With a varying but undeniable frequency, works of art — sooner or later — make headlines when gavels are banged at auctions. As demonstrated by the most expensive piece up for grabs so far in 2023, it’s clear that art — in addition to being beautiful — can be very profitable if the stars align.
The painting in question — Lady with a Fan, by Gustav Klimt — was sold this past June 28 for €97.71 million, or $103 million. Most notably, the previous acquisition of this work occurred in 1994, with a price of €8.97 million euros, or $9.5 million, more than 10 times less than the current price.
Profitability isn’t just exclusive to Klimt. In its Luxury Investment Index — which measures the performance of various luxury items — the real estate consultancy Knight Frank identified art as the king of all the so-called “passion goods” in the last 12 months. Its 30% average return triples the performance offered by the second and third groups on the index: watches and jewelry. Hence, the big question isn’t whether or not art can be profitable, but rather, whether such profitability is only available to a select few.
To answer this question, it’s advisable to first look at the characteristics of the art market. It’s diverse and — although it’s especially difficult to make general distinctions about it — it’s not impossible. The first thing to know is that, in the art world, there is a primary market and a secondary market.