The Benefits of Obtaining Genuine Contemporary Artworks | Seed Gallery

Due to the lack of transparency in the contemporary art market and the absence of trustworthy data on art investments as a whole, acquiring art is often seen as an exclusive pursuit reserved for a privileged high-net-worth class of people. These men and women typically acquire expensive artwork for sentimental reasons or as a status symbol that sets them apart in their respective spheres of influence.

Nevertheless, beyond the subjective value it holds for both the owner and the admirer, there are at least three notable financial advantages linked to obtaining original works of contemporary art.

1: The worth and value of artwork appreciates over time

Although it is a fact that only a small portion of artworks by contemporary artists, even those who have attained fame and success, will appreciate in monetary terms during their lifetime, it is also a well-established fact that artworks typically function as financial assets.

This is supported by the tendency of artwork values to appreciate over time, given that their utility is not contingent on any deteriorative practical purpose. This characteristic renders them both a means of preserving value and a potential source of capital gains, especially when they are well preserved, accompanied with a certificate of authenticity and have an undisputed provenance.

2: Assets with lower liquidity

Since contemporary art sales tend to be sporadic, with only a few players, both buyers and sellers participating in both the primary and secondary art market, they are to a degree an illiquid asset, especially when compared to treasury bonds, traditional stocks or other commonly traded financial products. Generally, a liquid asset will tend to be more attractive as the investor can “withdraw their money at any time.”

Contemporary artworks are less liquid than most available money market products. This makes speculative investing in art with the intention of realizing quick gains a very high risk and absolutely less attractive strategy, especially for novice art buyers.

But on the upside, history has clearly proved that a less illiquid asset like artwork, especially when the artist's career and work are astutely cultivated will likely result in sustainable and higher returns in the long term compared to liquid assets.

3: The market depends on interpersonal connections and unspoken trust

The contemporary art market lacks many of the formal coordination mechanisms and institutional structures found in other markets. It consists of a widely dispersed global network of buyers and sellers, heavily reliant on personal connections and implicit trust among key participants to conduct transactions.

The market's fragmented nature, combined with its opacity and the often-subjective nature of valuations, can result in information imbalances, leading to elevated transaction costs. This, in turn, necessitates the involvement of art experts such as art critics, art conservators, art advisors, reputable galleries, and museums, who function as both gatekeepers and facilitators of market activity.

However, the advantage of these close relationships and trust between sellers and buyers in the contemporary art market guarantees the meticulous preservation of artworks as well as continuous price monitoring. These two key factors contribute to the potential for significant returns each time a quality contemporary artwork is offered on the secondary art market.

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