Investing in art - a good investment?
The fact that art is not only suitable for admiring and marveling at, but can also be a political statement or an examination of a socio-political or economic issue is anchored in the minds of art lovers . In the same way , art is increasingly seen as an investment or an asset .
The relevance of artists and the associated creation has always been measured by the selling prices and figures quoted. This means that art, in addition to the emotional and decorative side, also contains an investment element.
You've probably already thought about purchasing a work of art or a signed print from an established or emerging artist .
In this article we want to critically examine the topic of how the art market has also become an investment business and what we as potential art buyers should consider.
Whether art can be seen as an investment has always depended on the establishment and further development of the artists . Not every trend goes down in art history and many things that remained under the radar of art connoisseurs and critics for a long time rapidly increase in price over time and find a place in the most famous public and private collections worldwide. Intuition, good advice, experienced partners and direct contact with the artists themselves are factors that today largely determine whether a favorite art is also suitable as an investment.
Investing in art – why it is more relevant today than ever
The art market is growing rapidly and not all developments that can currently be observed can be fully welcomed. Beginners in particular who expect good returns from art often do not know where and with what to start investing and which sources to trust.
If you are considering whether you should invest money in art, the current global economic situation probably also plays a role . Confidence in the strength of currencies is dwindling and classic forms of investment are no longer as lucrative and safe as they once were. Maybe you already invest in other material forms of investment, such as classic cars, real estate or high-quality wines and spirits . Young investors are currently entering the art market because they want to broaden their portfolio and there is sometimes great respect for highly volatile forms of investment such as cryptocurrencies or NFTs. Whatever the reason for your interest in alternative forms of investment , it is important that you approach your investment with the right goals and the necessary knowledge right from the start.
Art as an investment – is it always right?
If you have not yet actively dealt with the returns on works of art or with the art market in general, you will encounter this at regular intervals when you learn about some of the dubious machinations of the super-rich through the media. In fact , there are currently still some tax loopholes that make the art market somewhat opaque . It is not uncommon for the acquired works of art to disappear for years or even decades in so-called freeports , which are usually located in the tax-free zone of airports. Since transactions can also be concluded within these high-security buildings in the tax-free zones, the network of wealthy people is able to trade rare luxury goods practically tax-free. Many people now talk about the Freeports as the most amazing and impressive museums in the world, which unfortunately no one ever sees. Of course, it must be noted that in these freeports, which are now a thorn in the side of many a government, it is not only works of art that remain unaccounted for for tax purposes . There you can also find rare wines, relics, jewelry and even rare luxury sports cars.
It happens that people mess around with art and the large sums of money that sometimes flow from it, but it is a very small part of the art market. If you want to invest in art yourself, you probably won't reach the sums that are circulating in the media, and your intention is completely different. So rest assured and focus on the essential factors that will help you make the right decisions in the market.
What should you pay attention to when investing in art?
There are certain points that you should definitely consider before investing in art. The most important elements for a successful investment in art can be found here:
1. Maintaining or increasing the value of the purchased art
Young and less well-known artists who are just beginning their careers and are sometimes not even represented by a gallery are usually still priced in regions that do not pose too much of a risk for entering the art market . If you like a work that falls under this category and you find the artist exciting and promising , this could be a good introduction to an initial investment in an original work . However, you should also be aware that up-and-coming artists who do not yet have a particularly high reputation on the art market do not provide any guarantee of an increase in value . Too many factors determine whether artists can establish themselves on the art market, increase in relevance and ultimately become part of the secondary market for works of art. The secondary market for art represents the platform that is used as an intermediary for the resale of works of art . Less than 10% of young artists even manage to establish themselves sustainably on the art market. So always keep in mind that an investment in emerging artists may offer faster potential for appreciation, but the risk of a total loss of value is also significantly higher. When investing, always make sure that the preservation of value depends on the storage and care of the work of art. So how has the work of art been cared for so far and has the work been adequately insured ?
Increasing value is a more complex issue compared to maintaining value. Works by artists who are already established in the scene offer more opportunities for a sustainable increase in value with a lower risk of default . Here we are also talking directly about art investments from 50,000 EURO upwards. It's always worth taking a look at the artists' CVs. Anyone who has already gained some experience tries to use the “blue chip potential” of young artists. “Blue Chip” is an unofficial title given to artists who can be sold quickly and usually profitably on the art market.
The price and the increase in value are of course also based on market demand. Regardless of whether the artists sell their works themselves, use an agent or are represented by a gallery , the price rises with demand. I adjust the price of my works based on traditional market prices, but I also incorporate other variables into the pricing, which enable clear guidelines for the relevance of the works created through the evaluation of my marketing activities. If you would like to know more about the topic of pricing artwork, you are welcome to read my article on the subject .
2. The relevance of market knowledge
The more knowledge you gain in the context of the art market, the better your chances are of investing in works of art that promise good returns in the medium and long term . Although investing in art has presented itself as a fairly stable investment in recent years - compared to other markets - it is still a risky and complicated undertaking . You need to follow updates from the most important art platforms and magazines, as well as the results of public auctions, and network well. Take advantage of the opportunity to incorporate the expertise of experienced art consultants or consult experienced experts. Never forget that the price of art, which is generated solely by the collecting and speculating circles, is not in relation to the quality. Whether you separate yourself from your own sense of beauty in art because a work of art offered to you promises a high return but you don't like it, that's up to you.
Once you have decided on a work of art, you should first check what information about the artist is publicly visible. What does the artist's vita look like ? Is there a comprehensible art history with relevant exhibitions? What is the reach and media presence? What did price developments look like in the past and at what pace are prices currently developing?
It is also not unimportant to consider the recognition value of the work created . Can a common thread in the artists' series be derived from this ?
Last but not least, the authenticity of the works of art should also be checked. Because the art market shows that there is a large number of plagiarisms in circulation . The sometimes high sales proceeds naturally also attract counterfeiters . If you want to see examples of this, I recommend the documentation “ The Master Forger - Wolfgang Beltracchi” and “Made You Look”. Both documentaries provide good insights into why no one in the art market value chain actually benefits when fakes are discovered and therefore a large number of forgeries remain undetected.
A conclusion about investing in art
If you already have a passion for art, it doesn't hurt to take a closer look at the art market and its potential returns. In this way , the passion and aesthetic value of works of art can be combined with a sustainable investment.
In the end, the art market certainly offers a good option for sustainably multiplying capital , but what is actually much more important is the emotional power that a work of art can carry . Most of the works sold do not end up on the secondary market because the buyers see such high emotional value in the work that a sale is ruled out despite the high potential for returns.
With the information listed about investing in art, you should note that I or a blog post cannot provide you with comprehensive financial investment advice, but rather an insight into the market . If you are still relatively inexperienced in the market, you should definitely consult experts when making an investment .
