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THE INVESTOR
June 13, 2021

Market Now

[Feature] Not just window shopping: Young generation dives into art market

  • PUBLISHED :March 30, 2021 - 17:59
  • UPDATED :March 30, 2021 - 17:59
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Visitors at the annual art festival Galleries Art Fair 2020 look at art pieces by visual artist Julian Opie. (Galleries Association of Korea)

Appreciating artworks at galleries or exhibitions has been a pure joy for Jeong Hye-young, a 35-year-old office worker in Seoul, not just for finding peace of mind from stress-filled work but also because she sees their rising price value.

“I don’t think art is only for the rich. After starting to buy paintings, I feel like I know more about the artists and truly enjoy the artworks,“ said Jeong who has been collecting paintings by contemporary artists including Oh Chi-gyun, best known for his hand-painted “fingerworks.”

“Price values of paintings increasing is also an appealing factor of collecting arts that it can be considered as an investment, not just as a subject of appreciation,” said Jeong.

Jeong is among a growing number of people, especially those in their 20s and 30s, investing in art.

At an auction held on March 23, local auctioneer Seoul Auction sold 95 percent of 146 paintings, prints and sculptures worth 10.4 billion won ($9.2 million) in winning price combined.

“Many bidders participating in the auction were those in their 20s and 30s,” the auction company said declining to give numbers, citing protection of personal information.

The growing interests in art investment comes in line with the South Korean art market entering a new golden era that went through a long period of depression since its previous heyday between 2005 and 2007.

Art pieces by domestic master artists, including the late Kim Tschang-yeul, has been hitting new highs in value with exploding demand, according to a recent report by art appraisal firm Korea Art Authentication & Appraisal Research Center.

Not only in South Korea but also in major markets in Asia, art investment has been prevailing in times of ultralow interest rates and high liquidity.

A report released by investment bank UBS early in March showed that art broker Sotheby’s reported strong sales in Asia in 2020 with auction sales reaching $932 million. Among other age groups, millennials were more willing to purchase at higher prices online.

Of 2,569 rich collectors around the world surveyed in the report, 56 percent were those belonging to the so-called Generation MZ, depicting people born from the early 1980s to the early 2000s. The millennials, in particular, spent an average of $228,000 to purchase artworks, and 30 percent of the millennial investors spent more than $1 million.

The rising popularity of art investment can be attributed to online platforms that facilitates online auctions and new type of art investment such as co-sharing, like investing in fractional shares, according to market watchers. But investors are drawn to arts because it raises hopes for stable financial returns rather than investing in stocks or cryptocurrency.

“Investing in real estate requires a lump sum of money while cryptocurrency is highly risky,” said Song Ja-ho, CEO of art co-sharing platform operator Pica Project. “Those young collectors seem to think art is something special as they can own and enjoy while they can get some financial gain from it,” he added.

Another merit of investing in art in Korea is that it is somewhat free from taxation. Buyers of any artwork sold at 60 million won or less is exempted from paying tax. For artworks priced over 60 million, 20 percent of income tax is imposed only on 10 percent of the selling price. Trading of artworks by living artists do not incur any tax.


Art, tokenized

On the Pica Project platform, people can jointly own an expensive masterpiece with as little as 10,000 won. After being displayed at a gallery run by the firm for a while, the artwork is later sold at a premium, and the proceeds are distributed among investors proportionally.

Young art collectors also venture to invest in something new, such as nonfungible token, a digital asset that can contain drawings, animated GIFs, and songs. NFTs have been sweeping the conventional art industry as well as cryptocurrency market as some of tokenized paintings are sold for millions of dollars. Riding on the NFT fad, ”Missing and Found,“ a NFT-based digital artwork featuring a big-eyed girl with heavy makeup created by South Korean artist Mari Kim, was sold for 607 million won ($535,250) in a Pica Project auction this month. The digital image, whose starting price was 50 million won, was paid for in Ethereum, a type of cryptocurrency as well known as bitcoin. It is speculated that the buyer is a young tech-savvy art investor.

Although the increasing interest toward art is good for the industry, some market watchers say novice art collectors first try to develop an eye for great pieces via extensive research and observation of news and trends.

“Fledgling buyers should think twice before they make decisions to collect art pieces, and they should not be easily swayed by others’ opinions when picking an art piece,” said Yoon Bo-hyung, a lawyer and author of an art collecting guidebook titled, ”I choose artworks over Chanel bags.“

“If you are not so sure about whether to buy a certain art piece or not, then do more research and find something which makes you feel ‘this is it … this is mine,’” she added.

By Kim Young-won (wone0102@heraldcorp.com)

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