Investing in Art

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Art has proven itself as an investment. Hardly any other type of investment has managed to multiply capital more sustainably over the long term. The art market is rapidly evolving and opening up to increasingly wider target groups and buyer states.

However, those who want to invest in art should be extremely well-informed, especially when starting. This type of investment follows very specific requirements and strategies.

ARTES supports you in your art investment. Find out how here.

Why is art worth investing in?

Why is investing in art profitable for my company?

What are the advantages & disadvantages of art compared to other investments?

What is the right investment strategy?

What is the best way to start investing in art?

How can you become a professional?

What tax aspects should be considered when investing in art?

What security measures should be taken for art?

How do I recognise trends in the art market?

ARTES supports you in your investment!

Why is art worth investing in?

Often, for investors, art is much more than just a pure investment. In addition to its material value, art also has an emotional value. The joy of the artwork and the high prestige factor distinguish investing in art from other forms of investment.

However, just purchasing a work of art is often not enough. Successful art trading in the long term requires an intensive engagement with the artists, the acquisition of insider knowledge and active participation in relevant art events. The question of asset preservation and maintenance or which insurances are necessary will arise sooner or later. Many art collectors, therefore, often invest a lot of time in this area.

But the beauty of engaging with art is that it broadens the horizon and opens doors to new areas and scenes. Therein lies an incomparable attractiveness of this kind of investment. Therefore, investing in art is not only a financial but also a social investment.

Investing in art can also mean a preference for security. Many people who buy artworks do not primarily want to make a quick profit, but rather acquire something beautiful with a lasting value.

For this reason, artworks are a popular capital investment for the future of one's own family.
However, investing in art is not only profitable in monetary terms: it increases the quality of life and provides the pleasant certainty of having contributed to the preservation of culture. Similarly, the emotional attachment to a work of art can become so strong over time that it may even soften the impact of a loss in value.

Sometimes, the appreciation for a work of art even grows to such an extent that the financial component recedes completely into the background, and the work ultimately remains in the buyer's collection.

 


• The representative power of art

• Increase in quality of life

• BStability/security of investment

• Long-term capital investment and the possibility of inheritance

• New social contacts and insight into the world of artists and art lovers


Why is investing in art profitable for my company?

@ToDo Alternativtext

"In my case, through the art promotion of my company, the name Würth was greatly transported. Würth has made it understandable that we also deal with the beautiful sides of life. The employees feel very comfortable in this scenario."

(Dr Reinhold Würth, entrepreneur & art collector)

 

Art consultants give the following advice regarding the furnishing of corporate spaces, doctors', or lawyers' offices: a carefully prepared art plan is a reference for how you pursue goals within your company and what value your clients and employees hold.

Investing in original art is always a direct investment in your customer and employee loyalty. Art conveys an atmosphere of stability, creativity, and success.

It is also worth investing in young artists. Their works are usually more affordable than those of established artists and yet far more substantial than the usual framed poster.

In addition, you can deduct the expenses for art for your company spaces against tax.


• Art as a reference for your company

• Conveys stability, creativity, and success

• Art purchase tax-deductible for companies


What are the advantages & disadvantages of art compared to other investments?

Art can be very suitable as an investment, but there are also some things to consider.

Compared to an investment in a stock, investing in a work of art offers a certain degree of security. A total loss is almost impossible here, even despite fluctuations in value, especially if the work is by a well-known artist.

However, the art market is not completely disconnected from the stock market, as many collectors also make money on the stock market. This can lead to setbacks, which are often more moderate in the art market.

An important factor in deciding to invest in art is often also the high prestige that comes with owning art. Unlike a stock that disappears in the drawer of your desk, you always get the pleasure of looking at a work of art and the enhancement of your business or private space. As with other financial investments, it is important to acquire a certain prior knowledge of art.

Especially for beginners, the opacity of the art market, which follows its own laws and is less transparent than the financial market, can be particularly difficult. Therefore, it is recommended to seek advice from an expert in the art market.

The same applies when verifying the authenticity of a work of art before purchase, which is often difficult for a beginner to determine alone. ARTES can help you here. Both our art consultation and authenticity certification are based on years of expertise in the art trade.

