THE LEADING MARKETPLACE FOR ART LOVERS

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The post-pandemic scenarios, combined with the initially forced and now increasingly progressive digitisation, foretell a growth in the art market. This trend is driven, among other factors, by the current value of other financial instruments, such as real estate, which are lower and riskier due to market fluctuations. Investments in art collecting are increasingly growing despite the initial stop due to the pandemic.

Related articles: Why Investing In Art Is a Good Idea - Miami Art Week 2021: Recap - 15 Contemporary Black Artists Everyone Should Know About

The pandemic was certainly a very complex challenge for the art world and its market. The most important art fairs and galleries have undergone forced closures, which have risked jeopardising the economic stability of the sector. Nonetheless, the shift to online platforms and the expansion of the digital market have allowed a significant recovery with numerous advantages also for investors.

Investing in Contemporary Art

Investing in Contemporary Art in recent decades is becoming a trend that is increasingly within everyone's reach. A testimony to this is the growing presence of young people in the investor category; thanks to sales of artistic goods that are increasingly vast, including lots with extremely diversified costs, as well as thanks to the emergence of new possibilities for cooperation between collectors. For example, it is possible to purchase works of art in "parts", as if they were  shares. Investing in a work of art is often considered an "emotional investment", or an investment in which the choice is primarily based on personal taste and desire rather than on economic and earnings reasons (only 3% of those who invest in art claim to do so with speculative will). However, it is certain that, although this is not the main intent, it is an investment that can lead to a long-term profit. In short, investing in works of art is a way to make really good business. So, it is crucial to be well informed on how the art market operates, also by referring to the world of consultancy, if it is necessary. By now, most national and international credit institutions offer consultancy on art, which is recognised in all respects as an alternative asset that can be useful for diversification in investment portfolios.

The consequences of the pandemic

The pandemic has created a strong sense of precariousness and uncertainty towards any type of investment, showing itself to be a complex challenge to be faced at 360 degrees. But how is the art market faring during the pandemic?

The cultural and artistic sector was initially one of the hardest hit during the pandemic. Art institutions, galleries, art fairs faced cancellations and disruptions. The crisis revived the age-old question: Should the government invest in art? Advocates for a more forceful government intervention in the sector relied on traditional arguments, pointing out the significant positive economic and social impact of the sector. While governments tended to provide fiscal stimulus over the crisis, the measures taken to support the overall economy were not able to fully guarantee the stability of the artistic sector, which relies in part on non-traditional business models. 

Despite this, in its 2021 report, Deloitte showed how the art market stabilised during the second half of last year, also thanks to the introduction of the digital market. The art world is one in which human relationships and the personal enjoyment of the environments in which art is exchanged are thought to be still essential and unavoidable. However, the digitisation to which this world  - has been initially forced has made it possible for the art market to more than recover from an initial underperformance relative to other sectors, generating completely new scenarios. This shift has made it possible to fill the large digital gaps that plagued the art system. It made it safer in the eyes of investors to buy art online while also opening the market to new stakeholders.

 

Deloitte e ArtTactic - Art & Finance Report 2021 - 7th edition

 

The booming online art market

In recent years, the online art trade has become a booming business. Online platforms allow you to find data and information on the work you want to buy. In some cases, they also allow to participate in auctions or buy from international galleries. An interesting piece of data about the future of online auctions is to be found in the fact that 94% of auction houses surveyed predict an increase in online sales over the next five years, while no respondent foresees a possible decline. This is because in 2020 the digital auction sector for the first time doubled its value compared to the previous year (sales in online auctions represented 25% of total sales compared to 9% in 2019). Similarly, the entire so-called secondary art market expects that the increase in online sales in the sector will remain sustained, even expecting an increase.

On top of all this, despite the continued interruptions during 2020, sales to private collectors have been the most prevalent in the art market, as in previous years. Of these collectors, according to a series of interviews presented in the March ART + TECH Report, 80% have bought art online at least once. The most often purchased works were paintings and photographs, more than half of which were created by young artists. This is another important and interesting fact: 40% of young art collectors under the age of forty plan to buy more art online this year. The same young collectors are also those who buy mainly from young contemporary artists online, they are twice as likely to buy online compared to other age groups. Let's look at the Kooness case for example: over the last year, sales through the platform have tripled and users have quadrupled. Most of the users are under 45 years old.

Paintings as an investment: how do you know if a painting is valuable?

In order to value a work of art, whatever the historical period to which it belongs or the kind of work, it is essential to have a minimum of familiarity and competence in the sector to avoid running into unpleasant experiences. Especially if the value of the artwork you are considering purchasing is particularly high, the precautions in terms of analysis are never too many.

Therefore, if you are a beginner approaching the world of the art market for the first time, it could be very useful to rely on experts in the sector and due diligence, who can evaluate the authenticity and actual value of a work of art. The sector of experts who provide advice on due diligence for art to private collectors, art lawyers, wealth managers, family offices, auction houses and trade fairs is increasingly expanding.

