Art

The Allure of Art and Collectables: A New Investment Frontier

The Affluent Ceo.

Aug 3, 2023 — 4 min read

In the world of high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs), a fascinating trend is emerging: the rising value of art and collectables as a form of investment. The 2023 edition of the Knight Frank Wealth Report provides a comprehensive look at this intriguing development.

The Performance of Various Collectables

Art, in particular, has seen a significant surge in value. The report attributes this to the high prices paid for museum-quality works of art by ultra-wealthy collectors. In 2022, the art market saw a significant boost, with single-owner collections, including works owned by Microsoft founder Paul Allen and American investor Anne Bass, generating totals in excess of US$2.5 billion. This figure more than doubled the collection sales in 2021, demonstrating the growing appeal of art as an investment.

The watch market also experienced substantial growth, with a 33% increase in 2022, reaching a total of £475 million. This growth was largely driven by the top three auction houses, reflecting the growing demand for luxury timepieces among collectors.

Classic cars also had a strong year, with a Mercedes-Benz Uhlenhaut Coupé setting a new record for the most expensive car ever sold at US$143 million. The car market saw a rise of 25%, marking the strongest finish in nine years.

Luxury handbags, another category in the index, saw a rise in value, reflecting the growing demand for these items among collectors. The wine index recorded a growth of 10%, despite some of the index's top performers hitting a peak.

Interestingly, whisky, despite being the Knight Frank Luxury Investment Index's 10-year leader with a growth of 373%, was one of 2022's weakest performers with growth of just 3%.

The report also highlights the performance of other collectables such as coins, jewellery, furniture, coloured diamonds, and rare whisky bottles. Each of these categories has its unique appeal and market dynamics, offering a range of options for collectors and investors.

The Rise and Fall of NFTs

Non-fungible tokens, better known as NFTs, became the talk of the art world in 2021. These digital assets, which represent ownership of unique items or content, have been at the center of a speculative frenzy. However, by the end of 2022, the embryonic sector was already reeling, hit by the contagion from the fall from grace of crypto evangelists and the slump in Bitcoin and other cryptocurrencies.

Despite the volatility, the views of respondents to the Knight Frank Wealth Report's HNW Pulse Survey are evenly split when it comes to NFTs. Around a third believe they still have potential, while an equal number say they have always been sceptical.

Elena Zavelev, co-founder and CEO of CADAF, the Crypto and Digital Art Fair, and founder of art and tech education platform New Art Academy, remains optimistic about the future of NFTs. "I am convinced that blockchain technology and digital art are here to stay and develop," she says. "My deepest hope for the NFT market is that in 10 years’ time nobody knows what blockchain is, nobody knows what NFTs are and no one remembers crypto, all despite using them seamlessly within our everyday technology stacks."

Collectables perform in the face of uncertainty

Despite these economic uncertainties, the Knight Frank Luxury Investment Index shows that investments of passion, such as art and collectables, continue to ride high. These alternative investments offer not only financial returns but also emotional value, making them particularly appealing to HNWIs and UHNWIs.

As the global economy continues to evolve, the world of art and collectables offers an intriguing avenue for investment. Whether it's a painting, a vintage car, or a rare watch, these tangible assets hold a unique appeal that extends beyond their monetary value.

Conclusion

In conclusion, the world of art and collectables is becoming an increasingly attractive investment frontier. As traditional investment avenues become more volatile, the allure of tangible, emotionally valuable assets continues to grow. Whether you're an established collector or a newcomer to the scene, there's never been a better time to explore the potential of art and collectables as an investment.