How Big Is The Art Industry?
Paintings, like many fine arts, have been highly prized as collectibles for thousands of years. It’s generally believed that works of art have appreciating values in their own right over time. Many auction houses specialize in certain types of artwork, and the marketplace for these works becomes highly populated as a result.
In an article by Artsy, the art market was worth a staggering amount of $50.1 billion last year, in 2020. This was a tough drop from $64.4 billion in 2019, mainly because of the global crisis we are facing, the COVID-19 pandemic. Despite this fact, the art market still manages to thrive thanks to its successful shift online.
Why Do People Pay Millions To Buy A Work of Art?
You may be wondering, what are the people, who pay millions for a painting, thinking? Do they really admire the piece of art? Is it for love? Excitement? Entertainment? Did they buy it to establish the status or approval of their peers? There are a lot of different reasons why, some of them may be personal and some may be practical.
On the personal side, anyone can use their own money any way they want. If they want to buy that painting to impress other people, to show their love, to just be entertained, or to have a little bit of excitement, then they can. They have the right to do so.
Art as an Investment
The good thing about investing in art is that, unlike stock investments, the value of art doesn’t decline with the stock market, It has rules of its own. Of course, this depends on the potential value of your acquired painting, but most of the time, the value of artwork always appreciates.
Other rich and famous people also buy paintings from old artists or rising talents to promote their work. Promoting their works also means that they intend to raise their value. Raising the value of their prospect’s work simply means more money for them. It is really amazing how rich people are able to think out of the box to maximize their investments.
Practically speaking, investing in artworks can be rewarding especially if you have conducted enough research. Moreover, don’t expect to get rich overnight by investing in artworks because 10 years or more is the minimum time window if you ever decide to invest.
The 1031 Exchange
Many of us don’t know that the rich are buying art to save up on taxes. Yup, you read that right. Art collectors all over the world are aware that the Internal Revenue Service (IRS) gets their fair share of tax payments whenever a multi-million dollar painting has been sold. Well, bright people found a loophole in the policies of the IRS and it is very brilliant.
Basically, a 1031 Exchange allows you to swap properties which are held for business and investment purposes. These properties must be like-kinded in the eyes of the IRS so that the capital gain taxes can be deferred.
In the case of paintings, an article by Groco suggests that rich people save millions of tax money by selling their collection pieces and using the money to buy more art. It can be viewed as a continuous investment and it’s brilliantly effective. No wonder the rich keep on getting richer, huh?
So, Why Do Paintings Make So Much Money At Auctions?
Here are the ten (10) reasons why paintings make so much money in auctions:
- Historical Significance
- The Backstory of the Artist
- The Popularity of the Artist
- The Thrill of the Auction
- Subject Matter
- Love and Passion
Of course, paintings that are well-preserved will definitely sell at a higher price. If it has no tears, sun damage, or holes then the better.
According to Art Business, the best optimum condition of art is when it’s in its original untouched unrestored condition. This means that the painting hasn’t been altered in any way since it was created. Art collectors are often willing to pay a premium price for that.
There are a lot of ways in how a painting’s historical significance can affect its overall value. For instance, paintings that were made in the Renaissance and Middle Ages are valued for a much higher price today.
The Collector says that the notion of restitution greatly affects the value of a painting. If it has an interesting story and great historical significance, then it will certainly be valued more. One example of this Adele Bloch-Bauer II, worth $88 million, was made by Gustav Klimt. It was stolen by the Nazis in World War II and at some point in time, it was owned by Oprah Winfrey.
The Backstory of the Artist
Naturally, the story of the artist’s life and death greatly affects the value of his works over time. If the artist was one of the biggest names during their time such as Leonardo Da Vinci, Pablo Picasso, Vincent Van Gogh, and such, then their works will certainly be worth millions.
An article by Howden says that the value of an artist’s work also appreciates after his death. For instance, Vincent Van Gogh has produced 900 paintings during his lifetime but only ever sold one. Yet, after his death, his paintings became so popular. In fact, his portrait of Dr. Gachet sold for $82.5 million in 1990.
The Popularity of the Artist
Certainly, if the artist is popular and attracts a lot of attention in the industry, then his or her works will definitely cost more regardless of the painting’s technical aspects, according to an article by Culture Trip.
For instance, the works of popular modern artists such as Jeff Koons and Damien Hirst will certainly be valued more in auctions. The same can be said for all-time popular painters such as Leonardo, Picasso, Munch, Michelangelo, and many more.
Naturally, the authenticity of a painting sets it apart from its duplicates. For instance, the real authentic Mona Lisa painting could be worth millions to billions of dollars. However, of course, copies of the Mona Lisa paintings are certainly worth less.
An article by Articheck discusses that during the old times, the authenticity of the painting was only based on word of mouth and reputation. These days, official papers and records are the ways to prove a painting’s authenticity, hence, increasing its overall value.
Aside from the fame and popularity of the artist, provenance also plays a huge role in increasing a painting’s value. The Collector says that if a famous or influential person owns a piece of art, it will automatically appreciate in value by the time the ownership will be transferred.
For example, the White Center by Mark Rothko was only worth $10,000 before it was owned by the Rockefeller family, America’s most powerful family. By the time it was auctioned by Sotheby’s, it was sold for an astonishing amount of more than $72 Million.
The Thrill of the Auction
In an article by The Collector, Christie’s legendary auctioneer Christophe Burge talked about the time when he hammered the sale of Van Gogh’s Portrait of Dr. Gachet. He describes that the hall full of billionaires was applauding for the money and excitement, not for Van Gogh or his masterpiece.
Auctioneers are very talented people who are capable of raising the amount of something and ultimately selling it for more than its original worth. That is why some bidders in Christie’s or Sotheby’s are ready to spend millions just for the thrill of it.
Another reason for the appreciation of a painting’s value is its typicality. For instance, if the painting being sold is exhibiting features of a famous artist such as Vincent Van Gogh’s Post-Impressionism, Pablo Picasso’s Cubism, and Edvard Munch’s Expressionism, according to an article by Culture Trip.
Culture Trip suggests that if we are strictly talking about modern paintings which are sold today or even classic paintings of which the artist was not that famous, then the subject matter certainly plays a huge role. For instance, paintings of women are more valuable than paintings of men. Paintings of nature can also be valued more than paintings of dark-themed places.
Moreover, if we are talking about the works of a famous artist, then this rule certainly does not apply.
Love and Passion
An article by The Collector says that the greatest reason to increase the value of art is still how much people love and appreciate it. Besides, the purpose of an artist’s masterpiece is for his work to express himself.
Therefore, the value of artwork still depends on how much the artist and enthusiasts love and appreciate it.
Most people underestimate the financial power of paintings. In fact, a contemporary masterwork is considered valuable not only because of its intrinsic worth, which goes far beyond monetary value but also because of how it has been treated and preserved over time.
The history of a work of art goes back many centuries. This means that the artworks that we see today were once considered unworthy, and likely to be destroyed quickly. As a result, they were carefully selected for preservation, which preserved their original visual value while also adding to their historical worth.