In general, you should be aware that works of art are more suitable for long-term investments. The sale can take weeks, months or even years - unlike a stock. Thus, according to experts, investing in art primarily serves to preserve value in the long term.

Advantages

• Lower risk of fluctuations in value

• Total loss is almost impossible

• Prestige factor of art

• Enjoyment of the work of art

• Long-term value retention

Disadvantages

• Long entry phase

• Low transparency of the art market

• Not a short-term investment


What is the right investment strategy?

Usually, unique pieces or small editions are interesting for the investor. Depending on the goal, different strategies can be pursued when investing in art. Buying from unknown artists may offer the attractiveness of high-profit potential, but it is also associated with the highest risk. One should keep in mind that less than 10% of up-and-coming artists succeed in establishing themselves in the art market. The disadvantage of investing in unknown art is also that there are only low chances of reselling it at an appropriate price.

Investing in well-known artists is less of a risk. This not only requires less expert knowledge, as the price development is usually transparent and can be read via auction-based charts. However, the high personal liquidity of the investor is a prerequisite in this case as unique pieces often cost over 100,000 euros, and experts even set the minimum investment at one million euros.

Investing in well-known artists has other advantages and disadvantages: While their art is easier to buy and resell, higher dealer and auction house commissions also need to be taken into account in addition to the market values. Even when investing in well-known artists, there is no absolute certainty of an increase in value. Sometimes extremely "hyped" artists quickly lose attention, or a financial crisis causes them to quickly lose value. One strategy to avoid these risks is to invest in artists who have already proven themselves for some time, and whose art is already recognised in art history.

An intermediate strategy is to invest in up-and-coming artists who are not yet established but already have first exhibitions at well-known gallery owners or notable events, as well as their first public purchases.

Unknown artists

Advantages:
• Low investment
• Possibility of large profit increase
Disadvantages:
• High risk
• Lower resale chances

 

Emerging artists

Advantages:
• Medium risk
• Possibility of large profit increase
Disadvantages:
• Long research phase (galleries, events, acquisitions)

Well-known artists

Advantages:
• Less insider knowledge required
• Transparent price development
• Easy buying and selling
Disadvantages:
• High investment
• High trader commission

To find out how an artist is positioned on the market, it is recommended to follow these questions: Are the artist's works being traded? How many galleries represent him/her? Is he/she present at fairs? How many works are auctioned annually? How many works are auctioned and how many works are returned?

Well-known artist’s have already made a name for themselves: the artists' names have then become a kind of "brand" that stands for fame and a good reputation.

Whether an artist is well-known can be researched by the price development of his works over the past years, for example, through artprice.com, artrankings, or the "Art Compass".

Media reports and quotes from respected critics or artist friends can also provide information about the artist's established status. Likewise, it is worthwhile to get an impression of past and upcoming exhibitions held at well-known institutions.

Those who buy art from established artists are usually looking for works with a recognition value. This increases the prestige factor of the investment.

The choice of the type of art and the artist to invest often depends not only on financial interest but also on other, so-called "soft" factors: The personal taste of the investor and the representative value of the work of art almost always play a decisive role.

@ToDo Alternativtext

• Choice of art type: painting, photography, graphics, design

• Search for unique pieces or objects in small editions

• Choice of the right strategy: well-known artist, unknown artist


What is the best way to start investing in art?

To invest successfully in art, it's important to be well-connected in the art scene, regularly visit galleries and important events, and stay up-to-date by reading publications or specialist magazines Another crucial aspect when buying art is having the right amount of good instinct. Developing a sense of art doesn’t happen overnight and requires time and dedication.

Especially for those who are relatively new to the art market, it's worth considering seeking professional advice. For example, consulting an art advisor who can support the client in buying and collecting art, researching procurement options, or making contacts.

A good consultation provides expertise, insight into the artist's work and intentions and an overall understanding of the technique and the art historical context of the work.

Often, it's helpful if the advisor has a background in art or art history and therefore brings enthusiasm for art and knowledge of the market.

For those seeking professional support in art management, it's important not to settle for just buying advice and object searching as a service.

