The trend of pawning fine art is gaining significant traction in South Africa, mirroring global shifts as individuals look for innovative ways to unlock the value of their high-end assets.
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Lamna Financial, a high-end pawnbroking service, has reported a substantial percentage increase in loans secured against art, confirming art as a valuable and growing asset class in the financial landscape.
According to Charles Meyerowitz, CEO at Lamna Financial, “More clients are recognising that fine art can unlock substantial liquidity, similar to traditional high-value assets like vehicles or luxury watches. We’ve seen a growing demand for loans secured against art, with loan-to-value ratios ranging between 50-70%, depending on the quality, provenance, and market demand of the artwork.”
“Many people see fine art as something to enjoy, but they may not realise that it can serve as a financial asset. Fine art is unique in that its value tends to appreciate over time,” he says.
“Pawnbroking against art allows collectors to access significant sums of money quickly without having to part with their pieces permanently.”
Meyerowitz further points out that the recent Lamna High-End Pawnbroking Index (LHPI) shows a significant 94% year-on-year increase in loan payouts, with a 61% rise in the number of deals completed over the same period.
“On average we see a 20% increase on art-secured loans, a trend that is expected to continue as awareness around art financing grows in South Africa,” he adds. “While vehicles, watches and luxury goods remain popular choices for asset-backed loans, we are seeing a sharp rise in clients who are using their art collections for similar purposes.”
Globally, the art market is experiencing strong growth in the use of art as collateral for loans. According to recent reports, the global market for art-secured loans is expected to exceed $20 billion by 2025, with major financial institutions and boutique lenders increasingly offering art financing solutions.
South Africa is following this trend, with an increase in the number of high-net-worth individuals leveraging their art collections for liquidity.
Art auction houses such as Sotheby’s and Christie’s have developed dedicated lending programs, further normalising the concept of loaning against art. The Citi Global Wealth Management 2023 Art Report highlights that art-backed lending has grown by 15% year on year, driven by both rising art values and a demand for flexible financing options.
In addition, consultancy firm Deloitte’s recently reported that auction houses and boutique lenders have increased their lending by 119% over the past five years compared with a 31% rise at banks.
While art pawnbroking is relatively newer in South Africa, Meyerowitz adds that the country’s growing fine art market, along with its economic fluctuations, have made this a viable option for collectors.
“Art loans are particularly good because art is so unique, you can’t sell it and buy it back later unlike a car or a watch,” he says.
“It’s because of this dynamic, it makes it an ideal and highly unique asset class – for the right assets.”
“While markets fluctuate, blue-chip art retains its value over time, making it an excellent choice for those looking to unlock cash quickly,” says Meyerowitz.
“At Lamna, we’ve loaned against everything from paintings by South Africa’s top artists to international masterpieces. Some of the most valuable art pieces include Vladimir Tretchikoff, Alexis Preller, William Kentridge and Robert Hodgins to name a few.”
Meyerowitz adds that many clients choose to take loans against their art for a variety of reasons. Some use the funds to invest in new business ventures or property developments, while others leverage their art to manage cash flow or finance personal projects.
How does pawnbroking work against artwork?
Much like other assets such as luxury watches or jewellery, he says that fine art is appraised based on market value, authenticity, and condition.
“Upon evaluation, the piece is held as collateral while the owner receives a loan against its estimated value,” he adds. “The artwork remains secure with the lender until the loan is repaid in full, at which point it is returned to the owner.”
“Our expert evaluators assist clients with unlocking the value of their art collections,” says Meyerowitz. “With an in-depth understanding of the art market and a commitment to offering fair loan terms, we’re becoming a trusted partner for those looking to leverage their fine art for financial flexibility.”