Buying art for investment is an opportunity is not a new concept, in fact it’s been determined that art has been used as an asset class since the 1960s. With a $1.7 trillion global marketplace, art is a profitable investment that consistently outperforms other asset classes such as FTSE 100 and S&P 500. Art as an investment has low volatility and the ability to hedge against inflation which means that over the past decade, Post-War and Contemporary art has become a top choice of investors looking to diversify their portfolio.
Although the value of a piece of art is dependable on numerous different factors subjective, so it is essential to understand all these variables before you make your investment in art. Throughout this article, I will guide you through the crucial factors which need to be carefully considered by art investors and collectors to help them determine what art they should buy, or even sell.
One key element an art investor should know is what type of work their chosen artist creates, with a particular focus on genre, for example: minimalism, figurative, pop-art, collage, abstract. The era the artist operated in, such as: modernity, post-war, contemporaneity, renaissance, cubism, surrealism, expressionism, dadaism. It is essential to know both the era and genre of the artist in order to determine the potential of your investment, for example post -war abstract expressionism works could be in higher demand in the art market than surrealism artworks.
What is Art Investment?
Firstly, art investment is a type of investment that involves the purchase, sale, or trade of artworks. Art investment strategies vary depending on the investor’s personal preferences and risk tolerance. Some investors opt to invest in newly emerging artists which are typically low-cost, but high-risk investments. This is because the artists don’t have long history and large record of sold prices for their work, so it is hard to predict whether the newly emerging artists will dramatically rise in popularity and rapidly grow their demand in the art market which consequently equals an increase in price for the artist’s work. With millions of artists in the world the chances of a newly emerging artist becoming renowned are slim hence why this strategy for investors is so high risk.
Alternatively, other investors chose to invest in established artists who are already well-known in the art market and in some cases have their own recognised artist estates. These come at a higher cost but are low risk for investors as their long track record of achievements and history of sales means they already have a realised potential in the art market. By looking at the artist’s long career, art specialists and auction houses can analysis patterns in the artists sales and make accurate predictions on the future sales giving potential investors a more calculated investment opportunity.
Art galleries are the most common places where art investment transactions happen. They are usually located in cities with a strong arts culture and high demand for artwork. As well as having physical spaces in cities, these galleries also operate online offering a worldwide art consultant service in order to be able to reach a larger audience of artists and investment clients. Art galleries can sell artwork on behalf of living artists and artist estates on a consignment basis. This is where the gallery does not own the artwork outright, they just broker the transaction that happens between the artist and investor. In other cases, the gallery can buy artwork outright straight from the artist, or artist estate, and sell it on to the investor. This is also classified as a, ‘secondary market’ sale as the artwork has had a previous owner before being sold onto the investor, instead of going straight from the artist to the investor.
What are the Best Ways to Buy and Sell Art?
With increasing changes in the type of investors and with advances in technology in the art market, it is getting easier to buy and sell artworks, but harder to keep track of the transactions taking place as they are happing so often and broadly. Here is a list of some of the most popular methods being used currently:
Buying from galleries
If you see a gallery that has an artist you like, or you just simply like that gallery, then it is quite easy to make an enquiry and ignite a consultancy service with that art gallery to find the best suited artwork for your investment. Although it is not always approved, some art galleries are happy to negotiate on the price of a particular artwork. However, it is important to bear in mind that the retail price of a particular artwork is not always decided by the gallery, but is sometimes dictated to them by the artist themselves.
Buying at an auction
You can also bid for your chosen artwork at auction houses like Sotheby’s or Christie’s. Auction houses, like galleries, also offer an exciting opportunity for collectors and investors to purchase valuable artworks. Auction salerooms are open to the public and new bidders are always welcome. And with the increasing number of well-conceived digital auction platforms out there, it has never been easier to bid online. The auction house process is when the auctioneer announces the prices, and the bidders call out their bids until no participant is willing to bid higher. The process ends when the auctioneer accepts the highest final bid.
