In 2021, the global art market value was $65.1 billion. Art possesses the ability to motivate us, enhance our environment and life, and enable us to perceive things from other’s perspectives. It’s been typical for those with money and prestige to spend millions on it since the Revolution and even before that.
Often we hear paintings getting sold for thousands of dollars or so at the auction these days, it makes you wonder what inspires someone to pay a fortune for artwork.
Let’s look at these 14 reasons why wealthy individuals prefer expensive paintings.
Tax Avoidance
Prestige
Investment
Diversifying your portfolio
An aspect of your lifestyle
A secure place for funds
To enrich their environment
To boost imagination
To brag about it
Quality
To boost the rent
To set up Art Galleries
Cultural pride
Money laundering
Tax Avoidance
In several countries, including the United States, tax regulations favor you if you purchase expensive art frequently. For example, if you sell an artwork and deposit funds in a bank, you are ought to incur capital gains tax on it, however, if you invest in another artwork with the same funds, you’ll escape paying taxes.
Prestige
An artefact that looks perfect, and which was also made by a world-famous artist, is unique, and in certain scenarios is a well-known creation, will offer the bidder quite the thrill once the hammer drops at auction. A strong feeling when we see something we’ve wanted for years, the same feeling will indeed be amplified if it’s a Monet, Van Gogh, or Hearst.
Investment
Most individuals buy stuff as they intend to invest in it. Some people buy houses to reside there. Some of them think of it as a long-term investment, an asset providing them with monthly earnings while also increasing in value over time. Art, too, is a strategic idea to invest in.
Owning modern art for €400 today might be worth €600,000 in 10 years. In about 10% of situations, indeed, fine art has consistently fetched increasingly better returns over the last 50 years.
One can be sure that when they get their hands on a Leonardo da Vinci, it will smash records. In 2017, his painting Salvador Mundi sold for a record-breaking $450 million. This is why it’s an insanely important aspect of why the rich buy art.
Diversifying your portfolio
Because art is indeed going to increase in value if it already has a significant value and is somewhat risky, you may consider investing in some art to diversify your holdings, particularly if you’ve got a large, highly high-value portfolio or want to make art a small component of it.
The main principle, regardless of the worth of your investments, is to have variety. If you have a few high-risk stocks and a large number of safe stocks or you’re extremely wealthy, have billions in shares, bonds, and real estate, and would like to invest more in something risky but thrilling? Investing in artwork seems logical at this point.
An aspect of your lifestyle
Previously, the wealthy went shopping for fashion, fancy cars, or yachts; but, times have changed. Art has become a must-have thing for the rich. Nothing beats being an art lover if you’re glamorous and want people to appreciate it. It’s not only about possessing it; it’s more about being seen at auctions and exhibitions.
Vibhavari Madki
A secure place for funds
While art is typically a high-risk asset, it has several unique advantages.
- Art market rate fluctuations are different from share market price swings, implying that they could be used to hedge against a recession or crisis.
- People purchase art during times of risks and uncertainties and profiting, such as during WWII. Today in nations with unstable economies and currencies that are subject to depreciation, the wealthy frequently invest in art as a means of diversifying their risks.
To enrich their environment
Almost everyone wants their homes and offices to appear attractive and feel better in them, and regardless of whether us being wealthy or not, we design them to make the time we spend there more enjoyable. Rich people whether it’s their multimillion-dollar homes or the workplaces of the businesses they manage, they’ll do the same for it.
To boost imagination
It’s no surprise some of the world’s top talented artists invest in art, and owning beautiful art on your walls will surely spark your imagination. Some celebs who possess art are incredibly innovative, and this isn’t limited to those who work in that industry. Startups and corporate leaders can be inspired by art as well. Perhaps it’s because artists are creative and bold, traits that entrepreneurs like and appreciate when they see a wonderful piece of artwork.
To brag about it
Investing intelligently in the equity market or in a prosperous firm you manage, demonstrates your financial acumen. You may be flaunting by purchasing a fancy home, a yacht, or a Ferrari, but it is also something essential that you will utilize.
Even if it’s a solid investment, purchasing a work of art worth $1 million demonstrates exceptional choice, however, there’s something indulgent about it since it’s something you wouldn’t need but desire. When you’re wealthy, you’re more inclined to want to flaunt it, and art is a perfect way to do so.
Quality
Usually, the rich purchase fancy clothing because they value quality over cost. You can own a masterpiece lasting hundreds of years and even be bequeathed to your children. The caliber of art gives you the feeling that you’re purchasing something valuable that will outlast your legacy.
Although kids who inherit valuable artwork seem to be keener on selling them than preserving them. This isn’t surprising, since parents and children often have different preferences, and the urge to sell the art mom and dad used to adore for a six-figure price might be impossible to deny for certain individuals.
Alan Joseph
To boost the rent
If you possess a luxury condo that you rent to super-rich with taste, hanging some pricey artwork is one approach to boost the rent prices. Not only that, but it also raises the property’s worth. In some ultra-exclusive groups, art is anticipated to cost the same as a typical home, and a modest picture of Van Gogh’s starry night is believed to not cost about the same as a conventional house.
To set up Art Galleries
The wealthy all across the world enjoy buying art and displaying it in exhibits where they discovered it, often with their signatures on it. In some circumstances, where self-interest is a prominent factor, there are very specific advantages to establishing art galleries. When the hella rich in China open an art gallery, it’s usually because it’s a tried-and-true method of obtaining approval for real estate deals.
Cultural pride
Over the last 20 years, the quantity of pricey masterpieces from China and Africa specifically has increased dramatically, notably among purchasers from such countries, implying that when you are wealthy, it is natural to want to acquire fine art that makes you proud of where you came from and demonstrates your love of your culture.
Sushree Sangeeta Behera
Money laundering
We’ve now arrived at the truly evil aspect of the art business, namely, money laundering for organized crime. The wealthy people who earned a fortune through illegitimate ways would suppress their sources of wealth from the regulators, and expensive art deals are the optimal method to do so.
Now we know why pricing is very subjective, and even specialists have difficulty in determining value. Inflating the worth of a piece is simply based on what you want it to be.
Deals are frequently made behind closed doors and discreetly. Although current laws on how art sales are done have indeed been strengthened, it’s logical to conclude that money laundering remains a major factor in global art purchases.
Conclusion
Even if they don’t know much about art, most people choose to have it because of their love or have some sentiment attached to it. They consider it as an investment as it helps them to diversify their portfolio. And lastly, they do want others to appreciate it if they have paid a high price for that artwork.
FAQs
Why do rich people buy paintings?
Rich people buy paintings to diversify their portfolios, design their homes or avoid tax.
What is the most expensive painting ever sold?
Salvator Mundi by Leonardo Da Vinci is the most expensive painting priced at $450 million.
Is art used for money laundering?
Yes, many wealthy people who earned a fortune through illegitimate ways often launder money through art.
