중앙데일리

‘Private enjoyment,’ lucrative art

Tax-free private sales help spur market for collectors

Jan 24,2007
Despite the sluggish economy ― or maybe because of a newfound appreciation of a quirk in Korean tax law ― Koreans are increasingly turning to art as a financial option. Especially with the recent dogged government efforts to restrict real estate price increases, the art market is flourishing ― from exhibitions and new galleries to auction houses and art-related financial products.
“The invigorated auction market and creation of art funds shows that the Korean art market is evolving from an age of appreciation to an age of investment,” said Seo Jin-soo, head of the Art Market Research Institute. “At this point, it is important to prepare the foundation so that the art market is systematic and continues to develop.”
Oddly, personal transfers of artworks are subject to few taxes in Korea, the only exceptions being taxes on donations or gifts to heirs.
Park Hae-young, an official at the National Tax Service, said it has been that way since 2003, when a change in the law went into effect. “Galleries that sell art works as their business are subject to taxes but individuals that collect artwork are not, because we view it as a purchase for private enjoyment, not investment,” Mr. Park said.
That means individual collectors can keep all the money they gain in indulging in the “private enjoyment.”
The most prominent growth in the art market is in the auction market. According to the Art Market Research Institute, the Korean art auction market totaled 59.1 billion won ($63 million) last year, based on the price of the auctioned works, not including sales of Korean art abroad. The turnover here was two and a half times the figure for 2005.
Last year, the priciest item sold on the auction market was a 17th-century porcelain vase that went for 1.62 billion won. In 2005, the most expensive piece was a Park Soo-keun painting, which was sold for 900 million won. That record was surpassed last month by another of Mr. Park’s paintings, a 1962 oil work titled Nosang (On the Road), which fetched 1.04 billion won when it went under the gavel at K Auction. The sale was also a record price for modern Korean art.
Auction houses say the number of artists selling their work at high prices has tripled in the last year. Last year, 80 pieces sold for more than 100 million won, up from 25 in 2005, according to the auction houses Seoul Auction and K Auction. There are three major auction houses in Korea. Two of them, Korea Art Auction, founded in 1996, and Seoul Auction, started in 1999, were the dominant players until 2005, when K Auction was established. In the past year, however, new small auction firms have sprung up, such as East and West Auction House, focusing on Asian antiques. In addition, an art auction Internet portal site, Art Portal, mainly features North Korean artwork.
Art Portal monthly sells more than 700 pieces, mostly paintings, online. The paintings start as low as $100. “Paintings by some famous Chinese artists may have cost only hundreds of dollars 10 years ago, but now some are very valuable. Some painters win awards in international art fairs, driving up the value of their work. That’s why some who participate in auctions view art as an investment,” said Kim Bum-hoon, president of Art Portal
With prices soaring, Seoul Auction said that the number of people attending auctions nearly tripled last year. Kim Yoo-mi, a spokeswoman for K Auction, said interest in art auctions is high because auctions make the price of art transparent.
The expansion of the art market includes the growth of exhibition space. According to the Kim Dal-jin Art Research Institute, a private art data archiving center, 63 exhibition spaces, including museums and galleries, were newly established last year.
Some of the notable art space openings last year included the Seoul National University Art Museum, designed by Dutch architect Rem Koolhaas; Gallery Buk, featuring paintings of North Korean artists; and Atelier Hermes, a small gallery featuring French contemporary works and the fashion company’s own history.
Foreign galleries are also increasing their presence in Korea. In September, Espace SOL was established by a U.S. trade firm and in December, the Berlin-Michael Schultz Gallery opened in Seoul.
Money flowing into the art market can be detected in the scale of art fairs and the creation of art-related financial products.
For the first time in its 12-year history, the Korea International Art Fair ended its art fair last year without a deficit, achieving sales of 1.2 billion won. The title of the fair was, “Mr. Kim, let’s go shopping for paintings.” It helped attract a middle-class market to the art world.
Other mid-priced fairs drew well, including the “1 million won painting fair,” hosted by Spring Yellow Gallery, and a sale of 500 paintings and sculptures at Seoul National University to celebrate its 60th anniversary.
Art funds, non-existent before, have also been created recently. In September, Goodmorning Shinhan Securities, Seoul Asset Management and Pyo Gallery created Korea’s first art fund, worth 7.5 billion won.
Fund applicants pay a minimum of 100 million won and 95 percent of the money is invested in artwork selected by Pyo Gallery ― most of the portfolio consists of famous Asian artists.
On Monday, one private equity art fund, formed by five art galleries and three banks, opened an exhibition and sale in Seoul of works that the fund bought late last year.
Because of the increased interest in art, banks are providing art-related services to special clients.
Kookmin Bank held small exhibitions last year at its private bank branches, setting a theme for each branch.
Last year Hana Bank began art-related services with K Auction for its VIP customers, and Korea Exchange Bank opened a small gallery with the cooperation of Gana Art Gallery.


By Wohn Dong-hee Staff Writer [wohn@joongang.co.kr]



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