What’s in a painting? The answer varies from person to person, but what we can agree on is that art is becoming increasingly popular as an investment asset. So much so, people are now investing in art more than wine, according to the Wealth Report by real estate firm Douglas Elliman.
The average value of art sold at auction rose by a significant 21% within a twelve-month period. Compare this to other luxury assets such as investment-grade wine which took second place with 11%, followed by watches at 5%, coins and jewellery at 4%, cars at 2 % and stamps at 1%.
So, the market is growing, but do we really know why people are investing in art?
Bendor Grosvenor, art historian and collector believes that passion and personal enjoyment fuels art purchases more than any other motive.
“You’re supposed to buy art because you like it,” Grosvenor recently explained in the Financial Tmes. “You get a ‘dividend of pleasure’…”
Fine art purchases are also some of the most likely pieces to be collected for social purposes. Who doesn’t love putting prized possessions in the spotlight, as a focal point in a room and a novel conversation piece?
Another emotional drive for investing in art is heritage value. Many collectors enjoy what they own and plan for their art to be inherited by someone close who can share in that experience.
Art took centre stage this year due to the uncovering of a missing masterpiece. After being restored, Leonardo da Vinci’s Salvator Mundi turned the heads of every art collector alive. The historic artwork eventually sold for $450 million, knocking the previous record of $179 million for Picasso’s Women of Algiers out of the water.
There’s no question: investing in art with historical or cultural significance can result in an outstanding return. But few will take possession of another Marie-Therese portrait (recently sold for £50 million, the highest auction price for any painting ever sold in Europe).
Despite this though, plenty of individuals are entering the market. In fact, 72% of collectors are buying art for collecting purposes, but with an investment view, according to the Art & Finance 2016 report published by Deloitte Luxembourg with ArtTactic.
Why do so many people gravitate towards investing in artwork? Well, when you spend time researching before buying, it’s possible to make a valuable purchase at an affordable price. Emerging artists in particular represent huge growth potential, as their career is still in the early stages and their work has the potential to grow significantly in value.
The art market can also represent a safe place to place wealth in the long term. Writer for the Guardian and Observer, Julia Kollewe, explains:
“Modern art is an effective hedge against inflation – returns tend to be better at times when prices in the economy are rising, which is the case now.”
Many collectors are driven purely by the enjoyment of discovering talented artists and displaying their work in the home. This doesn’t mean these individuals aren’t seeing a bountiful return by investing in artwork – they simply benefit from the best of both worlds.
Art depends on its stewards, on people to treasure it. Without them, it’s only stuff,” Gully Wells explains to T Magazine.
Whether you already know the tricks of the trade, or you’re looking to learn how to invest in art, here’s a refresher of some important steps to consider:
If you want to learn more about investing in contemporary art, take a look at ‘The Six Key Factors to Consider When Making an Art Investment.’ To find out more about any of our represented artists, please contact Maddox Gallery. Our Sotheby’s-trained art consultants will be happy to provide expert advice.
Written by James Nicholls, Chairman, Maddox Gallery.