Last updated on March 29th, 2024 at 10:28 pm
Although the UK isn’t expected to go into a recession this year, it’s always good to know how you can protect your finances in times of economic uncertainty. You may be wondering whether investing in art is a wise decision during inflation. Well, art can be a great way to protect your finances during a recession, acting as a hedge against inflation.
But where do you start? And how stable is the art market during periods of recession? That’s what we’ll be exploring in this blog post. Read on for some guidance if you plan on buying art to protect your finances in a recession.
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Is The Art Market Stable During Periods of Recession?
A recession is defined as two three-month periods of negative economic growth. The last recession in the UK was back in 2020 as a result of the pandemic and only lasted for six months. Although we are no longer in a recession, the shockwaves are still having an impact on our economy – and this isn’t likely to change much any time soon.
Historically, the art market has remained stable throughout periods of recession. During the Great Recession (2007-2009), the demand for art remained relatively stable, withstanding the extreme economic fluctuations at the time. During the credit crunch, art sales actually spiked. Likewise, the art market had a successful year following the 2020 recession. It’s important to note that not everything loses value in a recession.
Why Buy Art During a Recession?
We’ve established that the art market remains resilient against times of economic crisis, and can quickly recover following a recession. Assessing global auction sales following the 2007-2009 recession, the figures from 2011 were almost on the same level as the pre-recession figures – demonstrating just how resilient the art market is against inflation.
Pieces of art continued to sell for impressive prices during the recession. In fact, following the bankruptcy of the Lehman Brothers, the Yves Saint Laurent art collection fetches an impressive $483.8 million at Christie’s. Essentially, buying art during a recession can move capital from a relatively slow investment vehicle into a more secure, faster-moving vehicle.
Art is a tangible asset. Investing in tangible assets during inflation is a wise choice. Art investments have a low correlation to typical markets and are considerably less volatile than other asset classes.
Stocks, however, are typically liquidated in order to fight against inflation. Art, however, stands tall against these fluctuations. Art can be a much better investment opportunity during times of recession and can be a great way to protect your finances. However, be sure to always conduct thorough research when investing in art – especially during times of economic crisis.
Where to Invest in Art During a Recession
There are several places you can purchase art during a recession – whether it be an art auction, an art gallery, an art fair or even online. If you choose to purchase art at an art auction, be prepared to exceed your budget a little. It’s also important to consider the additional fees – you may pay 15% of the hammer price as well as shipping and storage fees, which can add up to more than 25% of the hammer price.
You may benefit from working with an art advisor when buying art to protect your finances in a recession. An art advisor can help you to understand the art market and make an informed decision on your investment.
If you’re looking to invest in art from up-and-coming artists, art fairs are a great place to start. However, buying art from emerging artists can be considered a more ‘risky’ investment than purchasing art from established names. Art galleries can be a great place to invest in art. Not only can you view different pieces of art from a range of artists, but at many art galleries, you can also invest in artwork.
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