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But then you have X money tied up in some presumably illiquid art with questionable value. Seems better to just invest the X money from the start.

ThinkBeat 2y ago
but then you do not get the tax benefits discussed above. The market for "investment art" I huge and everyone involved has an upside by art appreciating in value. > The artist may get more money (since the artist only gets paid in the initial transaction the artist may only get a fraction of the value as it increases. The artist may find that later work will become more valuable as other investors want more of his art. >The gallery gets more money, and it may attract more art investors > and the auction house gets more money if it ends up there. How much art is worth is difficult to estimate on its own. I mean a white canvas painted uniformly white is worh a lot of money if a famous artist does it. It is worth entirely nothing if I do it. I expect then that the market decides the value. All investors want art to get more valuable and are in on it. As an art lover, this is such a tragic scheme. Unknown amount of art that will never been seen by the public. Locked up inside a storage facility in a big box Often the investor has no interest in the art at all, just an investment made by some form of a broker.
theshrike79 2y ago
Art is like Schrödinger's cat, its value is only determined when it changes owner. If someone pays 1M€ for a piece of art, it is "valued at $1M" and you can use it for collateral for a loan at some percentage of its valuation. Will it actually be 1M€ if it needs to be liquidated? Nobody knows. It can be worthless or it can be worth 10M€ - it all depends on what the next person is willing to pay for it. But until that point it's "worth" 1M€. --- This is why there are so many empty (commercial) properties, they were valued at a specific €/m2 price and were used to take loans based on that value. Until they're rented/leased again, that is their worth and value. Could the owner get someone in the property by lowering the price? Definitely. Would that also cause a rolling cascade of loans not having enough collateral to back them up? Yup.

ThinkBeat 2y ago

but then you do not get the tax benefits discussed above. The market for "investment art" I huge and everyone involved has an upside by art appreciating in value. > The artist may get more money (since the artist only gets paid in the initial transaction the artist may only get a fraction of the value as it increases. The artist may find that later work will become more valuable as other investors want more of his art. >The gallery gets more money, and it may attract more art investors > and the auction house gets more money if it ends up there. How much art is worth is difficult to estimate on its own. I mean a white canvas painted uniformly white is worh a lot of money if a famous artist does it. It is worth entirely nothing if I do it. I expect then that the market decides the value. All investors want art to get more valuable and are in on it. As an art lover, this is such a tragic scheme. Unknown amount of art that will never been seen by the public. Locked up inside a storage facility in a big box Often the investor has no interest in the art at all, just an investment made by some form of a broker.

theshrike79 2y ago

Art is like Schrödinger's cat, its value is only determined when it changes owner. If someone pays 1M€ for a piece of art, it is "valued at $1M" and you can use it for collateral for a loan at some percentage of its valuation. Will it actually be 1M€ if it needs to be liquidated? Nobody knows. It can be worthless or it can be worth 10M€ - it all depends on what the next person is willing to pay for it. But until that point it's "worth" 1M€. --- This is why there are so many empty (commercial) properties, they were valued at a specific €/m2 price and were used to take loans based on that value. Until they're rented/leased again, that is their worth and value. Could the owner get someone in the property by lowering the price? Definitely. Would that also cause a rolling cascade of loans not having enough collateral to back them up? Yup.