What determines the price of a piece of art?
Prices have been rising at a phenomenal rate at
every major art auction since the 1950s.
Such tremendous growth in the participation of art
collecting and dealing today has brought an increasing fascination with the art market and
the way it works. Collectors vary from the young enthusiast who ventures $100 for a
painting by an unknown artist, to the deep pocket connoisseur who pays millions for a work
by a great master like Van Gogh. There are more people collecting art now than at any
other period in history, and they are collecting from a wider spectrum of artists and
mediums.
For the first time ever, a living artist can make a
good living. Yet relatively few people, even among collectors, know why art has become
such big business. Both buyers and sellers continue to ask themselves: "what is this
work of art worth?"
Values in the art market have never been clearly
defined. A market for art exists simply because most people take natural pleasure in
possessing beautiful things. Beginners should concentrate on their own likes and dislikes
as opposed to value potential.
When you start collecting art, you should not think
about the investment potential in it. Buy it because you like it. The
reason you collect art is because you love it, you understand it, and it's going to
enhance your life.
Fine art is becoming more and more a part of the public psyche. There are art galleries
and art stores, books on art, magazine devoted to every facet of the subject, newspapers
with art sections and now, even a cable TV station. The overall demand for artwork is
booming.
Another factor on the demand side of the art market
is the influence of the schools of investment in vogue at a given time. Those watching the
financial transactions of the wealthy follow art investment trends, adding to the demand
for works by particular artists.
On the supply side, the supply of fine artwork is
absolutely limited. With notable exceptions like Native American art, investment-quality
artwork generally implies a dead artist. As more of this limited supply is purchased,
there is progressively less available for sale. So, the remaining demand must be satisfied
out of this limited and now-decreased supply.
It looks like the perfect investment: An increasing
demand coupled with an absolutely limited supply. Now, add to that the prosperity of the
1990’s and you will begin to understand the attraction of the art market.
Collecting art for the purpose of investment must
be carefully considered. Art is a long-term investment, and can be a hedge against
inflation, but you must understand that most appreciation occurs over time. It is
very important to like the art you buy since you will probably have it for a significant
period of time.
Art investment is often cloaked by a veil of
secrecy. It is a very personal process based more on human emotion than on any
predictable formula.
In the end, the investor-collector comes back to a
subjective assessment of quality. As beauty lies in the eye of the beholder, so lies value
in the mind of the buyer
As portfolios plummet, uncertainty increases, and paper wealth vanishes
overnight, some investors may be longing for assets they can touch.
Like a fine diamond, a wonderful
painting or a carefully crafted piece of pottery now gives its owner the added security
that its value won't soar or crash with the NASDAQ index.
Conclusion:
