalent status in the art collecting world, and for good reason: collectors value scarcity. There is only one Nighthawks, whereas Struth could have reproduced thousands, indeed millions, of his image of visitors to the gallery.

Photographers have responded by limiting their reproductions to just a few signed images. At the Photographers’ Gallery in London, the first public gallery devoted solely to photography and which has championed up-and-coming photographers since opening in 1971, Anthony Hartley says: “The assumption among the general public is that the supply is endless, but that is not the case any longer. Editions tend to be limited, and dramatically so. Just five or 10 prints are standard and the negatives kept by the photographer. All the prints in the edition are produced at the same time, so buyers know that there will never be, say, another 25 produced.”

But what’s to stop a photographer cashing in later with more editions? “Generally it is a self-regulating market. If photographers produce a new edition then they are simply shooting themselves in the foot,” says Hartley.

Facebook Twitter Pinterest Tamas Dezso’s The Flooded Village of Geamana (2012). Photograph: Courtesy of The Photographers’ Gallery/Tamas Dezso

Provenance is crucial. At Sotheby’s, head of photographs Brandei Estes says: “The most important thing is for there to be a signature or the artist’s stamp. If there’s not one, then just forget it.”

So what should the budding collector be buying, and how much should they pay? Sotheby’s has a reputation for dealing with multimillionaires, but Estes says: “We start from £3,000, with the average around £10,000-£15,000. Compared to traditional art auctions it’s relatively accessible. You’ll pay an arm and a leg for an original print of Robert Doisneau’s Kiss – they’ll go for £250,000 upwards – but he produced many, many other photographs. You can find them in galleries from £2,000. No one seems to want his other ones.”

The top end of the British photography market is dominated by what might be called “decorative” photography – in other words what looks nice on the walls of rich people’s houses. That often means fashion photography, Estes says, such as the original print of a young Kate Moss by Albert Watson that sold for $25,000. “Peter Lindbergh, Helmut Newton and Michel Comte are fashion photographers who all sell well. These are images you can live with every day of your life. What’s notable is that Watson has other photos just as good as the Moss one for a fraction of the price. We had a beautiful one of Christy Turlington which sold for £5,000, which is cheap compared to a Kate Moss at £20,000. I firmly believe that if you buy photos such as these now, they will be fetching more in the future.” She also namechecks the wildlife photography of Nick Brandt as immensely popular among collectors.

At the Atlas Photography Gallery in London, which deals in 20th-century and contemporary photography, Ben Burdett says collecting appeals to a new demographic. “Photography is more relevant and more understandable to a lot of people who aren’t art professionals, and prices are very much lower than buying a comparable work by a contemporary artist. A lot of contemporary art has priced itself out of buyers’ incomes.”

Facebook Twitter Pinterest Untitled (2012) from the series Tiksi by Evgenia Arbugaeva. Photograph: Courtesy of The Photographers’ Gallery/Evgenia Arbugaeva

Finding young, emerging photographers that are more affordable is central to the work of the Photographers’ Gallery, says Hartley. “These are the photographers who are too young to have a secondary market yet. Our job is to get them to that level. In the past we have represented photographers who have sold in the low hundreds, but who now sell in the big galleries for 10 times what we were selling them for. But we always caution about investment. There is never a guarantee. Crucially, buy first of all what you love.”

Some of the gallery’s most popular sellers are works by Evgenia Arbugaeva that capture a magical realism in Siberia (above), and the painterly images of Tamas Dezso (left) that feature the derelict landscapes of post-communist eastern Europe. Their work starts from £1,200 for a 20x24-inch photo from an edition of 10, but after that prices escalate, with large-scale prints priced at £6,500-plus.

For the vast majority of people, dropping a few thousand on a photograph is in the realm of the outlandish. Eamonn McCabe, the Guardian’s former picture editor and photographer, who recently presented a BBC4 TV series on the history of photography, is mildy sceptical about the boom in collecting. “A lot of dead photographers will make a living; I’m not sure the living ones will. There is a yearning for masters such as Man Ray and Irving Penn, a clamour for a craft that is seen as disappearing. The big market is for black and white, and for nostalgia.

Facebook Twitter Pinterest Jude Law, photographed by Eamonn McCabe: ‘A lot of dead photographers will make a living. I’m not sure the living ones will.’

“I ran into David Bailey the other day. He said he’s not getting much in the way of work these days, but the art market had discovered him.”

News photography commands relatively low prices, with even images by legendary war photographer Robert Capa, co-founder of Magnum, selling for significantly less than what are seen as aesthetically more pleasing fashion prints. “Because people know the works of a photographer in a newspaper, they don’t see the work as art. People are reluctant to pay much,” says McCabe.

The success of touring exhibitions such as the World Press Photo Awards and a growing appetite among major galleries may see photojournalism prices start to rise. Sophie Wright, Magnum’s global cultural director, says the Tate Modern has been instrumental in broadening the acceptance of documentary photography in the art market. Meanwhile, the V&A, the first museum in the world to collect photography, is opening a new photography centre in autumn 2018 that will more than double its current photography exhibition space.

Most insiders admit, though, that New York and Paris outrank London in the global photography market, with demand from the Middle and Far East rising fast. Magnum recently sold a full set of vintage Werner Bischof prints described as a “complete photojournalistic essay” to Hong Kong’s planned new museum of visual culture, M+. They document the influx of Chinese immigrants into the city during the 1950s.

Magnum has established a Collector’s Circle where members meet aspiring and established photographers to share their passion – although it costs £10,000 to join. Wright says: “There has been a lot written about the move to invest in art as a source of assured returns in a turbulent economy; however, you should buy what you love, as you will most likely be living with it for a long time afterwards.”

You must also keep it in good condition: behind museum-quality glass is one option, and avoid direct sunlight and water damage. “I once spoke to a billionaire on a yacht,” says Estes. “He said his photo was falling apart. I said what do you expect – you’re keeping it at sea.”