2024-04-16
It has become an established belief that the obvious investment of capital is real estate. However, this is a very tight market, with a high entry threshold and, as history shows, not always as stable as it might seem. The situation is different with the art market. So why are works of art the best investment?
It's 1884. On the occasion of the upcoming Easter, Tsar Alexander III set a unique task for his goldsmith Peter Carl Fabergé. He was to make a unique gift for the ruler's wife, Maria. The result of his efforts was a beautifully made egg, which, however, cannot be compared to any folk Easter egg. The work of Fabergé was made, among others, by gold, silver and rubies. The tsarist couple liked the gift so much that giving it became an annual tradition that survived Alexander's death and was cultivated by his son Nicholas II.
130 years later, a scrap metal dealer in the United States came across a fake gold egg with a watch inside while shopping in an antiques market. He decided to buy them and sell them quickly. The initial lack of applicants forced him to obtain information about the newly acquired item. It took only a few moments spent on the Internet for the American to realize that he had probably acquired tsarist property for only 14,000 dollars. He turned for help to the London company Wartsky, which confirmed the originality of the item, bought it from the man and almost immediately found a willing applicant for it. Neither party to the transaction has provided a buy or sell price for the historical treasury. However, it is known from unofficial information that the value of the most expensive egg bought until that time was: $18.5 million, which means that the scrap metal merchant did not lose his investment, on the contrary.
There are a few remaining Fabergé eggs in the world. You can count on a miracle and search the garage or the yard for a golden egg. On the other hand, you can consciously become interested in the art market, which turns out to be one of the best places to invest your money.
According to reports from 2018, the auction houses recorded a record turnover of PLN 252 million (in the first half of 2017 it was PLN 86.3 million), as well as a record number of 302 auctions. However, this is not a one-off explosion, but a permanent process. Reports from 2019 indicate a constant increase in sales of all auction houses. This year's turnover increased by approximately 17 percent (from 252 million to 294.9 million), and the number of auctions increased by 35. In 2019, one of the largest transactions in the history of the Polish auction market was also carried out. 20 figures made of bronze by Magdalena Abakanowicz were sold for PLN 8,024,000. Sales records are recorded almost daily. The record for the price of a single work was broken this year despite the crisis related to the pandemic. The collector paid PLN 6,900,000 for the painting "Portrait of Professor Karol Gilewski" by Jan Matejko. It is a demonstration of the incredible power of the art market and an announcement of its further development.
The numbers and statistics are overwhelming. Do they mean that investment in art is reserved for people with a very high financial status? Of course not. Beginning collectors who are looking for safe investments can allocate their savings to the works of living, middle-generation, award-winning and non-mass-creating artists. Their works can be purchased from 5 thousand PLN, and the value of these works may increase by as much as 10 - 15% per year.
Going further, it turns out that the law regulates the sale of works of art in a very convenient way for investment. Polish legislation differently than, for example, the French one treats paintings and sculptures as elements of movable property. This means that after 6 months from the purchase of the work, its sale is not subject to income tax, of course, if the sales contract is private.
What is the world situation like? According to a report by the Art Basel portal, in 2017 the art market achieved total sales estimated at USD 63.7 billion, an increase of 12% compared to the previous year. In 2019, the same portal reports that the turnover of this market amounted to USD 64.1 billion. The 2017 report also highlights the enormous increase in the importance of online auctions. It reports that in the last five years (as of 2017), the online art market has grown by 72%, reaching approximately $5.4 billion. In 2019, it reached USD 5.9 billion. The United States, China and the United Kingdom remain among the largest tycoons in this segment.
There are many other reasons to invest in art. The demand for it is always greater than the supply because it is not produced in order to satisfy the market and the needs of consumers (in other words, it is not operated by mechanisms typical for the market). Works of art are called objects of admiration. Let's not be afraid to say that in the world of quick and superficial decisions, they are a prestigious attribute of people who have intuition and are able to turn their property. It is enough to mention respected personalities from the world of culture and business who invest their savings in this alternative investment segment; they include musician Eric Clapton, actor Brad Pitt, François-Henri Pinault, president of the Kering group, and Bernard Arnault, president of the LVMH group. The owners of works of art are also modern monarchs, e.g. from the circles of Arab culture. David Rockefeller had paintings in his collection, incl. Claude Monet or Pablo Picasso. The Beckham couple had been creating their collection for 8 years without boasting about this fact to the world of the media. These are clear testimonies that collecting art by wealthy people from various industries cannot be called a whim, but a deliberate action. Systematic participation in auctions and immersion in the meanders of this market may allow us to gain many new business contacts that will be able to further increase our profits and experience.
Creating your own collection can become not only a beautifying element of our living space, but also a source of income. It often happens that collectors make their collections available to museums and galleries, benefiting from it. It is worth remembering that marketing activities can be made towards your own collection, which will increase its value, and reasonable management of the collection may positively influence the interest of various industry institutions.
Art has always been associated with beauty, so when investing, we should not ignore its aesthetic considerations. A well-thought-out collection becomes an eye-catching attribute of our home or workplace. Catalogs related to interior design very often use art in their projects, making it an indispensable element of decor. The research "Calm and collected" by the Art Found shows that people associated with art feel better and are more satisfied with their lives. Using the offer of cultural institutions with works of art also brings other benefits, such as: broadening knowledge, experiencing peace, reducing stress and encouraging reflection.
So what art is worth investing in? In Poland and in the world, the market is definitely dominated by young art, which is being replaced by old art. According to reports, between 2018 and 2019, young art saw a 17.6 percent increase in turnover. According to the Art Basel report, post-war and contemporary art was once again the largest sector on the global market - its share in 2019 amounted to 53%.
Passion is very important in engaging in this market. Professional advisors confirm that the work we buy should be liked and aroused in us emotions. In conclusion, investing in art requires a great deal of knowledge and patience, but the results can not only enrich us financially, but also develop our sensitivity to culture. It can become not only a source of high income, but also a new lifestyle.