Why invest in art?

Investing in art is a subtle endeavor where aesthetic pleasure and financial advantage intertwine harmoniously. Acquiring a piece of art means immersing oneself in a world of beauty and meaning, while simultaneously placing one’s wealth within a market valued at $1.7 trillion, which often surpasses the returns of traditional asset classes. This investment offers undeniable benefits: low volatility, modest maintenance costs, and, above all, significant appreciation potential. Art becomes a valuable alternative during market fluctuations, transforming into a true safe haven in times of economic uncertainty. Yet, there is another equally appealing, though more discreet, advantage: tax optimization. In many countries, including France, there are tax incentives that allow savvy investors to significantly reduce their tax burden, adding a patrimonial dimension to the beauty of the acquisition. By relying on informed expertise and a deep understanding of market trends, this investment turns into an adventure where emotion is balanced with reason, aesthetics with profitability, and passion with fiscal optimization. Thus, investing in art is not merely about acquiring a piece; it is about embracing a way of life, where each acquisition opens the door to new horizons, both cultural and financial.

The Art Market Outperforms S&P 500

According to the Artprice100 index, the art market has consistently outperformed the S&P 500 between 2000 and 2023, demonstrating its robustness and potential for superior returns. During this period, the Artprice100, which tracks the top 100 performing artists globally, exhibited impressive growth rates. While the S&P 500 achieved an average annual growth of 7 to 8%, the Artprice100 frequently exceeded these figures, offering investors attractive returns and valuable diversification. In times of economic turbulence, art continues to prove its worth as a stable and resilient asset.

Contemporary Art

Since 2000, contemporary and post-war art have increased by 220% and 246% respectively. Combined, they have outperformed European Old Masters by 175% since 2000. The categories of contemporary and post-war art reached a historical peak in 2022, with growth of 294% from 2000 to 2022. The post-pandemic recovery was also most pronounced in the contemporary and post-war categories, with an initial drop of -9.9% and -7.9% respectively from 2019 to 2020, followed by an increase of 26.2% and 26.7% between 2020 and 2022. This was followed by a cooling-off period in the market in 2023 with a decrease of -17.9% and -13.0% from 2022 to 2023.

Prints and Limited Editions

Auction sales of prints and limited editions have followed the surges in the contemporary market and generated $103.2 million in 2023, an increase of 18.3% from 2022. The number of lots sold also rose by 28.6% in 2023. Over the past decade, the print market has undergone significant transformation, with a doubling in the frequency of auction transactions and total print sales revenue. While other segments have seen a decline in transactions, the print market has demonstrated remarkable resilience, particularly during the pandemic. This increased activity has not only invigorated the print market but also enabled it to surpass the $500 million mark for the second consecutive year in 2023.

Buying on the Primary or Secondary Market?

As a secondary market gallery, we highly recommend this option to mitigate risks in your investments.

1. **Price Stability**: Artworks on the secondary market benefit from a sales history, providing better visibility on the actual value of the artwork. This stability reduces financial risks.

2. **Artist Reputation**: Artists whose works are resold on the secondary market generally have a solid reputation, validated not only by experts and collectors but also by institutions such as museums. Moreover, these artists are often represented by multiple major galleries, contributing to the stability of their market. Their dynamic activity, through frequent exhibitions and constant media presence, maintains and enhances their popularity, thus strengthening the value of their works.

3. **Potential for Appreciation**: Sellers on the secondary market are looking to realize a return on their initial investment, which can be an indication that the artwork has potential for appreciation. Buying an artwork that has already increased in value is often a safer strategy. In summary, the secondary market offers better predictability and security for investors, making it a more favorable environment for well-considered investments.

Taxation on Art in France

In France, the taxation on the resale of artworks varies depending on the seller's status (individual or company) and the nature of the transaction. For individuals, there are two tax options available when reselling an artwork: the flat tax on precious objects and the capital gains tax.

For Individuals:

1. **Flat Tax on Precious Objects**: This tax applies at a rate of 6.5% on the sale price if the artwork is sold for more than 5,000 euros. This option is chosen for its simplicity as it doesn't require calculating the capital gains.

2. **Capital Gains Tax**: Applicable if the artwork is sold for more than 5,000 euros. The tax is calculated at a rate of 36.2% (including 19% tax and 17.2% social contributions) on the capital gain realized. A deduction of 5% per year starts from the third year of ownership, allowing for total exemption after 22 years.

For Professionals:

1. **Tax Depreciation**: Businesses can deduct the purchase of original artworks by living artists if these artworks are displayed publicly within the company’s premises. Depreciation is carried out through an annual deduction equal to the purchase price divided by five, provided this deduction does not exceed 0.5‰ (per thousand) of the company's annual sales

2. **Asset Diversification**: Art serves as an alternative investment that can provide inflation protection and risk diversification, differing from traditional investments like stocks and bonds.

3. **Accounting Benefits**: Artworks are tangible assets that can be included on the balance sheet, potentially enhancing the perceived financial robustness of the business.

4. **Exemption from Real Estate Wealth Tax (IFI)**: Artworks are exempt from the IFI, offering advantages for companies and executives with significant real estate holdings.

Each country has specific rules, and it is recommended to consult a local tax advisor to understand the precise tax implications related to art investments in a given country. These tax benefits can offer interesting opportunities to optimize art investment returns.