What makes art so expensive? | CNBC Explains

What makes art so expensive? | CNBC Explains

How do you put a dollar value on a piece of art like this? Or this? Or this? It’s a billion-dollar question. Well, more than that actually. It’s estimated around $50 billion in
art was sold worldwide last year. Compared to stocks or commodities it’s
hard to measure how much art is worth. Why? For many the value of art
lies in the eye of the beholder. Meaning one piece of art could be worth a lot
to one person and nothing to someone else. You can get a sense of the ranging
valuations of art in just one gallery. From one piece costing in
the thousands of dollars. All the way to a
Picasso in the millions. What makes a Picasso
worth millions? One reason is simple economics:
Supply and demand. Wealthy art buyers, whether they’re Picasso enthusiasts
or investors looking for a place to store their money, all want to get their hands on a Picasso. But
there are only so many Picassos left in the world. The supply shortage drives up
prices as buyers outbid each other. So sales in the high-end art market come
from a select group of in-demand artists whose work, like Picasso’s,
is considered scarce. The most expensive pieces of art sold across sectors
last year were from artists who are no longer alive. Even in contemporary art, 25
artists accounted for nearly half of public art auction sales in
the first six months of 2017. Put another way, the art market is
like the professional golf market. A handful of professional golfers make a lot
of money, millions of dollars, when they win. But there are many more golfers in the field
who earn just a fraction of those winnings. The price for a piece of art isn’t
just about the artist’s reputation. There are other factors at play, like
the art’s size and genre, its condition, the prices of similar pieces and
where the work has been exhibited. Art Fairs, like Frieze here in London, are an important
venue for new buyers and they’re likely to stay that way. Sales at art fairs hit an estimated $13 billion
in 2016, an increase of 57% since 2010. But half of art dealers
in one survey said the costs associated with exhibiting
at art fairs are a top business concern. This piece sold for around $20,000
and that’s considered a good value. Even new buyers willing to spend thousands
of dollars can be put off by the idea that they need to spend millions to be part
of an exclusive club of art collectors. It’s the million dollar buyers generating headline
after headline of record sales in the art industry. The top end of the art market is dominated
by a select group of players who are pretty private
about their business. Which can make it tricky to value how
much they’re actually spending on art. More and more art sales are conducted in private
which attracts high net worth investors. These wealthy buyers are also lured
by tax breaks for art donations or the prospect of making
big returns on a piece of art. Galleries, dealers and auction houses can
be tempted to cater to high-end clients who pay millions of dollars for art, and who
keep coming back, instead of to the average Joe. You can see this trend in a chart showing the
value of art sales, the total dollar amount, versus the volume of sales, the number of
transactions, in global fine art auctions last year. Art that sold for more than $1 million accounted
for nearly half of the market’s value in less than 1%
of transactions. China has been driving a lot of the growth in
high-end art sales since the financial crisis as it mints new millionaires and billionaires
looking for places to invest their money. China ranks third in global art
sales after the U.K. and the U.S., and those three countries combined
make up 81% of global sales by value. Just because some art costs millions
doesn’t mean you have to pay that much. A worthwhile investment can be art that
you like for just a couple of bucks. Hey guys, it’s Elizabeth. Thanks so much for watching. Check out more of our videos over here. We’re also taking your suggestions for future CNBC Explains so leave your ideas in the comments section. And while you’re at it, subscribe to our channel. See you!

39 thoughts on “What makes art so expensive? | CNBC Explains”

  • Why certain car brands cost more and sell more even when their competition offers better performance for cheaper price?

  • The best living artist at the moment is Inès Longevial. You all should check out her Instagram where she showcases some of her wonderful art pieces.

  • Art buyers are really stupid, they buy a stupid drawing of something, is worth millions. This is the greatest way to waste your money, art has not no function. Why does a ferrari 350 gto worth less than a piece of paper with some graphite on it. The painting should only cost, as much as the materials cost that it took make it. Like the paint it self cost and paper. Paintings are useless. Why does my kenworth painting poster only cost few bucks but a stupid ramdom rubbish cost millions. Every expensive art buyer is a fucking idiot, they buy something that does not benefit them or anyone. They may as well burn their money. That means i can just draw something random, and make millions. But i wont millions, cuz for weird ass reason. If you have billions, and you dont what to spend it on, then donate it, dont spend it on something worthless.

  • It's funny how people on here don't understand that each time a piece is sold, it is worth more. Depends on who owned it before, how well known it is. Art is an investment. even if you don't "get" art at least understand that it is an investment just like any other. If you buy art from an artist that is not known, there is more risk as the artists work may never be worth more. but It could be worth a million in 10 years. Or a million in 50 years and is can make your family money. You can buy a painting for a million, let it sit in your vault for 50 years and then sell it for 20 million.

  • There are so many reason why a piece of art could be worth something. You can see the ultimate list of reasons here, trust me, it will blow your mind! artpage101.com/why-get-a-painting

  • Art is more the story behind it. The price is also determined by the auctioneers, its not like picasso decided his art should be billions. Same with banksy. He never wanted his art to be auctioned but people spend a ton of money just for a wall he graffitied on

  • things are changing – people no longer need to go to a museum or a gallery or an art fair in order to see the most current – most recently created art – they now are able shop at home on their personal computer – or in their palms with their smart phones and this makes each computer or smart phone into their own private gallery –

    through the websites that show art online a viewer can become a client instantly – order an artwork in the size and medium that they personally want and by doing this they become co creator of the art that they are purchasing – this makes the art that they have purchased not only valuable because it is what they like but even more unique because it is make to their own personal specifications – and so unlike the perception that many people may have that there are many pieces of the same because many people can purchase the same image online – these pieces purchased according to the specifications of individual purchasers who are co creators of work that they order online are actually unique in that they are made specifically for the person ordering – they are shipped to your home or office or to the person you may be gifting the piece to where they can be viewed in the specific environment that they will be showing in and then the work has a 30 day money back guarantee so if for any reason the person ordering them is not completely satisfied – the art can be returned and the money returned –

    this is the most efficient and cost effective – time efficient and profound way of purchasing art in today's world without the added expense of the gallery – museum – fair costs added on for the purchaser to pay over the true value of the art that they are to take possession of – and in addition the provenance of the piece that is ordered is assured – since it was actually made for the individual that purchased it –

  • I really think this is foolish. Its just rich people throwing away their money. Its ok if it is really old and by great artists but they sell plain art at such high costs what rubbish is this. I really think it is just stupid and waste of money.

  • I sometimes when people treat art to something worth more than life rather than as lesson form of interpretation from painter point of life

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