These days, financial assets, such as stocks and government bonds, are more than ever no sure investments and as a result the affluent have created their asset class: art.
New world-record prices, such as that which The Scream obtained in May, indicate that investors do not care very much about the amount of money they are spending on art, as long as they get what they want.
Damien Hirst said in a recent interview that the collectors of his art were mainly buying his works to resell it quickly with the sole aim of generating profits. As Hirst points out, this is not something that an artist wants and said he would welcome it a lot more if the buyer kept the art work and enjoyed looking at it everyday.
Fast reselling of art is pushing the prices further up as people are only reselling it at this point of of time when they make the most profit, therefore they are trying to make the painting seem very special and have to promote it in a way which gets other collectors highly interested in the work and let them fear that it could be sold very soon due to its high quality resulting in high demand. Notably, the price of an art work is depends on its quality, but also the price decides the quality. Price and quality goes hand in hand and cannot be separated from each other.
As long as there is demand for them, prices will remain sky high and will increase in the future as it was the case in the 80s.
As the art market has seen a high demand for art originated from China, Europe and America, galleries from these countries have all already opened branches in Hong Kong. The White Cube Gallery, the Parisian Gallery Perrotin and the Gagosian Gallery are hoping to break to through the Chinese market due to their new branches to get the Chinese more interested in Western Art.
One argument why this process will take a long time is that the Chinese need to understand European history first – before they can understand and appreciate quality art coming from Europe and America.
China has seen a recent drop in its GDP, notably in its consumer spending, and the question investors are asking themselves is whether this was just a short-term slump or if the trend is going to continue in the same direction.
European and American art galleries, others than the ones mentioned above, are still trying to move to Hong Kong; but the question which arises at this point is whether they can still get a piece from the cake, or if the train has already left the station to secure additional gains from new branches in China.
Interestingly, the emerging market’s economy of South America is also catching up very fast. Due to its international art fairs South America is trying to spread its art all over in the world. Whether or not this market is going to triumph over China will be visible in while – but this is still only a speculation which would lead to higher prices for art works and a widening of the art bubble if investors were to value South American higher than it has been the case before, resulting in a bigger high quality art market.