What drives people to buy art?

As an art adviser, of European origin married to an English man, aside from the usual questions on my views on Brexit, I am often randomly asked by people I meet not involved in art “Why do people buy art?”. In my view there are many different motivations to buy art. The top four ranked reasons for purchasing works of art are: (1) Emotional Value; (2) Portfolio Diversification; (3) Investment Returns; and (4) Social Value. As with many aspects of life, these rankings fluctuate over time.

1. Emotional Value

The Art and Finance Report 2019 by Deloitte shows emotional value to buy an art work has overtaken the social value of art acquisition from 2017. The reason for this may be that art is now more accessible to a wider, less elite range of collectors.

Furthermore, collectors may be less interested in what others think of them when buying art and more interested in owning what they may consider a beautiful and valuable piece of art. A very good example of an emotional art buyer was Peggy Guggenheim who was instrumental to drawing the art world’s attention to modern art, particularly Abstract Expressionism. She devoted her entire life to art and its artists, and was married to the artist Max Ernst from 1941 to 1946. She became a prominent collector of what was then contemporary art. She bought art work that had an emotional appeal to her which were relatively inexpensive at the time.

Today the Peggy Guggenheim Collection in Venice is virtually priceless.

What I have found as a professional art consultant, is a recent emphasis on female artists. Female collectors want to support female artists nowadays. Sometimes they do it because they are stimulated by feminist ideology themselves. A perfect example of this is the purchase of a Jenny Holzer work, who was popular in the 80s and is now regaining popularity because of the current movement in feminism.

Other times female collectors are influenced by the purchasing habits of other female collectors, which appears to be a trend-related emotional purchase.

2. Portfolio Diversification

Art not only provides aesthetic fulfilment, it also provides asset portfolio diversification in varying degrees. The Art and Finance Report 2019 by Deloitte states 42% of investors bought art for portfolio diversification. This is the highest proportion since 2011. It can be inferred that investors want art related services as part of their wealth management. Art can be broken down into the following sub-classes:

(1) European Old Masters (1300-1700)
(2) Global Impressionist Art (1850-1900)
(3) Global Modern Art (1900-1960)
(4) Global Post War Art (1945-1970)
(5) Global Contemporary Art (1946- nowadays)
(6) Fine Chinese Paintings & Calligraphy (since 1500 BC)
(7) Chinese 20th Century & Contemporary Art

According to the same Deloitte Report in 2019, Global Post War Art and Global Contemporary Art have the strongest correlation with the S&P 500, 74.45% and 75.63% respectively, whilst European Old Masters and Global Impressionist Art have the lowest correlation with the S&P 500, 29.96% and 27.45% respectively. Art remains a stable, independent and investment safe haven from the volatile stock markets and recently poor performing property markets particularly in the UK in 2019.

3. Investment Returns

Art as an investment differs from other forms of investment, because it also symbolises an object of personal pleasure and status. You can always hang a painting in your drawing room or put a sculpture in your garden for you and your friends to enjoy and admire. The same is not possible with the S&P 500. Admiration of one’s share certificates on a wall does not provide one with the same aesthetic euphoria and satisfaction. Therefore, having decided that art is a good alternative asset class with varying degrees of correlation with the stock market, and to invest in art whether to diversify your portfolio or because you have fallen in love with one particular art work, one should look at the annual return of the different art categories over a period of twelve months, five, ten and fifteen years.

Global Contemporary Art has performed best in the last 12 months and 5 years with a return of 1.27% and 5.70% respectively, whilst Fine Chinese Paintings & Calligraphy (since 1500 BC) performed best in the 10 year and 15 year period with returns of 7.45% and 9.43% respectively.

In the same 12 months, 5 year, 10 year and 15 year period the S&P has returned 29.87%, 9.42%, 11.28% and 6.75% respectively. The out performance of the S&P is not entirely surprising given we have been in a stock market bull run for the past 10 years. Will there be a flight from the volatile stock markets to the more stable and serene art market as the US Federal Reserve starts to ease in higher interest rates in 2020?

So which category should you invest?

If you were to ask me, which art category I recommend to invest in? I would reply that it always depends how long-term your investment would be. “Long-term” is a broad term in the art world, as it usually takes ten to twenty years for an artist to develop and establish himself as an enduring investment-worthy artist and to persist alongside other artists.