The case that certainly caused the most uproar, which inspired the docu-film "Made you look: A true story about fake Art", was the one of a historic New York's art gallery, the Knoedler Gallery, located in the centre in Manhattan. The Knoedler Gallery closed its doors in 2011 after selling an impressive number of fakes passed off as originals by highly rated artists such as Rothko, Pollock, Motherwell, for a total of over 80 million dollars. The works in question were devoid of a certificate of authenticity and documentation, but the technique and materials used to create them had convinced Freedman, owner of the gallery, but also a series of renowned experts, critics and historians. Several laboratory analyses conducted later by the International Foundation for Art Research and the Dedalus Foundation highlighted a discrepancy between the materials used in the falsified and those used inauthentic paintings, causing a series of complaints that led to the closure of the gallery.

This is a rare case that, precisely because of its extraordinary nature, caused a lot of fuss, but it highlights how often even the most experienced can be deceived by a fake, attributing to an artwork a value that is not real. Therefore, it is essential to always be very careful, trusting only those entities that guarantee the required certificates of authenticity. There are two types of forgeries: those created from scratch and therefore copies of originals; and those that attempt to increase the estimated value of the works of minor artists by affixing the signatures of major artists. Fortunately, nowadays there are many more scientific tools and techniques to refer to in case of doubt.

In the case of contemporary works of art, however, care must always be taken that the certificate of authenticity is present. If it is not, the decisive element to evaluate its value will then be the signature of the author.

The value of a work of art is determined not only by the intrinsic value of the work being considered, but also (and sometimes above all) by external elements such as the method of sale, its market position, the tax regulations, and its liquidity on the financial markets.

 

Deloitte e ArtTactic - Art & Finance Report 2021 - 7th edition

 

Collections that acquire value  

In the seventh edition of the international report Art & Finance 2021, Deloitte and ArtTactic have explored in more detail what the new needs of collectors are and how the services of Art Wealth Management are responding to them. As specified in the report, although there are no precedents of crises comparable to the current pandemic, the descriptive data of the pre-covid historical trends can still be extremely useful and indicative to represent a reference for the future and a point from which to start with the development of new strategies.

 

Deloitte e ArtTactic - Art & Finance Report 2021 - 7th edition

 

Analysing how collections acquire value over time, first of all it must be pointed out that, among the sector operators interviewed, 81% state that their customers buy art out of a passion for it, but also as a form of investment. Almost 90% of asset managers, in fact, in agreement with most of the collectors themselves, affirm that works of art must necessarily be included in the range of services offered to the market.

By comparing, for example, the price trend of the most popular Italian artists with those of other popular assets held by investors, it emerges that both on the national and international scene, the art works recognised for quality and value "beat" not only the trend in the value of gold by a substantial margin, but also property indexes. Therefore, the answer to the question whether it is the right time to invest in art is not only positive, but rather that it is perhaps the best moment of recent decades, thanks to the combination of the favourable factors listed above. Investing in art right now is a move that will certainly pay off in the future, also allowing diversification of one's portfolio by including new safe assets.

How to invest in art?

Art can act as a good portfolio diversifier; it is a physical asset, so it performs well in inflationary times; it is not impacted by market volatility: art usually either maintains or increases its value over time; and now it is the best time to invest in it. The growth of the contemporary art market has, for instance, outperformed the one of S&P 500 (1995-2021) by more than 4 percentage points, according to Masterworks. So, how do you invest in art? 

Art can be purchased in different types of markets: from more traditional ones such as art dealers, auction houses, and art fairs to the rising online platforms, such as online auctions and digital platforms (e.g. Kooness.com). 

Whatever the type of market chosen, a few steps are in order to ensure a smooth purchase: 

1. Research the latest market trends, familiarising with artists as well as artistic movements that interest you or you feel particularly attracted to. You can look to digital platforms, such as Masterworks, where you can track the art market looking at repeat-sales data, historical appreciation of artists. But you can also look at art news and magazines.

2. Speak to professionals, such as curators and art advisors. For example, here at Kooness a team of dedicated curators can help and assist you in the process of selecting the artworks that are right for you

3. Look at the trading history (if any) of the artwork chosen, in order to get reliable points of  comparison for the value of the piece as well as to have an idea of its growth rate. 

4. Especially if you buy art online, make sure that the website and methods of payment are trustworthy, and check for authenticity certificates. Have a look at our guide for buying art online.
 

Investing in art is not only good for your portfolio, but it is also an extremely rewarding and emotional experience.

 

Cover image: Artissima Fair. Photo Perottino – Piva – Bottallo. Courtesy Artissima 

Translated by Francesca Allievi from Investire nell'arte? E' il momento più giusto degli ultimi 50 anni

Stay Tuned on Kooness magazine for more exciting news from the art world.
 

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