Why London is Exceptionally Unique as an Art Investment Hub

Why London is Exceptionally Unique as an Art Investment Hub

In this comprehensive exploration of the international art market, we bring insights from our interview with Khrystyna Dzenzerska of MERVEILLE Art Advisory. Our focus centers on understanding the unique position of London as a global art hub, unraveled through Khrystyna's lens. We delve into the nuanced dynamics that distinguish the major art markets across the globe, particularly highlighting the distinct characteristics of the US, UK, and China.

We decode what sets London apart in the global art scene. From its unparalleled infrastructure, rich cultural heritage, to its strategic market position, London emerges as a compelling epicenter for art collectors and investors alike. We further explore the evolving trends in art collection and investment, the impact of digital platforms, and how these facets contribute to reshaping the art market landscape.

Table of Contents

  1. Main Art Markets and Their Differences
  2. What Makes London Different?
  3. Capitalizing on London’s Unique Position
  4. Approach for Investors
  5. Remote Access to the London Market
  6. Conclusion

Main Art Markets and Their Differences

Geographically, the three largest global art markets are the US (45% of sales by value), the UK (18%), and China (including Mainland China and Hong Kong) at 17%. The US maintains its position as the largest global art market due to having the highest number of millionaires and the second-highest number of billionaires in the world (46% and 24% respectively), leading to more disposable income. The most valuable artworks are sold in New York during major auction sales in May and November each year.

The UK has historically been the largest European art market, retaining this position despite post-Brexit concerns, increased red tape, and the costs and time required for transporting artworks from the EU. The UK's thriving cultural sector and English being the primary language are also significant factors. In 2023, the UK had the largest share of new art buyers in the world – 29%.

China is the fastest-growing market, regaining momentum post-COVID-era restrictions. The rise in high-value works sold in Hong Kong and Asia's growth in the luxury collectible sector (up 22% in 2022) are notable trends.

France, with a 7% market share, is the fourth-largest art market and has become the strongest European market post-Brexit, partly due to its low import VAT rate of 5.5%. France is known for selling XIX-XX century works, but recent successes like Paris + Art Basel and the opening of numerous global galleries in Paris signify a strengthening position in the contemporary market sector.

What Makes London Different?

London boasts unparalleled infrastructure, including galleries, museums, auction houses, and a wealth of experts with deep market knowledge. Its trade-friendly regulations and auxiliary service providers contribute to a well-developed art sector ecosystem. The strong and transparent legal system is an additional advantage. The fact that business is conducted in English, the main international language, further enhances its appeal.

Capitalizing on London’s Unique Position

In London, the best art is readily accessible, and experts in every field of the art market are available to help structure acquisitions or sales to maximize ROI. They can assist in finding the right channels, avoiding legal hurdles, taking advantage of offshore zones, and utilizing specialist art lenders, especially for those with liquidity needs. Numerous art funds are also available for investors, offering a wide range of choices.

Approach for Investors

Thorough research is key. For those looking to streamline the process, hiring an art advisor can be beneficial. An advisor can assist with data analysis to make the right decision based on the client's needs, whether it's a passion purchase or part of an investment portfolio diversification strategy.

Remote Access to the London Market

Accessing the London market remotely is entirely feasible. Potential buyers can identify an artist of interest, determine which gallery represents them, and start negotiations via email. Purchasing art online is another option, though it requires confidence in scam-detection skills. Real-time online bidding at auctions is also a popular method. Employing a local art advisor can simplify the process, handling the necessary legwork for about 10% of the artwork’s purchase price.

Fractionalized ownership, a topic gaining attention, aims to democratize art ownership by enabling the possession of a share in a masterpiece stored securely at a distant location. However, the actual return on investment is not always guaranteed and can be minimal. High exit costs and other fees should be considered when cashing out. Investors are advised to consider artworks as a heterogeneous commodity that does not trade frequently, unlike homogenous stocks that can be traded on the same day in a favorable market situation. Additionally, the holding and transaction costs associated with art are relatively high.

Conclusion

Our insightful discussion with Khrystyna Dzenzerska offers a detailed panorama of the international art market, with a special focus on the strategic position of London. Her expertise illuminates the intricacies of art collection and investment, underscoring London's role as a vital hub in the global art scene.

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