As you can see from above, the art market has performed respectably in the 15 year period when compared with the S&P. It also depends on when one buys the desired art category. Just like any investment, there is a cycle of when one should buy and when one should sell art.

I always advise my clients to buy the desired art category at the beginning of an up-cycle and sell it as the market rises. Furthermore, as with any stock there are exogenous and endogenous factors that impact supply and demand which has an important role to play on the valuation of the stock. The same holds true for the different art categories.

A good illustration of this is the Chinese Art in general. Fine Chinese Paintings & Calligraphy and Chinese 20th century & Contemporary Art have been the two best art categories to invest in over the past 10 to 15 years. They have benefited from the socio-economic rise of China in the last 20 years. However, Chinese mainland’s auction sales fell by 6% last year and the Chinese art market share reduced by 5.21% in comparison to 2017 (daxueconsulting 11th September 2019). The reasons for the decrease in demand for Chinese art include:

  • According to Claire McAndrews in the report from 2018 of the global art scene, produced for Art Basel and UBS the reason for this decline lies in the trade and debt crisis in China (daxueconsulting 11th September 2019). The trade war between China and USA -mutually imposing tariffs upon each other on selected imported goods has had a negative impact on both countries. When the economy suffers people buy less art, leading to a fall in prices.
  • There are currently 5000 museums in China and 1500 of those are privately owned (Neue Züricher Zeitung, 29th June 2019). Many of these museums are “ghost” museums with limited content and struggling to make ends meet. The Tefaf report from March 2019 is predicting that a lot of the privately founded and owned museums in China will not be able to survive the next ten years, as China does not offer tax benefits to privately
    owned museums. If these private 1500 museums do not buy Chinese Art anymore then the value of Chinese Art decreases and so does the annual return.
  • Another argument why the annual return of Chinese Art decreased according to the Chinese Art Auction Report from Artnet is that only 49% of the auction lots on the Chinese mainland in 2017 were real sales. Christian Herchenröder stated in the Handelsblatt on the 14th February 2019 that ‘the budget to buy art is sufficient in China, but payment practice is bad’. The reason for this lies in the policy of the auction houses. Chinese auction houses do not guarantee the authenticity of their art. There are many forgeries, especially in the field of Chinese porcelain and classic paintings. Art buyers or collectors are obliged to research the authenticity for themselves and when they are not experienced and knowledgeable enough they feel unsure to purchase Chinese Art and at times refrain from it.

Finally, if one wishes to invest in an art category that consistently gives one a positive annual return, regardless of whether one invests over a period of one, five, ten or fifteen years, I would recommend to invest one’s money in Global Post War Art or Global Contemporary Art. Global Post War Art has a 12 months and 15 year return of 4.42% and 7.81% respectively. Whilst Global Contemporary Art has 12 months and 15 year return of 1.27% and 7.12% respectively.

Social Value

Again, according to The Art and Finance Report 2019 by Deloitte, social value still plays an important role in buying art. Reinhold Würth, the Chairman of the Supervisory Board of Adolf Wurm Group, a world market leading manufacturer of assembly and fastening materials based in Germany, saw the social value for his art acquisitions as extremely important. He believed, that the public would be aware of his collection and his company through press reports. Würth also noticed that having a company art collection had a positive effect on the economic performance of his company. The main strategy behind the purchase of his company’s art collection was to make his employees identify with Adolf Würth Group and make them committed to the company.


Non-professional investors are always recommended to seek professional advice before investing in the stock market. The same can be said for art collectors. Therefore, I believe after reading briefing notes, a future collector should not hesitate to ask an art advisor to assist them to choose an art work to build up their collection.

As we have seen above as an art collector you should evaluate the potential returns from your investment in the desired art category with the S&P 500 over a certain time horizon to ensure you achieve the best return on investment, as well as a balanced and well diversified asset portfolio.

Having said this, the most important motivation in investing in art remains its emotional intrinsic value. You should be passionate about the art work you wish to acquire to build the first fundamental cornerstone of your collection. Art is always subjective. What is attractive to one person might not be attractive to another person. Therefore, if you want to invest in art, you should choose an art work, which evokes some form of reaction in you. Good luck with your first purchase in 2020.

Published in the Lorange Network - February 2020


What drives people to buy art?