 


• Gain specialist knowledge

• Get to know the art scene

• Use professional advice: Art consultant, art manager, art dealer, gallery owner


How can you become a professional?

@ToDo Alternativtext

For successful investment in art, it is not enough to be wealthy. It is necessary to have a deep understanding of the art world and to regularly visit galleries, important art events, auction houses, and even artists' studios. Without the appropriate networking and professional knowledge, it is difficult to discover or acquire rare items in the art market.

To achieve the best possible profits in art investment, it is essential to choose the right time and not miss sales dates and locations. Collectors often become members of the friends or patronage circles of museums, since selective sales may arise when the collection is eventually dissolved.

If a purchase opportunity arises, it is recommended to thoroughly investigate the work of the artist, the object, and its intention. A basic understanding of the art historical context and the production technique is also essential. Expert knowledge is essential for every art collector.

But in the end, there is no recipe for success when buying art. Look, compare, inform yourself, let the works have an effect on you and in the end trust your instincts - this is also the advice given by renowned art collectors.

Those with little time for research should set a price limit and consult an external advisor. It may be less adventurous, but it is more serious and secure.


• Understand the art world

• Know sales locations and dates

• Consult external advice

• Create a collector profile


What tax aspects should be considered when investing in art?

Often, works of art remain in the possession of a collector for a long time. However, anyone who decides to sell a work should pay attention to the one-year speculation time limit that applies in Germany – otherwise, the profit will be shared with the tax authorities. If there is no full year between the purchase and sale of an artwork, the sale price minus the purchase price must be taxed. The profit is then subject to the personal tax rate, and the resulting taxes can be as high as 45%.

Only profits of up to €600 per year are tax-free. However, this €600 limit applies to all sales in a calendar year and does not apply, for example, if three objects are sold for €550 each. The amounts are then added up. It should be noted that this €600 threshold applies to all private sales transactions - whether art, vintage cars, or real estate - per year. After the one-year period, the sale is tax-free, regardless of the actual profit.

This one-year "speculation time limit" should therefore be kept in mind when selling works of art. If a regular income is generated with a work of art because it is, for example, loaned to a museum for a fee, the holding period is extended to ten years.

It is also advisable not to sell too many works of art within a short period of time, as this can raise suspicions of commercial trading. In that case, the value-added tax is also due in addition to income tax. The situation becomes critical already at three sales per year. The systematic purchase of art can also trigger a tax liability. The decisive factor here is the intention to make a profit: if the aim is to make a total profit over a longer period of time, the tax authorities may assume that the activity is commercial. It does not matter whether a business has actually been registered.

If the tax authorities cannot prove the intention to make a profit, art purchases are usually classified as private asset management or hobby. The profits from this do not have to be taxed. However, losses cannot be claimed either.

For companies, law firms or medical practices, the purchase of art has a double advantage. They can deduct the expenses for the art from their taxes and also achieve an upgrading of their spaces, as well as a gain in prestige for their company.

Sale

• Private sales up to €600 per year are tax-free

• Sale after one year tax-free

• Tax-free if profit-making intent is not provable


Purchase

• Art purchase for business tax-deductible


What security measures should be taken for art?

Art objects often have not only a market value for the buyer but also an inestimable personal value. But what if the works of art are stolen in a burglary, destroyed by fire or damaged by a burst water pipe?

Ordinary household insurance usually does not adequately cover the specific risks associated with art objects in terms of amount and scope. Especially for a higher-priced object or a larger collection, it is, therefore, advisable to secure oneself through private art insurance.

Art insurance belongs to the group of property insurances and offers special conditions for the insurance of paintings, photographs, collections, sculptures, but also furs, jewellery and antiques.

The special offers provide compensation in the event of destruction, damage or loss of the insured items.

In addition, the objects are secured for temporary changes of location, such as during exhibitions, auctions, galleries, museums, and the resulting transports.

Art insurance can therefore be seen as a combination of household and transportation insurance. It usually combines the requirements for the art context in a better way than booking separate offers.

 


• Private art insurance

• Household contents insurance

• Transportation insurance


Where do people buy art?

