Do you own paintings or art pieces? Art remains a unique type of asset due to its distinct characteristics and valuation principles. According to a study by Baumol, the lack of connection between an artwork’s value versus the cost of production results in highly unpredictable price fluctuations.
While other asset types are influenced by tangible factors such overhead or raw material costs, the value of an artistic piece is driven by subjective factors.
If you are someone who just started collecting art for investment, you may be facing the challenge of accurately predicting future price movements.
However, if you understand the different attributes that influence art valuation, you can maximise potential returns on your art investment, and make the process of collecting even more fun.
Collectors and investors like you can make informed decisions about purchasing, selling or holding onto artworks if you understand when each attribute weakens.
In this article, you will explore factors shaping the art market: from economic influences to cultural and social dynamics. The sections below will also delve into the elements that impact how art is valued, bought, and sold.
What is Art Valuation?
Art valuation is a branch of financial assessment focused on determining the fair market value of artworks, as noted by the Corporate Finance Institute. This process combines financial appraisal methods with personal interpretations of the cultural importance and meaning of a specific piece of art.
Investing in art can be profitable as artworks often increase in value over time. Yet, it also poses risks due to the subjective nature of art, making it hard to predict its financial performance. In other words, the unpredictability of art comes with challenges in acquiring consistent returns.
The rise of specialised applications and software has simplified art valuation. These tools provide easy access to extensive databases for monitoring an item’s value. Collectors, investors, and art enthusiasts can use such art inventory tools to easily manage or monitor their collections.
What Factors Influence the Market Value of Art?
You may have recently bought a new sculpture. Great! Now, how can you know when the art piece’s value will most likely appreciate? Or perhaps you already have an art gallery and want to understand each piece’s current market value. Where should you start?
Below are several elements you should monitor before or immediately after adding an item to your art collection. Being informed about all these factors minimises potential risks while maximising rewards when you invest in artwork.
1. Artist’s Reputation
Artists who have gained mastery in their craft or have a record of producing exceptional artwork usually demand higher prices for their pieces.
According to a study by Sagot-Duvaroux, Pflieger and Rouget, this achievement is often attained through critical acclaim, awards, exhibitions at prestigious galleries or museums, and consistent demand from collectors over an extended period.
Consider Willem de Kooning, one of the early artists who significantly influenced the abstract expressionist style. His painting Interchange (1995) sold for $300 million (£240.5 million), highlights how an artist's contribution to art history can impact the value of their artwork.
2. Rarity
Non-editioned pieces exist as a singular creation. Their rarity drives up demand in the art market, making them highly sought-after and valuable.
This is particularly true when an artist has a limited number of works available or when an artwork represents a rare period or style in their career, making it more appealing to art enthusiasts, as noted by an art service platform, RevArt.
Take the Salvator Mundi painted by Leonardo da Vinci. This painting was not only one of the most expensive paintings in the world but also the most controversial piece by da Vinci due to its long disappearance.
At the time, most of the roughly fifteen existing paintings attributed to da Vinci were owned by museums and unlikely to be sold. This particular painting was the last one in private hands and was sold for $450.3 million (£360.9m), making it the rarest painting in the world and perhaps the most valuable artwork by da Vinci.
3. Condition of Artwork
The artwork condition refers to the preservation of its physical integrity and aesthetic appeal, influencing its market price and potential for appreciation over time, as highlighted by a professional art service, Sybaris.
For instance, imagine two paintings: painting A being in excellent condition, and painting B having some visible damage. Generally, an artwork in good condition (painting A) is appraised higher than one in a deteriorated state, said an online art marketplace, My Art Broker.
An art condition report records the physical condition and changes in artworks like the ageing of materials, damage, vandalism, infestation and more.
This is mainly utilised for paintings and other artworks like drawings, sculptures, prints, and photographs to document any changes or preservation needed. Condition reports have been simplified with the emergence of mobile applications or software designed to manage art collections.
4. Provenance
The keyword here is "provenance", a term that originated from the French word provenir –meaning “to come from”.
The history of sales and acquisition for an artwork is an important factor in art valuation, says a publishing platform, Medium. A successful auction history has more chances of getting higher value than those that have previously failed to sell at auction.
A detailed provenance should trace the ownership history of an item from its creation, including specific descriptions of the piece. This includes the dimension, medium, and production date of the object.
The provenance's influence is exemplified in the collection of cookie jars that were formerly owned by Andy Warhol.
These containers were sold at an auction for approximately $250,000 (£201,935) due to their association with Warhol's kitchen. Without their connection, it is doubtful they would have sold for more than $40 (£32).
5. Technique
The technique used in creating the piece also influences artwork value. Typically, those painted in oil on canvas have higher art value compared to those on paper.
This is partly because oil painting is a challenging medium to master, often requiring artists to invest more time and effort into perfecting their craft.
Consider a Claude Monet painting, known for vibrant colours and distinctive brushwork. The use of his signature technique of capturing light and atmosphere with delicate brush strokes would likely demand a higher price at auction than a less skillfully executed painting.
Buying, Selling, or Investing in Art?
Predicting price increases for artworks can be difficult due to various capricious factors. From the artist’s reputation to the artwork’s rarity, condition, provenance, and technique, art valuation becomes unpredictable and inconsistent.
However, by staying informed about market trends, understanding the value drivers of artworks, and seeking expert guidance when needed, you can make more informed decisions when buying, selling, or investing in art.
Art Market & Valuation: Frequently Asked Questions
1. What factors affect the value of an artwork?
The value of an art piece is influenced by factors such as artist reputation, provenance, condition, and rarity. For instance, a painting by a renowned artist like Pablo Picasso would typically command a higher price due to the artist's fame and historical significance.
2. Why is art appreciation important?
Art appreciation provides the vocabulary to understand and discuss visual arts. It also introduces various mediums that help understand the world around you.
3. How does arts and culture affect our values?
It has the potential to spark reflection, empathy, dialogue, and new ideas. It also helps people to develop new skills and practise alternative ways of living and interacting.
Keep Your Collection in Check with MyAssets
Navigating the complexities of valuing art is undeniably a challenging task. Whether you are a collector, investor, or art enthusiast, utilising tools such as MyAssets to record and track the value of your collection can be highly beneficial.
MyAssets is a comprehensive platform that enables you to securely store relevant information about your collection.
From art descriptions and art conditions to purchase price and current market price, MyAssets ensures you can catalogue vital information and stay informed about the current art market trends.
The platform can be explored in detail at app.myassets.com.
