The idea of art as an investment rather than just a collection is nothing new. According to the Deloitte Art & Finance Report, over three quarters of collectors now purchase works with their investment potential in mind. However, for every article saying art is the next great investment, there is another predicating a fine art market crash similar to the 80 to 90 per cent drops seen in Japan in 1990’s. But the art market is more than just a bubble and below are five reasons why investing in fine art is a good long-term decision.
- The fine art market has grown 113% in 10 years
One of the reasons art and other luxury assets have caught the eye of investors is their exceptional growth over the last ten years. The Knight Frank Luxury Investment Index (KFLII) tracks the performance of a range of assets including fine art, classic cars, and fine wine. It has shown all three asset classes outperforming shares in the last 10 years and recovering from shocks like the 2008 financial crisis much faster. Works by blue chip artists like Gaugin, Van Gogh, and Warhol whose works are both desirable and limited in supply perform especially well.
- Over the long term, the fine art market is cyclical like any other
The constant debate between fine art bulls and bears often mirrors that of stock market pundits. As mentioned above, the art market has seen contractions and not all genres or style perform as well as others. The Old Master market for instance, has seen large losses in some years, but as the Borro Blog has previously discussed, this doesn’t prevent certain Old Master paintings from generating huge returns. This risk/reward trade-off allows potential investors to tailor their purchases to suit their needs. If you are looking for large returns quickly, speculating on emerging Contemporary artists might be your best bet. If, on the other hand, you are aiming for steady growth, then a piece Impressionism might be more suitable.
- Investing in fine art can also be investing in artists and art itself
Not all art needs to be bought at auction. Unknown and very early emerging artists are naturally a vital part of the art world and can often only be bought from galleries. Purchasing works by new artists, while a risky financial investment, encourages artists to innovate and find new modes of expression. It can also help support emerging gallerists who are struggling with the increasing costs of art fairs, or, you can look for alternative platforms for reaching new artists. Online fine art buying is taking off slowly, and is being touted by some as the next big step for the fine art market. If however, your preference is for blue chip pieces, they can be loaned to museums allowing everyone to appreciate your collection.
- Collecting fine art opens doors
Another potential upside of investing in fine art is its social value. According to Deloitte’s report, 61% of art collectors cited the social aspects of art buying as ‘a key motivation’ for purchasing. These perks include invitations to special events like MoMA’s annual party in New York, exclusive previews from major auction houses, and special events after fairs like Art Basel. If you have donated or lent art to a museum you may be invited to join its board, a very prestigious position.
- You own something you love for life
One of the most common pieces of advice new collectors receive is ‘make sure you are buying things you like.’ Even if you haven’t bought a piece by the next Basquiat, you can still appreciate your purchase – which is more than can be said for owning an Enron share certificate! Additionally, just because a piece of art doesn’t appreciate in value immediately doesn’t mean it will never happen. Artists including El Greco, Toulouse-Lautrec, and of course Van Gogh weren’t appreciated until after their deaths!