Millennials increasingly viewing art as commercial investment
According to new research, Millennials are increasingly looking at art as a commercially sound investment, in stark contrast to those older investors who viewed it solely in terms of its aesthetic appeal.
The research from US Trust found that 55 per cent of Millennials invested in and collected art for its aesthetic appeal, compared to 85 per cent of baby boomers who did so, leading art industry experts to comment on a stark change in the sector.
Evan Beard, the national art services executive at US Trust, told <a href="https://www.thestreet.com/story/13581797/1/millennials-are-viewing-art-as-a-financial-investment.html
” target=”_blank”>The Street: "The relationship the collectors have with their art is changing. Older generations would collect and buy art, but they were rarely sellers."
Indeed, older investors are more likely to be drawn to art for its aesthetic appeal, while the "new generation (Gen X and Millennials) are far more commercially driven with their art, much more willing to sell their art as they are collecting and they are savvy in using their art as collateral for loans", Mr Beard went on to say.
The number of those investors who saw an art investment as risky had dropped significantly, said Mr Beard, with just 27 per cent of Millennials believing that the investment form was risky compared to almost half (46 per cent) of baby boomer investors who believed so.
"Art can be used as a capital asset. The art market is hundreds and hundreds of sub-markets with their own interesting dynamics and the economic drivers of price in the art market are much different from stocks and bonds," Mr Beard added.
However, despite this, Mr Beard recommends that art investors, or potential art investors, choose pieces that they are passionate about or particularly interested in, rather than just opting for those that they think will create a profit in the longer term.
As the art market continues to gain interest across the globe, in light of the eternally busy spring auction season, the medium can also be used as a measurement of broader economic trends. While it was business as usual at the spring auction season, it was slightly less hectic than usual as a result of falling oil prices across the world, couple with fears of global economic uncertainty. Indeed, sales in New York at auction fell from the $2.6 billion figure recorded during the spring auction season last year to $1 billion this year, reports confirmed.
Art is now seen as a major force to be reckoned with in terms of investment potential. It is no longer just framed and hung in homes, but instead is used to diversify investment portfolios. Expert financial analysts have suggested that the yearly return rate for art funds currently sits at around 10 per cent over the last 40 years.
Despite the growing interest in the sphere, however, researcher Roman Kräussl, a professor of finance at the University of Luxembourg's School of Finance, warned potential investors — both individuals and art funds — to be cautious before jumping in head first: "If you own a painting, you bear the physical risks and costs, including insurance, damage and theft or forgery, among others.
"In short, buy paintings if you like looking at them. You can hope that your children will sell one or more of them later for a gain — but paintings are primarily aesthetic investments, not financial ones."