Three quarters of new collectors buy art online for investment, study finds

But buyers are not risking large sums, with the majority of works still priced below £10,000

Collectors who buy art online are increasingly doing it for investment, according to a report released by Hiscox fine art insurers today, 21 April. As many as 63% are driven by the value potential of works of art, with 75% of new buyers saying they buy art for investment. However, 93% of respondents say they collect for passion.

Robert Read, the head of fine art at Hiscox, says rapid growth in the contemporary art market, coupled with a lack of options in other markets, is enticing people to “get on the art ladder”. He sounds a note of caution, however: “I wonder whether this change in attitude is genuine, or whether it is a moment where people feel they are missing out if they don’t invest?”

The idea of art as an asset class has been gaining momentum for several years. But, as Read points out, art is not where people park the majority of their wealth. “It’s not a major investment such as your pension or property; art is a side bet,” he says. The prices paid for art online reflect this—84% bought works valued at below £10,000, the report says.

But, it all adds up. Last year the online art market grew by 41% to be worth an estimated $2.64 billion (4.8% of the estimated $55.2 billion global art market). By 2019, this figure is expected to reach $6.3 billion, according to the report.

Driving this boom is a proliferation of online trading platforms such as Heritage Auction, Paddle8 and Auctionata, with a few seeing triple-digit growth in 2014. Established galleries and auction houses are also adapting to keep pace. On 1 April, for example, Sotheby’s and eBay launched their joint live auction platform.

However, Read predicts only three or four players will survive out of the 25 or so currently competing for a slice of the online market. Who will endure is harder to predict. “You would have thought the main auction houses or one of the large dealers would be best placed to take advantage, but often when you have the yoke of the traditional model around your neck it’s harder to do,” Read says. “It could be an established brand in another area.”

Social media is also affecting buying; 24% of respondents say posts by museums, galleries and artists’ studios directly influenced their decisions. Facebook (52%) and Instagram (34%) are seen as the most important social media sites in the art world, while 41% of buyers say they discovered an online trading platform via social media (up from 33% the previous year).

One of the biggest problems online buyers face is they are not able to physically inspect the work before making a purchase—82% complained of this. Other challenges the report identifies include authenticity, shipping and insurance.

Meanwhile, according to an art fair report released by Skate’s investment company yesterday, 20 April, galleries are beginning to shift their focus from art fairs to online sales.

Out of 12 art fairs that open in the first quarter of the year, one (Art Basel Hong Kong) reported a 7.7% drop in visitors in 2015. Overall, it was the first time in ten years that gallery and visitor number failed to grow at a two-digit pace. Four fairs (India Art Fair, the Armory Show, Art Basel Hong Kong and the Brussels Antiques and Fine Art Fair) saw a reduction in the number of galleries exhibiting in 2015.

Skate’s says galleries have “scaledback the expensive travelling circus of art fairs” and are choosing to market themselves onlineinstead.