The art market: Facts and figures to start with
The art market is known for being hardly accessible, increasingly complex and internationally influenced. Big players like UHNWI’s, professional traders and other influencers own the biggest market share of it. The reasons for them are quite obvious:
Realizing huge gains
Protecting there wealth from inflation
Diversifying their investment portfolio
Optimizing their tax situation
But it doesn’t have to be like this. What most investors stop from investing is a lack of knowledge. This is why this blog is about the four most asked questions about the art market:
What kind of art suits me the best?
There are 174 art movements listed on Wikipedia and hundreds of other possible movements around the world. This can make it quite hard to decide. The major seven ones are:
Impressionism
Cubism
Fauvism
Expressionism
Dadaism
Surrealism
Pop Art
In the matter of art periods you can see in the graphic that modern and contemporary art own the biggest share of the market.
So it is recommended to move in one of this movements and periods. Depending on what you like the most.
What price range should I be in?
Besides your personal budget for art investments the price range starting from 100k - 10M USD realizes the highest amount of money:
Of course you can start with as little as 10k USD to invest but in the end you would need to have a certain amount of money to invest to diversify and also be in an attractive market segment.
When should I sell my investment?
Art investments in general are long term investments. You can find the average holding period in the graphic below.
You can see the average holding period is around seven years. This only contains auction sales and excluding the private market. Many investors/collectors hold a strong emotional bond to some artwork so they naturally struggle with the thought of selling it. Which is also a beautiful thing and absolutely right.
While other investors just “flip” a piece of art as fast as possible to realize gain.
Every investor has to decide that by himself.
Last but not least the most important question:
How do I know that the price is right?
Quite simple. If the price is paid the price is right. Supply and demand have a huge impact on art prices and therefore it is very hard to predict. Nonetheless there are some strong but here simplified indices for uprising artists:
Ability to create an emotional touching point
Some artist have the incredible ability to touch us humans brilliantly and deeply. This is what art is all about - to reach the soul of a person
Good critics
If influential critics give are fans of an artist this is a strong sign for rising prices
Retrospectives in museums
If a famous museum plans a retrospective about an artist it can really boost the price index
Story of the artist
People love a good story about an artist and even tend to exaggerate about the dramatic life the artist had. The media coverage can also strongly influence the future of an artist.
There are also many other signs that influences the popularity of art like for example the Zeitgeist.
If you really like the piece of art you are looking at then decide together with your advisor if you are really willing to pay a certain price, what your expectations are and what the future of the artist looks like.