According to the Economist newspaper, the art works in the world are falling into pledged assets to borrow money from banks.
The Economist newspaper noted the fact that collecting is no longer merely a hobby but a bargain investment. However, the art of not wanting to being sold, it can take a lot of time to sell a beautiful picture. So the fastest way to profit from a work of art is to bring the pledge into the bank.
Deloitte (one of the four leading global auditing firms ‘Big Four’) estimates the value of loans owed to art mortgages amounted to $ 17 billion in 2017, an increase of 13% over the same period last year before. Industry insiders also said that this number has continuously increased over time.
Evan Beard from the US bank said no one dared to earn 10 or 20 years ago from his art collection, but the world is now different. Bank of America is also the organization that mortgages artwork for the largest loan available today.
The valuation and auction results of works of art can now be done online since the 2000s, making it easier to mortgage loans. In the US, many collectors’ works of art are pledges.
Private banks have been lending mortgages with artworks since the 1970s. Now the market is growing stronger than ever. With a private bank, although the loan can be secured with artwork, it is only a last resort. On the contrary, for small, retail lenders, just a piece of art is the only collateral.
Athens, the US lender, asked for a $ 2 million work to secure a minimum loan of $ 1 million. At US banks or other private banks, the minimum loan amounted to $ 5 million. These banks only accept collateral as a work of art from famous artists because of its high reliability. Thus, borrowing with artwork is not as risky as many people think, a representative from Columbia business school said.
Amid the rapid growth of this lending market, Europe seems to be more or less resistant. No old continent bank has a large-scale mortgage loan program like American banks. And the US also accounts for 90% of this lending market.
Art financial companies such as Fine Art Group (London) or Westend Art Bank (Berlin) have jumped into the market. They said rich people are increasingly interested in making use of personal collections. In general, Europeans still do not want to mortgage their personal collections, but there is no denying that there is a collection of collectors who benefit from art.