How to Price Artwork
How is art priced? Pricing a work of art is far from a simple matter. Does the price of art always correlate with its value? Not necessarily.
We live in a material world, and market value, or rather, the cost-effectiveness of an investment, is a major factor that impacts the cost of art. Paintings in demand do cost more, but the trick is that so many hard-to-predict factors driving that demand come into play.
We also have to differentiate between monetary value or pricing and artistic value. These do not always correlate. In fact, commercial success often fails to translate into historical significance. It often depends on the gallery what they will focus on, but it is not uncommon for the commercial viability to be prioritized.
First and foremost, there is the supply and availability of an artist’s works for sale, and the demand for his works. Complicating matters further is that even if there is an impressive number of collectors who are after an artist’s work, not all of them may be willing or able to pay the same price. Many of those collectors may only be interested in making their investment worth their while.
Because of this, art in demand may also be overestimated and overpriced, which also makes it off-limits to the general public. This gives the art scene the air of pretension, arrogance, and off-putting exclusivity.
Be that as it may, when you buy art, there are many factors that affect how an artwork is priced and how much you will, and should, pay for it. All in all, it takes a lot of research and learning by comparison and from experience to price a work of art or predict the future price of a work of art. There’s also a lot of speculation involved, and last but not least, a healthy amount of informed guesswork.
How Would You Price a Work of Art?
Pricing artwork for emerging artists is not the same as pricing art for sale from a renowned, in-demand artist. Even more curiously, the prices of two prints from one and the same artist, even if they were created at the same time period, can be vastly different.
As stated above, the laws of supply and demand have to be factored in, but since the art market often works in mysterious ways, here are some additional aspects that need to be taken into consideration when pricing a work of art:
1. Techniques, Size, Materials, Production Cost
Let’s start with the most obvious factors: the costs and complexity of production. Prices of artwork may depend on the media and the techniques used to produce it. Sometimes, a complex technique or combination of media impacts the rarity of a work of art.
The bigger, more labor-intensive, and more expensive a work of art is to produce, the more expensive it is going to be. However, the cost of production is not always taken into account. This factor is often overshadowed by other factors, such as the artist’s sale and exhibition history.
Prices of art may depend on when a work of art was made. But another factor that affects pricing is the physical condition of the artwork, that is, how well a piece has been taken care of. So how to price artwork that has been so severely damaged that professional restoration and reparation becomes much too expensive or labor-intensive? If a work of art sustains substantial, permanent damage from being exposed to the elements for a long period of time, this can have a great impact on its value. The piece will not be worth as much as it was if it would have been had it been well-preserved or remained in the original condition.
2. Primary Market vs. Secondary Market
Artwork can be sold in different markets and those circumstances have an impact on how artwork is priced. So how to price artwork for the primary market vs. the secondary market? The difference can be staggering.
The primary market is the initial sale. An artist’s work is consigned to a gallery, from where it is brought by a collector, and the profit is split between the collector and the gallery. The artist may also sell their work directly to the customer. The absence of intermediaries and the lack of additional charges has a huge impact on pricing. The purchase price will affect the collector’s profit margin if and when they decide to resell.
If a buyer decides to resell a work of art, that is where the secondary market comes in. In many cases, the original purchase is motivated by the desire to turn a profit from the get-go. Often, buying a rare old piece of art takes place in the secondary market which partly explains the outrageous costs, especially when the secondary sale is done through an auction house or the gallery that first purchased the work. In these cases, the artist gets no share in the profits.
When a work of art is sold on the secondary work, its price is much higher, in spite of the fact that most artworks don’t actually grow in value between the sale and the resale, except in the case when the makers pass away or grow in significance and demand. The upside of the secondary market is that collectors are given a more diverse offer to choose from.
3. The Artist’s Reputation: Emerging Vs. Established Artists
Inevitably, how an artist is perceived also has a bearing on how art is priced. An artist’s reputation as a good painter or sculptor and the career they’ve built can increase the price of their work and make their work more desirable and by extension, more valuable. People are willing to pay more for works that are in demand and by an artist who has a promising career and future ahead.
It is not common for galleries to price the works of struggling new artists at a lower price point. The market for an artwork has its influence on its pricing and that is why different pieces of art can be priced differently even if they are made by the same artist and around the same time.
When you are looking to buy an artwork, make sure that you are attuned to the mechanisms and driving forces of its market and that you have a realistic idea of the prices of artwork that people will actually be willing to pay if you are looking to build a quality collection you can later resell.
Making an accurate forecast can be difficult as it requires experience and expertise: understanding the clientele, predicting the trajectory of an artist’s career, and taking into account their work’s nature and complexity.
Whether the artist is living or dead may also play a role in the process, as this, too, often impacts the perceived current or future value and rarity of a work of art.
Pricing art by a certain artists impacts their future prospects, career and positioning. But when an emerging artist is just starting out, it is inevitable that they will have to adjust their expectations by making the prices of their works more attractive, depending on the target audience or clientele, and a range of other factors, in order to pave the way for future success. Additionally, the repercussions of overinflating prices can be serious and far-reaching.
4. Supply and Demand
Straight off the bat, the supply and demand for an artwork determines its value. The supply curve of a one-of-a-kind original painting is perfectly inelastic. What does this mean? When it comes to supply and demand, an inelastic curve is one where a given percentage change in price will cause a smaller percentage change in the quantity of the product being demanded or supplied.
Let’s put this into perspective. A struggling new artist has to work hard to sell their works because there are not many people who want to buy their work. Even if the artist is popular does not necessarily mean that people will be willing to pay for his work, because there are various factors to be considered.
On top of that, artists have a powerful mechanism at their disposal: by limiting their own output, they are regulating their supply. However, deciding how to price art for sale also has to do with the roles of editions or copies of a work of art. There are unique works that are literally one-of-a-kind, but there are also editions or multiple. It is obvious which one will be worth more: the one with the lower supply and availability. On the other hand, editions are more affordable and more easily accessible, which can be beneficial in its own right. It is also worth noting that editions are not mere reproductions of a unique work. All editions of a work, despite existing in multitudes, are still originals.
When the market is more competitive and the demand is high, the price goes up. So what drives the demand? For many collectors, it is simply the matter of of whether something is deemed a good investment. Experts can recognize the potential and predict the career trajectory of emerging unknown or relatively unknown artists who have the potential to become a big deal. Successful artists owe a lot to the results of effective networking and receiving validation from expats and institutions helps them build a fine reputation and rapport with the movers and shakers of the art market. All of this affects the prices of secondary market sales and help artists attract attention and establish themselves. Seasoned dealers have a keen eye for works that have great chances of success, and they also have the connections to promote them.