Economics: Why The Art Market Has A Bright Future

 

(Drivebycuriosity) - The art market is changing, benefiting from the growth of the global economy.  Art is not only bought by collectors, who love it and want to own it, art is also purchased by investors & speculators who hope to sell it later for a higher price. These people consider art as an asset, comparable to stocks, bonds & real estate - and as long as they become more wealthy, they spend more for art. The rising global wealth is flowing into stock markets, into real estate and into art works. As long the global economy is advancing and can avoid a recession a lot of money will stream into art work and the market will continue to climb.

There is a growing number of Chinese billionaires who want to show their wealth & taste by amassing impressive art collections. According to Artprice.com "major Chinese collectors are actively and vigorously diversifying their acquisitions. Aware of changes in their domestic market, they are investing in major signatures of Western art from all periods including Old Masters, Impressionists, Modern and Contemporary art" (artprice). 

CNN mentions "Joseph Lau, who bought one of Andy Warhol's Mao Zedong portraits for $17.4 million in 2006, and Wang Jianlin, one of China's richest men, who paid $28.2 million for a Picasso. Billionaire and former taxi driver Liu Yiqian famously paid $170.4 million for an Amedeo Modigliani painting -- reportedly using his American Express card." (cnn). China's new collectors aren't only looking for big names. They also buy works by both Chinese and Western artists -- many of them up-and-coming (cnn).



                          Preparing For The Future


And there is a second trend, which is also pushing the market for art. Museums, especially private collections, are mushrooming all over the world. This summer I visited The Broad Museum in Los Angeles (driveby). The contemporary art museum is founded and owned by the billionaire Eli Broad,  who had build two Fortune 500 companies in different industries: KB Home & Sun America. The private institution has a spectacular collection - and the admission is free (on top of this post an image by Takashi Murakami with observers spotted @ The Broad).

The Broad is not alone. More than 700 new museums are opening every year, reports the magazine Artprice  (artprice): "More museums opened between 2000 and 2014 than in the previous two centuries". Many of them are owned by private investors. "Trophy galleries transform art landscape", claims the British Times and reports that "700 new museums are opening each year as the super-rich rush to put their collections on show" (thetimes).

Many of the new museums are privately owned like The Broad. More than 200 of these were founded after the millennium, and 60 or so in the past five years, reports Condé Nast Traveler (cntraveller). And the oil rich states of the Middle East are investing their wealth into cultural centers to create magnets for tourists to prepare for their future. Artspace reports about 8 new Middle Eastern mega-museums on the rise, mostly in Abu Dhabi (UAE) & Doha (Qatar)  (artspace).

The legion of new art museums and the growing private collections create a huge demand for art work. The magazine Artprice concludes that the demand for museum quality works from this industry has been one of the driving factors in the spectacular growth of the art market. Today’s museums are like yesterday’s cathedrals; open to people from all generations and all social classes eager to experience the singularity afforded by artworks in a world of increasing standardization (artprice).

Anyway, I wouldn´t buy art as an investment. I think stocks are the better alternative and their average return beats other asset classes by far  ( nyu.edu  investopedia). But buying art for fun, to demonstrate one´s taste and wealth, to impress friends, neighbors & family, makes sense. The wealthy need to fill the walls of their classy new flats & mansions in Manhattan, London and Miami.