Art and Inflation: Ally or Enemy?

Art and Inflation: Ally or Enemy?

Art prices have historically increased during periods of high inflation.

Inflation in the UK hit its highest annual rate since 1982, pressuring the Bank of England to keep increasing interest rates, consequently deepening the nation’s cost-of-living crisis. Amidst the inflation and staggering high interest rates, should you consider investing in art?

Although the exact correlation between inflation and the art market is disputable, art prices have historically increased during periods of high inflation. If you're considering investing in a piece of art for its potential financial return, it's critical to be aware of the risks involved:

  • Art can be reliant on the erratic public taste and short-lived trends
  • Art market is unregulated
  • Art is a heterogeneous product, as it is unique and cannot be replaced or substitute - however there are risks of forgery or fraud
  • Art is highly illiquid due to a limited pool of potential buyers
  • Higher transaction costs, especially for fine art investments
  • Low probability of short-term trading and quick profits
  • Investors need to spend substantially more time to become experts compared to other traditional financial investments
  • Artworks do not generate any cash flow
  • Similarly to gold or oil, there are no interest payments or dividends

In contrast, art is believed to be a good investment long term because it holds its value and generates moderate returns. Other than the possible rise in value, art can be regarded as a good asset class:

  • Art can serve as an inflation and currency devaluation hedge in almost any environment
  • If purchase wisely, there is little risk of losing your principal
  • No minimums required to invest in
  • Favourable tax treatment often can be received
  • Art has a low correlation with other financial assets such as stocks and bonds, offering diversification possibilities and risk reduction
  • Lending our the work to events, exhibitions, conferences or expert meetings can bring an additional revenue
  • Art investments can be moved considerably easily and suffered little to no geographical risk
  • Art can be protected against calamity risk by insurance policy and specialised services.

With more than 20 years of experience and unrivalled industry knowledge, Cube Fine Art is your trusted partner when it comes to safeguarding valuable artwork investments. We guarantee to retain their quality by keeping them from harmful factors such as light, humidity, temperature, light, atmospheric pollutants as well as pests and rodents thanks to our top-tier climate-controlled storage solutions.

Speak to our friendly customer service staff on 0800 027 2668!

Although many are speculating that the ongoing rising inflation and interest rates would lead to an economic recession, art has historically proven to be a good investment and outperformed gold during peak inflation from 1973 to 1981 in the US. While gold’s annual growth was 31.1% during that period, art’s average calendar-year appreciation was 33.2%. 

In addition, art does not only serve as an investment but also a form of consumption, as the no macroeconomic conditions or inflation rate can take the pleasure of possessing and looking at the artwork away from the owners. 

Ultimately, whether or not you decide to invest in art, the principles are the same like any other asset investments: Do your research thoroughly, watch the market closely, avoid getting caught in short-lived trends and invest in what you love. 

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