Buy directly from artists
Since the COVID-19 pandemic, this method has increased in popularity. With art galleries closing down and artists being unable to exhibit their works due to global lockdowns, in order to survive artists had to build up their own websites and social media so that they could continue to sell their artwork. Collectors and investors then had to contact the artists directly to buy their artwork by contacting them through their social media messages, or by enquiring on their website. Another reason why collectors and investors go straight to the artist is because they want a specific commissioned work. This piece is not available in galleries, or auction houses, so collectors have to liaise directly with the artist to get exactly what they are after. However, this method does not always guarantee the collector the best price as they often do not have not built up long-term good rapport with the artist. Unlike art galleries, who have been representing the artist for a while so have a strong personal relationship with the artist, or artist estate, and so in turn are in a better position to negotiate on price.
How to Choose Which Gallery is Right for You?
Choosing the proper art gallery can be a daunting task. There are thousands of established galleries around the world who now can also be contacted online. Some are more exclusive and more expensive, while others are less so. Some exhibit only established artists, while others exhibit only emerging artists.
Some investors do not take much notice of which gallery they are purchasing from as they are only concerned if that gallery contains the artwork they want, or not. Other investors who do not chase after particular artists and artworks want to choose a gallery that has been established for a while and built up a good reputation. To make the decision easier, investors should think about their requirements for example, how much time they want to spend choosing their artwork (if they have not already chosen it), what their budget is for the artwork, and whether they want a newly emerging artist, or an established artist from a particular era and genre.
Art galleries can be categorised into non-profit galleries, and private galleries. Private galleries work on with a commercial structure and buy and sell artworks in order to make a profit. These artworks could be sold on behalf of an artist, or on behalf of a client from their private collection. Non-profit galleries work with a charitable structure and sell artwork for a cause or raise money for and external organisation. These are often open to all members of the public, and example of this is the National Portrait Museum.
How to Find Out if Art is Valuable or Not?
There are many different factors which dictate the value of a piece of art, such as: condition, year, artist, genre, medium, size, and previous prices of past sold works for that artist. Artwork valuation is a complicated process that requires an in-depth understanding of the art market and art history. It is essential to understand the history of an artist and their artwork before calculating its value. Certain artists have had larger more fundamental impacts on art history and how we view art today and so consequently these artists are more popular and highly-sought after. Whilst other artists have not challenged the boundaries of art as much and so ultimately are not as popular, or valuable, in the art market. Finding out who had the picture previously might help determine its value, for example if it was previously owned by a member of the Royal family this will increase the artwork’s value and demand.
Before buying art for investment, you should inspect its condition. Check for any damage, this could be: rips, tears, and cracks. Any flaws in the artwork will reduce its value. Tears in canvases and cracks in sculpture works are particularly common if the artwork has not been carefully protected. Over time canvases can also become bowed and sag, however this can be easily corrected by tightening the bars on the canvas and adding moisture to the canvas material, then letting it dry so the canvas fabric can stretch back to its original tight form.
Looking at the back or your artwork, or underneath of your sculpture is the final thing you can do to assess its value. Painters may sign on the front, back, or underneath of their work. The artwork’s provenance can also be attached to the artwork which helps to verify the work’s authenticity.
An artwork’s value is determined by its scarcity, demand, and quality. Artists who have highly impacted art history, or are creating artwork which pushes the boundaries of the art world are typically more popular. Art is something that doesn’t have a set price as its price is determined by a multitude of factors, some of which involve subjective answers. It is important to keep up-to-date with non-biased research on your chosen artists and know what to look for when buying or selling art. It is also crucial to decide on which avenue for acquiring artwork is best suited for you for example, buying directly from artists may result in the investor receiving biased information and a poor price, whereas art galleries can offer investors numerous services such as, Art Consultancy which helps give investors a knowledgeable guide through the art market and to help them achieve the best price for their artwork.