The art of investment: when the new hides gold and the old holds treasures
The slanting light of an autumn afternoon filtered through the windows of Sotheby’s auction room in New York. On the rostrum, a small, brightly coloured painting—Untitled (1982) by Jean-Michel Basquiat—awaited its moment. Bought for $20,000 in 1984 by an anonymous collector, it would sell that day for $110.5 million. A 552,500% increase in value. A few streets away, in a brand-new Brooklyn building, an off-plan apartment (VEFA, or Vente en l’État Futur d’Achèvement) had just been delivered. Its owner, a young Wall Street executive, had paid $1.2 million for it two years earlier. Today, he was struggling to sell it for $1.1 million. Two markets, two destinies. One born of time’s patina and the aura of a deceased artist; the other, a dream of modernity and ten-year guarantees. Which had truly created value? And, more importantly: where should one place their money if they hoped, one day, to tell a story as captivating as that of this Basquiat?
By Artedusa
••11 min read01The myth of the blank page: why the new fascinates us
There is something intoxicating about being the first. The first to step onto a new floor, to breathe in the scent of fresh paint, to turn on the lights in an apartment that has never been lived in. The primary market—whether in real estate, art, or stocks—plays on this fascination with virginity. An IPO is the story of a company offering itself to the public for the first time, like a bride stepping into the light. A new real estate development promises a home without history, without ghosts, without traces of past lives. And a work of art bought directly from a gallery? It’s the thrill of owning a piece of the future before the world claims it.
Yet this purity comes at a price. In 2019, WeWork, the coworking unicorn, was preparing its IPO with a staggering valuation of $47 billion. Investors clamoured to get in, seduced by the narrative of a "disruptive" company led by a charismatic founder, Adam Neumann. Three months later, the valuation collapsed to $8 billion, and Neumann was ousted. The primary market is often just that: a heady mix of intoxicating promises and poorly assessed risks. Real estate offers no shortage of examples either. In Paris, new developments in eco-districts like Clichy-Batignolles or Bercy-Charenton saw their prices drop by 15 to 20% in 2023, victims of rising interest rates and construction costs. The new is beautiful, clean, reassuring… but it’s rarely where the most spectacular gains are made.
02The patina of time: when the old becomes a goldmine
If the new seduces with its lack of history, the old fascinates precisely because it has one. A townhouse in Lyon, built in 1880, with its ceiling mouldings and a stone staircase worn by generations of footsteps. A Picasso painting once part of the Rockefeller collection. A bottle of Romanée-Conti 1945, drunk by Churchill at a historic dinner. These objects are not valued merely for their utility or intrinsic beauty, but for the stories they carry. And it is this narrative dimension that explodes their value on the secondary market.
Take Parisian real estate, for example. In 2010, a 50-square-metre apartment in the Marais, bought for €500,000, sold for €1.2 million in 2023. A 140% gain in thirteen years. Yet this property had nothing exceptional about it: oak parquet, a marble fireplace, sash windows. Nothing that, on the surface, justified such a leap. Except that… this apartment had been carefully renovated, respecting the original materials. The mouldings had been restored, the woodwork repainted in pastel tones, and a custom kitchen had been integrated without distorting the space. The result? A perfect blend of old-world charm and modern comfort—exactly what wealthy buyers from around the world seek. A few streets away, a new studio in a recent development, bought for €400,000 in 2015, struggled to find a buyer at €380,000 in 2023. The difference? One told a story; the other was just a standardised product.
03The game of appearances: how investor psychology creates value
Why is a Basquiat painting worth $110 million, while a similar piece of street art by an unknown artist won’t exceed $5,000? Why does a Haussmannian apartment in Paris sell for 30% more than a contemporary duplex of the same size? The answer lies in one word: aura. A concept dear to philosopher Walter Benjamin, who saw in art a "unique presence" capable of transcending its mere materiality. In markets, this aura is built through three powerful psychological mechanisms.
First, the scarcity effect. A unique work, a property in a protected neighbourhood, a bottle of wine from a limited-production estate… The rarer an asset, the higher its perceived value. In 2021, NFTs (non-fungible tokens) exploded precisely on this principle. Digital images, infinitely reproducible, sold for millions because they were declared "unique" on the blockchain. Even if, technically, anyone could make a copy, simply owning "the original" was enough to create value. As if you were buying the right to say: "I have the real one."
Next, the halo effect. A work exhibited at MoMA, an apartment once owned by a celebrity, a watch worn by Steve McQueen… These elements create an aura of prestige that inflates the price. In 2017, Salvator Mundi, attributed to Leonardo da Vinci, sold for $450 million. Yet its authenticity is still debated among experts. No matter: the mere fact that it had been exhibited at the Louvre and had belonged to prestigious collectors was enough to justify its stratospheric price.
Finally, the trend effect. Markets—whether financial, real estate, or artistic—are subject to the whims of fashion. In the 1980s, investors rushed into Japanese stocks, convinced that the Land of the Rising Sun’s economy would dominate the 21st century. In 2023, it’s artificial intelligence that attracts all the capital. In art, the same cycles repeat: Impressionists in the 1980s, Chinese artists in the 2000s, NFTs in 2021… Anticipating these movements is the supreme art of the savvy investor.
