Art for Investment
The art market is at its highest peak, with more being spent on both individual artworks and artworks as a whole, than ever before. This is partly due to the high demand for artworks that comes from emerging markets – such as Russia, China, Dubai and India – and partly due to Britain’s ongoing financial success.
Where to InvestBuying works from certain artists, such as Damien Hirst, David Hockney, Tracey Emin, Frank Auerbach, and so on, will guarantee a good return over time. However, if you are not already a multi millionaire, you may wish to look elsewhere in order to build a collection for profit.
The main thing to remember is that although the art market is stable at the moment, it is unlikely to hold its value during an economic recession, should there be one. Furthermore, it is the lower end of the art market that will suffer most during an economic slump. Those with enough money to buy at the higher end of the market are unlikely to be affected. Whilst the value of a Hirst may stop growing as quickly during a recession (or even stay fixed), the value of a lesser known artist’s work could drop dramatically.
If you are really looking to invest for investments sake, you would be better off investing in housing (though there are pitfalls here too), or seeking the help of a financial adviser regarding low risk stock investment. However, if you have a genuine desire to collect art, there is little reason to shy from trying to profit from it. Though be warned: the ability to do this requires shrewd business acumen and plenty of patience – you could be waiting years for a work to develop financially; even then you must carefully choose when to sell and who to sell to.
Ultimately you must remember that there is only one formula that makes investing in art worthwhile: a genuine love of art, coupled with stable finances and a desire to invest. This is likely to fall in place as part of a wider investment portfolio, the benefit being that this aspect of your portfolio will bring enjoyment all the time it is appreciating in value.
It is often said of artists that if you are in it to make money, you are in the wrong industry! The same could be said of collecting art. You will never make a successful collector if you do not start from a simple intense passion for art.
Capital Gains TaxIf you sell an artwork for over £6,000 you will be liable for Capital Gains Tax at your rate of income tax, below the yearly £8,800 Capital Gains Tax exemption bracket.
In light of this it is wise to plan some of your sales around the tax year. This is something investors will be used to anyhow. It is also wise to put the sale of artworks in the name of your partner, should they fall into a lower tax bracket – that way Capital Gains Tax will be paid at a lower rate!