Art investments appreciated by 8% in 2023 and 105% over the last 10 years. They can be used as collateral for obtaining credit, and tokenization has democratized their access.
Among all investment possibilities in luxury goods, art is currently one of the most profitable. According to The Wealth Report 2024 by the consultancy Knight Frank, the price of art rose by 11% in 2023, while jewelry increased by 8% and watches by 5%. Other luxury items, such as cars, saw a price drop of 6%. Over the longer term, art has experienced a 105% growth in the last 10 years.
There are two types of markets in the art sector. One is the primary market, where artists or galleries sell their works directly. The other is the secondary market, which involves sales and purchases between collectors, often resulting in higher values.
When deciding which artists to invest in, it's important to consider the level of risk you're willing to assume. Investing in established artists may be safer but requires more capital. On the other hand, investing in emerging creators is riskier but can yield higher profits if they successfully develop their careers.
The buyer profile has diversified in recent years, with a growing number of young collectors. Sometimes, if an individual does not have enough savings to invest, a solution is to join forces with others to acquire a work, which they can sell a few years later.
Art as a solution for obtaining credit
Works of art are also a useful asset to back loans. They can serve as a means of financing for artists, allowing them to use their own works as collateral without having to sell them directly. Likewise, collectors can use their art as collateral if they need to obtain liquidity. In fact, there are financial companies specialized in this type of business.
Sometimes, collectors do not need cash to acquire new pieces. Art swaps allow them to exchange one piece for another, enabling them to trade a work for one that fits better in their collection, whether for renewal or diversification purposes. The main difficulty in these cases lies in agreeing on the value of the exchanged pieces to achieve a balanced swap.
The market value of a work of art depends on various factors, including the fame of the creator, the rarity of the piece, its state of conservation, and its ownership history. External factors also influence the price, such as the general economic situation and market trends at the time of the transaction.
Owning art without physical possession
In recent years, something has significantly changed how people access art: tokenization. This involves converting the rights of a work into digital tokens, which enables the fractional ownership and sale of art in the digital market. Pieces by renowned artists, which until recently were accessible only to high-level collectors, can now be divided into tokens with more affordable values for the general public.
For example, a company recently purchased a work by Andy Warhol, tokenized it, and divided it into 10,000 shares available through NFTs. These shares went on sale for $55 each. This approach allows broader access to valuable works, although it's important to consider the risks of a still-emerging digital market, such as its volatility and potential theft through hacking.
