Art is always a fantastic investment in yourself. On the other hand, it’s almost never a good financial investment, but don’t let that discourage you from buying art.
Nope, I’m not Betsy DeVos—just realistic. Unfortunately, a lot of new collectors do expect to sell their art for a profit, and I get why. A painting that sold for $10,000 in 2005 just turned out to be a DaVinci that sold for $450 million last year. Contrary to that lovely fact, stocks consistently outperform art as a financial asset.
Buying art is like playing the lottery. If you win, you might hit it big, but chances are you’re not going to win. If you’re clear about that, unrealistic expectations won’t sour you on art collecting.
In my next column, I’ll tackle how to buy art that has the best potential to be a great investment in yourself as well as a good financial investment, but that’s the exception. Let’s talk about the rule.
Most art won’t hold its value, let alone give you a higher return. This rule even applies to blue-chip art because there are a ton of outside factors that influence value.
That brings me back to the Hirsts I showed you in my first column (Collecting 101—Your Eye and Your Gut). This set of prints was the first serious work of art I ever bought. We were living in London in 2007, and Damien Hirst was the bluest-chip Contemporary artist of the day. In 2008, Hirst sold 223 of his works for $200 million, an average of $900,000 each. That two-day auction started on the same day Lehman Brothers collapsed, along with the global economy. Our timing for a monetary investment in Hirst couldn’t have been worse.
Regardless of its financial value, I still love I once was what you are, you will be what I am by Damien Hirst (seen above).
Think of art like a car. The minute you take it off the lot, it loses half its value. Same thing with your iPhone, but you don’t care. You don’t look at them as financial investments. You buy them because of the joy they bring you. You don’t expect to earn a financial return from them. NOT that I’m reducing art to just another luxury good. Hell, no! Art drives the kind of cultural change that powers revolutions. A Prada bag can’t do that, no matter how much you love it.
There are good reasons why people started thinking of art as a financial asset, and it’s not just the bankers’ fault. The shift started in the 1960s, got worse in the 80s, and has really taken hold with Millennials. I’m not picking on you, Millennials. There’s hard data that a lot of you think art is a good investment.
The shift started with Andy Warhol. While his Campbell’s soup cans forever expanded our idea of what art could be, Warhol also fundamentally changed the art world. He was a marketing genius who turned himself into the first art “star.” He also created about 400,000 works, which is why he called his studio The Factory. Warhol made truly great works. He also made a gazillion more works than other great artists. That combination has resulted in Warhol consistently accounting for about 17% of the art market. Let that sink in: one-sixth of the global art market is currently tied up in the work of a single artist. That’s insane!
Warhol not only blurred the line between art and other commodities, he also made art collecting cool. Then the excesses of 1980s’ Wall Street (to which I can personally attest) made a lot of people really rich, really quickly. The same thing happened in Russia in the 90s and in China in the 2000s. That means a lot more people collecting art—some to buy social status, to evade taxes, or to launder money. Voilà: art = cool = luxury good = asset class.
On top of that, add the anecdotes of exponential increases in art value. A dealer I know paid $8,000 for a painting and sold it about 10 years later for $1.6 million. One of my landlords paid for her luxury Soho apartment building with the proceeds from a Richard Prince painting she bought just a few years before for pennies. Both stories are true. They’re also the luckiest acquisitions made by art experts.
Just because we have good reasons to believe that art is a viable financial investment doesn’t mean it’s true. Here are the facts. Over the past 10 years, artworks worth less than $1 million generally decreased in value. During the same period, only artworks worth more than $10 million increased substantially in value.
Art also isn’t a liquid asset. IF you can resell a work at all, it takes about 12-18 months to do it. In the meantime, maintaining a serious art collection comes with enormous costs. There’s constant maintenance with expensive gear like UV protection shades and climate control. That means no turning off the AC when you’re on vacation. There’s also huge installation, lighting, conservation, insurance, and moving costs.
Our glorious Table Bleue by Yves Klein was damaged when we moved last year. (I’m still grieving.) You can barely see the scratches, but they’re in the plexiglass, so there’s no way to repair them. Even if you could, the piece is now worth a tiny fraction of its pre-move value. That’s why we pay a truckload for art insurance.
You also can’t assume you’ll get a tax write-off for donating your art. Not every piece is museum-worthy. Museums have limited space and a responsibility to give their stamps of approval only to important works. There’s no guarantee you’ll find a museum that will take the works you’ve collected.
So buy art, not only with your eyes, but with your eyes open. Collect knowing that you’ll probably never get your art budget back. Then revel in the fact that your life is filled with something way more enriching than stocks and bonds.
Holly Hager is an art collector and the founder of Curatious. Previously an author and a professor, she now dedicates herself full-time to help artists make a living from their art by making the joys of art more accessible to everyone.
top image // Table Bleue by Yves Klein, a plexiglass table that houses hills and valleys of loose International Klein Blue pigment.