For people who don't know much about art, it's natural to believe that abstract art sells for absurdly high sums. Christies and Sotheby's were among the auction houses that fueled the trend. While an abstract painting by de Kooning that sold for $300 million in a private sale in 2015 may have surprised some, it is not surprising to those who work in this profession. The cost of abstract art is high.
So, why does abstract art cost so much? For a simple reason, abstract art is pricey. It's in high demand! People nowadays purchase art not only because they enjoy it but also because it might be a profitable investment.
What makes abstract art so expensive?
When we talk about art that sells for a lot of money, we're talking about trophy art. Due to several variables such as conspicuous consumerism, art as an investment, and market speculation, abstract art sells for high prices.
In the art market, there is a trend of conspicuous consumption.
The act of spending money on luxury products and services in order to demonstrate economic power is known as conspicuous consumerism. This word was coined by Thorstein Veblen in response to a gilded society's extravagant wastefulness.
Veblen had a lot to say about the arts and why they should be supported. Our perceptions of beauty were closely linked to rarity and cost for him. He made a comparison between art and diamonds. Diamonds, while comparable to normal glass in many aspects, are rare in the earth's crust and difficult to extract. They become lovely when viewed in certain situations. Furthermore, while a Willem de Kooning oil is valuable, it is also valuable that makes De Kooning worthy. The human drive to demonstrate money and establish status, according to Veblen, gave rise to frivolities and false values.
Art assets appeal to investors for their capacity to transfer consumption over time, as well as their utility as wealth indicators. Returns reflect this "conspicuous consumption" dividend when art value is added to utility.
We can find a pattern if we look at the characteristics of the typical art buyer who is willing to spend a lot of money to get art.
They have at least $5 million in their bank accounts;
They own a substantial number of properties; and
They own at least one luxury vehicle.
So, how are they going to prove to the rest of the world that they have money now? Buying art is simple.
Abstract Art is a Good Investment
Purchasing art solely to improve the aesthetic appeal of a property is a thing of the past. Art is now also purchased as an investment. And in terms of investment, modern and contemporary art, particularly abstract art, are the most profitable. Abstract paintings not only maintain their value over time, but they actually improve in value by 4 to 8% per year.
Art is a large asset class with little correlation to other asset types. In an investing portfolio, such uncorrelated categories might help to balance potential losses while also generating good returns. As evidenced by the art market's performance in 2018. Other traditional markets also struggled during this time. Affluent investors are turning to art to diversify their portfolios and increase their returns over time.
Because it is a feasible option for diversification, art investment is becoming more important than ever. During times of economic instability, to keep an investment's financial strength. Asset classes that move independently of one another are essential to have on hand.
According to the Wall Street Journal, art is the greatest investment class for 2018. The art market outperformed other markets in 2018, as demonstrated by the statistics. During the same time period, blue-chip artwork increased by 10.6% on average, while S&P 500 securities decreased by 5.1 percent.
Let's start with a refresher on the principles of speculating. A speculator is someone who buys (invests) based on projections rather than present worth and demand. The goal is to resale at a better price in the future, essentially creating a vehicle to grow wealth.
This buyer, in turn, keeps the speculation going in the hopes of reselling at a better price to a later speculator, who will then continue the speculation.
One of the most annoying aspects of speculating on art is that it has no monetary worth. Artists work in their studios, manipulating various mediums into different shapes. Then their galleries, dealers, or agents say that their work is an art and that it is worth a particular amount of money.
The majority of art buyers who attend Sotheby's and Christie's auctions are art collectors or resellers who have something in common. Money, experience, and knowledge are all valuable assets. Consider a Pollock collector who owns ten of his works. He is well aware that if he purchases a piece by the same artist at a greater price, the value of his other ten Pollock pieces will rise as well. The same is true for art dealers who have some pieces by particular artists in their portfolio for a lower price than auction houses but can resell their portfolio for a higher price by boosting the value of the artists on auction houses.
The art market has never been more popular than it is now. If Sotheby's and Christie's auctions were once solely for art specialists, today's auctions are more akin to a fashion week event. As a result, unlike the worth of clothing, which falls over time, the value of artworks tends to increase with time, making it a safer investment than the bulk of financial items available. Finally, as I stated at the outset, there is just one fundamental reason why abstract art commands such high prices. It is in high demand.
If you're looking for art that is incredibly beautiful but is not that out of the bounds of reasonable payment, then look no further than www.gregfurie.com. The painter Greg Furie produces amazing abstract art, and the price of his paintings is affordable. His collection can easily be purchased by those who are looking for their first artistic wall painting, not wanting to splurge a lot, but there are also extravagant paintings available for those with more nuanced tastes.