From Paintings to Investment: The Rise of Art as an Asset Class
Art has existed since very early, associated with the formation and development of human society. With the progress of society, the form and purpose of art also developed, from simple artworks that express aesthetic value to becoming a valuable asset class that is strongly developing.
The art market has its origins in ancient times when works of art were bought and sold as commodities. The artworks of this period were mainly produced to serve religious, political, and personal purposes. By the Renaissance, the art market began to develop more strongly in Europe, with the emergence of famous painters such as Michelangelo and Botticelli, with their masterpieces preserved to this day; art centers also gradually emerged, carrying out exchanges, buying and selling works.
The 17th century marked the rapid development of the art market: the collection of artworks became popular among the upper class; the emergence of exhibitions, fairs, and the development of artistic centers such as Antwerp and Amsterdam…This was also the peak period of art, giving birth to many classic artworks of mankind.
In the 18th century, an important factor of the market appeared: the two most famous auction houses today, Sotheby's and Christie's, starting with antiques and then expanding to other types of auctions. The auction market continued to experience growth together with the expansion in size, number, and importance of museums in the 19th century.
In the early 20th century, art galleries and museums developed more rapidly than ever before. Western countries such as the United States, England, France, and Europe became increasingly popular with collecting and auctioning works of art. The art market had changed in the 1960s, when the works became more commercialized, witnessing the explosion of revenue from artworks through art auctions and consolidating art as a legitimate asset class. With that premise, the 1970s marked a strong shift in the way art is perceived, from aesthetic value to economic value thanks to the boom in the economic cycle, high liquidity, expanded market, and the increasing number of international art collectors...
To date, investing in art is still of great interest to investors not only for the inherent characteristics of asset classes such as the potential for value appreciation, diversification of investment portfolios, and increasing international demand… but also for its scarcity, uniqueness, and a means of preserving aesthetic and cultural values... If in the past, investing in art was considered an activity only for the elites then currently, art investment has become more popular with different classifications and different investment forms such as paintings, sculptures, NFTs, digital arts, and many other luxury goods.
The Consistent Growth of Art Markets
The art market globally has been growing steadily over the past decades, with total sales reaching USD67.8 billion in 2022, growing 3% year-over-year with an average return of 7.6% based on the Art Market report published by Art Basel & UBS. The US, Hong Kong, China, the UK, and France remain the dominant markets for the transactions of art around the globe. The total sales by auction companies were estimated to have reached USD30.6 billion in 2022. According to Fortune, between 1995 and 2022, contemporary art appreciated at a compound annual growth rate of 12.6%, outperforming the S&P 500 whose total returns were 9% for the same period. Despite market volatility in capital markets, art’s values keep surging, attracting even more high-net-worth collectors (increased from 39% in 2019 to 66% in 2021).
Figure 1. Share of Global Imports and Exports of Art and Antiques (2022) (Source: Art Basel & UBS)
Beyond the aesthetic, many collectors view these artworks as an asset class in the face of headwinds like inflation, and rising interest rates… However, in Vietnam, this form is still quite new even though the art market in Vietnam in particular and Asia in general is maintaining its leading position globally. Recently, with the announcements of personnel appointments and events organized by a few international auction houses in the world such as Sotheby's, Christie's, and Phillips, this promises to be a potential investment opportunity for Vietnamese investors.
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