The Basics of Art Valuation
Art valuation
Art valuation is an art-specific division of financial valuation, is the process of estimating the market value of works of art. The art valuation practice combines the skills of financial valuation along with subjective views on the importance of particular artwork and cultural value.
Valuation of art is a sophisticated subset of financial valuation as it requires exalted expertise in valuation methods as well as profound knowledge of the art world. This may be used for different objectives such as investments in art works, insurance and tax planning. Art valuation is an ideal example of why financial valuation is considered as both art as well as science.
Presently the art valuation industry is booming. A large number of investors are considering investing in artworks as it provides them with rewarding returns because the pieces of art can appreciate significantly over time. Although investing in artwork is highly risky as the chances of losing money is high but the probability of profits is relatively low.
Artwork valuation is performed primarily by art valuation companies like prestige valuations.
Valuation of art is a sophisticated subset of financial valuation as it requires exalted expertise in valuation methods as well as profound knowledge of the art world. This may be used for different objectives such as investments in art works, insurance and tax planning. Art valuation is an ideal example of why financial valuation is considered as both art as well as science.
Presently the art valuation industry is booming. A large number of investors are considering investing in artworks as it provides them with rewarding returns because the pieces of art can appreciate significantly over time. Although investing in artwork is highly risky as the chances of losing money is high but the probability of profits is relatively low.
Artwork valuation is performed primarily by art valuation companies like prestige valuations.
Courses in Art Valuations
The corporate Finance Institute (CFI) currently offers a few courses in valuation and financial modelling. Keep scrolling to know the list of programs offered.
- Business Valuation Fundamentals Course
- LBO Model Course
- Real Estate Financial Modelling
- Mining Financial Modelling
- Mergers and Acquisitions (M&A) Course
- Building a Financial Model in Excel
Key factors of Art Valuation
The valuation of art work is driven by several factors. The valuator of art must assess all the catalysts carefully that may drive up a fair value of the art asset. The following are the main factors that influence the valuations of the works of art.
1. Demand
The value of an artwork depends largely on its current demand in the market. The demand is usually procured based on the demand of the similar art piece. However the identification of the akin can be difficult due to the uniqueness of each artwork.
2. Liquidity
Works of Art are highly non-liquid assets. It can only become liquid if there’s a high demand for the particular piece in the market. Hence the art valuer must always keep the liquidity risk in mind related to art investments.
3. Art Dealer’s Activity
The prices of art pieces also change depending upon the art dealers activities. Often the dealers get into contracts with artists. It is quite common that the dealers may decide to obtain the artworks at an auction which eventually affects the price of the artwork.
4. Market Data
Various companies conduct research and provide artwork data which can be used by art evaluators to integrate the information in the valuation report. The data obtained from research reveals the volume of sales from auctions and relevant price levels.
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