04Behind the scenes of the markets: where real value hides
If the secondary market seems more profitable, it’s because it relies on a simple principle: the discount. Buy an undervalued asset, rehabilitate it, and resell it at a profit. In real estate, this means hunting for unloved properties: an abandoned country house, a Parisian apartment with a 1970s kitchen, an industrial loft in a gentrifying neighbourhood. In art, it’s spotting emerging artists before they become stars, or forgotten works by established masters.
Take David Hockney, for example. In the 1960s, his paintings sold for a few thousand dollars. Today, his works regularly exceed $10 million. Yet in 2020, one of his paintings, The Splash, sold for £23.1 million at Sotheby’s. A 2,300% increase from its 1972 purchase price. How to explain such a leap? First, through the gradual recognition of his talent. Then, through the work of galleries and auction houses, which built his aura. Finally, through scarcity: Hockney produced a limited number of major works, and these are now almost all in private collections or museums.
The same principle applies to real estate. In Berlin in the 2000s, savvy investors bought entire buildings in working-class neighbourhoods like Kreuzberg or Neukölln, when prices were at their lowest. Today, these same properties are worth five to ten times more. The key? Having anticipated gentrification, of course, but also having had the courage to buy when everyone else was fleeing.
05Pitfalls to avoid: when capital gains turn into a mirage
Yet the secondary market is not a promised land without dangers. Its pitfalls are numerous, and often invisible to the unwary investor. The first? Illiquidity. A masterpiece, a country house, a rare bottle of wine… These assets can take years to find a buyer. In 2018, a collector tried to resell a Modigliani painting, Nu couché, bought for $170 million in 2015. Three years later, he still hadn’t found a buyer, and the painting was eventually withdrawn from sale. The moral? Even the most prestigious assets can prove unsellable if the market isn’t there.
The second pitfall? Fees. In the art market, auction houses take between 10 and 25% commission. In real estate, transfer taxes account for 5 to 8% of the sale price. Add to that renovation, expertise, and storage costs. In 2021, an investor bought a CryptoPunk NFT for $2 million. A year later, he tried to sell it for $1.5 million. After fees, he ultimately pocketed $1.2 million. A 40% loss, despite an apparent "capital gain."
Finally, the third pitfall is information asymmetry. In the secondary market, sellers always know more than buyers. An apartment may hide structural problems, a work of art may be a fake, a stock may be overvalued… In 2012, Greece restructured its debt, imposing a 53% haircut on creditors. Those who had bought Greek bonds on the secondary market, convinced they were making a good deal, lost everything.
06Strategies for the 21st century: where to invest in 2024
So, where should you invest to achieve real capital gains? The answer depends on your profile, your time horizon, and your risk appetite. But a few major trends are emerging.
For the cautious: the primary market for government bonds and new real estate in high-demand areas. French or German bonds offer modest returns (1 to 3%) but absolute security. In real estate, new developments under the Pinel scheme in cities like Bordeaux or Lyon allow for tax advantages while betting on growing areas.
For the bold: the secondary market for undervalued assets. In art, this means tracking emerging artists backed by influential galleries (like Almine Rech or David Zwirner). In real estate, it’s buying properties to renovate in gentrifying neighbourhoods (like Belleville in Paris or Saint-Ouen). In finance, it’s taking advantage of crises to buy quality stocks at rock-bottom prices (as in 2008 or 2020).
For collectors: the primary market for limited editions and the secondary market for rare pieces. A Patek Philippe watch bought in-store can gain 20% in value as soon as it leaves the boutique. A bottle of wine from a top estate, bought en primeur, can double in five years. And a work of art with a prestigious provenance (like a Rothschild or Guggenheim collection) can see its price multiply tenfold.
07The ultimate secret: knowing how to wait
There’s a scene in The Big Short where Michael Burry, played by Christian Bale, explains to his investors why he’s betting against the US housing market. "People want to believe houses are safe investments," he says. "But that’s not true. Houses are assets like any other. They go up, they go down. And right now, they’re overvalued." Burry was right: in 2008, the market collapsed, and those who had known how to wait made fortunes.
The same logic applies to all markets. The most spectacular gains aren’t made by following the crowd, but by having the courage to buy when everyone else is selling. In 1973, a young collector named Charles Saatchi bought a Francis Bacon painting for £10,000. Forty years later, that same canvas sold for $142 million. The key? Having recognised the value of a work before anyone else, and having had the patience to wait.
Today, as markets are more volatile than ever, this lesson remains relevant. Whether you’re investing in real estate, art, or stocks, remember this: real value isn’t created by buying what shines, but by seeing what others don’t yet see. And sometimes, that means buying a shabby apartment in a declining neighbourhood, a painting by an unknown artist, or stock in a struggling company. Because it’s there, in the shadows, that tomorrow’s treasures lie.