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Artworks by established artists are usually sold at fairs, auctions, in the art business and in galleries. The fear of plagiarism plays a role here, as there are often forgeries of works by well-known artists in particular.

Protection against plagiarism fraud can only be provided if an expert has verified the object before purchase and provided it with a guarantee of authenticity.

When buying through a gallery or auction house, it's important to consider that the listed price of a work is often subject to an additional dealer's commission. Depending on the initial price of the artwork, these additional costs may be significant. Fees of 25% or higher of the work's price are common. Therefore, find out in advance whether such a commission applies.

For the distribution of art by artists who are not yet established and who do not yet have a gallery, the internet is playing an increasingly important role. Online purchases have the disadvantage that you can only see the artwork as a picture on a computer before buying, but a reputable dealer will always offer to take back the work within a predetermined period if it doesn't meet your expectations.

A good dealer will also always advise you on the purchase of art and provide you with all the necessary information about a work. Buying art is always a matter of trust, and an honest dealer will strive to strengthen that trust.

The main advantage of buying through the internet is that there are no high commissions.

Another type of indirect investment is participation in art funds. These usually promise their investor’s percentage returns until distribution for their participation in the purchase of artwork packages. 

However, this type of investment has not caught on with many investors. The art market is a rapidly changing market to which many art fund models cannot respond. Investing in art funds, therefore, carries a corresponding risk but also the chance of above-average results.

 


• Art fairs, art trade, auction houses, galleries, art halls, art associations

• Online marketplaces, internet

• Art funds


How do I recognise trends in the art market?

In order to recognise trends in the art market, a long-term engagement with the matter is often necessary. Visiting and observing established events such as the "documenta" or the "Biennale" is indispensable here.

The German annually published ranking "Kunstkompass" by the manager magazin, which lists both established and up-and-coming artists, also offers help in finding out which artists are particularly popular at the moment.

"Artprice" provides an overview of price developments over the past years and the current price trend. Researching the media is also essential to stay up-to-date in the art market.

It is not only worth reading regularly published new books and subscribing to art magazines or professional journals.

Films about artists, TV features, quotes from critics or even clips on YouTube or Vimeo also give a sense of who or what is currently popular.

 


• Visit important exhibitions and art events

• Get informed about art rankings and prize placements

• Research in the media, TV, and internet

• Reading journals and magazines


ARTES supports you with your investment!

At ARTES, we help collectors and art lovers discover, learn more about and buy art. For over 35 years, we have worked with artists, galleries, publishers and art institutions to offer one of the most extensive collections of 20th and 21st-century artworks. We sell rarely available, limited edition and hand-signed original prints, sculptures, and unique pieces by recognised artists at fair prices.

When you collect with ARTES, you are not only collecting the important artists and relevant works of the past 100 years. You are also making a good investment for art, for the artists, and for yourself.

Works of art that you purchase at ARTES are carefully checked for origin, authenticity, and condition. For unique pieces, we provide certificates of origin and appraisals on request. In the case of original graphics and ARTES own editions, you will receive

a certificate confirming the authenticity of the work of art. You will also receive a perfect museum-standard restoration and framing, as well as the option to arrange for a date-specific return guarantee. This reduces your risk.

Buying art is a matter of trust. That is why we give you a guarantee of authenticity. ARTES will take back every delivered work of art within three years at the full purchase price plus a 10% increase in value if it should turn out that the value-determining information is incorrect.

We would be pleased to advise you on your investment plans and invite you to get to know KUNSTHAUS ARTES.

@ToDo Alternativtext

• ARTES offers exclusively originals and unique pieces by top-ranking artists

• Certification of authenticity thanks to many years of expertise

• Three-year ARTES guarantee, incl. return guarantee plus a 10% increase in value in the case of incorrect value-determining information

• Transparent pricing

• No additional commissions

• Free art consultation by our experts

• Order your artwork for a non-binding viewing at home

Contact us

Do you have any questions about your investment in art or are you looking for a specific artwork? Contact us, we are happy to advise you free of charge.

Phone: 0511 / 64 27 71-20 · Email: info@kunsthaus-artes.de