Source: RealTime Images

Where to Start When Investing in Art

With Australian tax time around the corner, there’s arguably never been a more lucrative time to enter the art investing fore.

Often incorrectly perceived as more as a tricky market to enter over the years, art has since firmly asserted itself as a burgeoning asset and is shifting the notion that making money in this space is not solely reserved for those that find a long-lost Rembrandt portrait in their attic.

Art is one of the few investments that allows an investor to consider more than just balance sheets and cash flows, but rather how it might liven up a living or business space, with the potential to appreciate over time simply by hanging on a wall.

While there are multiple ways to gain exposure to this market, acquiring a piece that speaks to an investor from both a financial and emotional perspective, is a good start to getting to grips with this market.

What’s more, business owners can take advantage of a 100 per cent tax deduction on the purchase of artworks for their businesses – a noteworthy incentive with EOFY fast approaching.

Under this scheme, small businesses with a turnover of less than A$10 million can claim this deduction allowance up to A$30,000 per item. This limit is the maximum for a single purchase but businesses can elect to make as many purchases up to that amount as they like.

So, with this in mind, it’s worth taking a look at some of the key elements someone might consider when selecting a piece.

The artist

According to Lyons Gallery, the artist is one of the most significant determinants of the value of artwork and the elements that drive the value can either be subjective or objective.

A seemingly obvious place to start, considering the artist and their status in terms of emerging, established or blue-chip could affect how much their works fetch for at a later date.

“Objective drivers are defined as influences that are not affected by personal feelings or opinions,” the Gallery says.

“Subjective drives are the opposite of this, where personal taste, feelings and emotional reasons play a role in purchases.”

The value of an artist can be determined by a number of factors, including their contribution to the medium, cultural impact, their level of fame or notoriety, how many works they produced in their lifetime and previous resale values.

Salvador Dali (1904 – 1989)
Source: Catawiki

Scarcity and rarity

Traditional economics explains the give and take relationship between scarcity and value — a similar principle can be applied to an artwork.

Artists that produce fewer artworks in their career may be harder to come across and in turn, become more coveted in general compared to an artist that had produced a larger of works in their lifetime.

This idea of rarity and scarcity can create an element of exclusivity if there are limited edition prints of a certain photograph, as an example.

Subject matter and style

Subject matter varies greatly and can also come down to a collector’s personal preference or affinities.

Broadly speaking, however, an artist might have a particular subject they are renowned for capturing or a style that is synonymous with them.

Particular pieces might embody the typical characteristics of the artist entirely and therefore make it more desirable than earlier works before their style had been fully established.

Conversely, however, earlier works could also be harder to get hold of or offer an intriguing insight into the artist’s career development.

Claude Monet, Water Lillies, 1917 – 1919
Source: Wikipedia Commons

Provenance and history

“Authenticity and history of the artworks is another major factor both objectively and subjectively driven,” Lyons Gallery explains.

Artworks that have featured in galleries and museums or have been previously owned by a large collector of celebrities could help drive the pieces’ reputation in this regard and can make it more desirable to an investor.

Artworks can be tracked to see their ongoing ownerships, however, Lyons Gallery heeds this distribution can hurt the value of a piece if it keeps appearing for sale.

Being able to clearly link the artist to the artwork is important not only from an investment perspective but in ensuring the piece is legitimate.

An emotional investment

Art can be a genuinely emotive purchase; when we connect with a piece of art, we are connecting with a piece of ourselves.

Regardless of whether one is purchasing a piece for an investment return or an emotional one, the importance of choosing a work that speaks to you on a personal level can’t be understated.

After all, you might be looking at it for a long time.

Rene’ Magritte, The Treachery of Images, 1929
Source: Wikipedia

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