The Global Art Market
There are art dealers, brokers, advisors, auction houses and gallerists. The size of the market to date is $ 67.8 billion, the second highest ever level. Each entity performs a specific function in the art market. They each operate in different art market sectors; primary, secondary and tertiary. Art is classified as a luxury good with high elasticity of demand; the scarcity, uniqueness and illiquid nature of art separate it from replenishable goods. There are antique dealers and dealers in old master and modern art as well as antiquities, which come under particular scrutiny over their provenance and authenticity. This is why Sotheby’s is continuing to operate a state of the art authentication system established by James Martin formerly named Orion Analytical. A very important painting by Diego Velazquez (1599-1660) will come to the market on the first of February 2024 in New York priced at $35 million.
According to Clare McAndrew in her recently published Art Basel UBS report imports reached their highest level ever in 2022 at $30.7 billion, with the US and China dominating the trade, and exports their second highest at $33.4 billion. Key hubs (UK, US, HK) also continue to grow in size. South Korea has developed its domestic market with the arrival of Frieze and expansion of KIAF. Arario Gallery explained that in 2020 they focussed on online sales, which didn’t really produce dividends until 2022 when young collectors started a trend and purchased via the internet. Foreign dealers have elected to open spaces in Seoul and Busan. Barakat, which held a remarkable show of the work of the Ghanaian artists El Anatsui (b.1944), and Efremidis for instance have opened in the capital. Korean dealers were universally in favour of the appearance of foreign dealers believing it would internationalise the market. They expressed too an interest to expand beyond the country’s borders with PKM expressing a desire to open a venue in London and Hakogojae and One and J Gallery in L.A. Hakogojae is promoting abstract Korean art, with overlooked artists like the Shaminist Lee Dong Youb (b.1946) and geometric abstractionist Ryu Kyung Chai (1920-1995) as well as a display of ancient tea bowls in 2020. Thaddaeus Ropac have opened a branch in the Korean capital and held a first-rate Anselm Keifer (b.1945) show and other Western dealers (Barbara Gladstone, Lehmann Maupin and White Cube) are vying to make Seoul more international than Hong Kong. Notable works by the analogue photographer Min Byung Hun (b.1955) were on show in Seoul in the Kuzo Gallery and the exquisitely painted ‘the landscape that is no more there’ by Manna Lee (b.1971) at Sun Gallery. What is unique to Asia is the measurement of value by size although this is becoming less common.
The buying at Frieze Seoul favoured international global art which I would describe as the industrial art of Jeff Koons (b.1955) and Damien Hirst (b.1965) The prices in this sector remain solid in spite of the high values relative to other markets according to Thierry Ehrmann of Art Price. There is every indication that this will continue to be the case with the preference for this art shown by the X generation. There is, however, particularly in emerging markets, an increasing appeal for traditional art with many artists in Asia and the Middle East, in particular, choosing to return to the past for inspiration.
Hong Kong meanwhile has completed the West Kowloon project with the M+ museum as its centre piece. Iconic galleries like Hanart TZ have moved there. The auction market in the territory according to the Art Basel UBS report is slightly down on the same period of 2022 in the first half of 2023. Individual spending of HNWI (high net worth individuals) may just tip the balance in 2023. Median spending from China was the greatest by far the greatest while the UK and Taiwan also showed strong growth with more modest growth in HK and the US. Most spending was in the painting category followed by works on paper. NFT works have fallen drastically in 2023 with monthly turnover 2% of the peak in 2022 according to Art Basel UBS. NFTs now represented only eight per cent of collections compared to 15 per cent in 2022. Art and antiques meanwhile have prospered with cross-border trade in 2022 and early 2023 reaching $33.4billion, while antiques in key hubs according to Art Basel UBS increasing 50% in HK, 38% in the UK and 15% in the US. The Hong Kong figures were particularly surprising bearing in mind the fact that mainland Chinese buyers rarely recycle works on the Hong Kong market once the work of art has been bought.
Generation X outspent their younger peers also acquiring most on works on paper and female artists attracted less buyers than in 2022 by a ratio of 39% to 61%. The proportion of art in portfolios has also dwindled. The markets that are attracting the most interest are France and Japan, suggesting that either the art is of the highest quality or is the most modestly priced. Art Basel state that personal buying has returned and most motivated by pleasure with 43% borrowing to finance their collections. Auction house bidding has declined from 2022; Christie’s, Sotheby’s, Phillips and Bonhams were down 16% in the first half of 2023 on the same period in 2022, suggesting that buyers wish to engage with the art (and artist) rather than speculate on the auction market, but also that millennials don’t want to buy what their parents are selling. A new group of Chinese auction houses have appeared at the top of the market to compete with Sotheby’s and Christies. In addition to China Guardian and Poly there is now RomBon Auction and Holly International.
Overall, collectors have less of a predisposition to sell and more to buy which suggests that we are entering a collectors’ market and leaving last year’s speculative market. Galleries are expanding their operations. Opera now has 16 operations worldwide selling Picassos and Warhols. There are now 3,855 art dealers in the UK with 34% based in London but of the 3,000 auction houses the UK accounts for just 12%. The UK import of works of art has not bounced back from last year and it is likely that a Temporary Admissions system will be introduced which allows duty relief in the new year.
Art Basel has rolled out a scheme in Art Basel Miami Beach fair called Access whereby buyers donate a minimum ten per cent of the cost to charity with works priced in the region of $25,000 to $285,000. This initiative may be extended to the other fairs run by the company. Median expenditure was highest amongst mainland Chinese buyers reaching a median figure of $241,000 in the first half of 2023 compared to a world median average of $65,000 in 2023. Chinese buyers were the highest buyers across a number of sectors with the notable exception being digital art according to Art Basel UBS HNW clients spent less on female art than male with a ratio 39% female to 61% male. The proportion of buyers spending works over $1 million fell from 12% to 4% from 2021 to 2022.
The average allocation to art in wealth portfolios fell to 19 per cent from a peak of 22 per cent in 2022 and this may have a lot to do with higher interest rates attracting capital to stocks and shares. The proportion of wealth through dealers increased in 2023 on 2022 by 25 percent to 47 percent with the exception of China with a much closer ratio in favour of 31 percent by auction and 41 percent by dealer according to Art Basel UBS This is surprising given the great number of auction houses in China and the absence of a great quantity of dealers. Customer loyalty proved to be a common attribute amongst dealers and those with the longest history tended to be in the strongest position. New arrivals to the market found it difficult to establish themselves unless they had substantial financial backing. Except for Asian markets there was a movement away from buying art from domestic galleries to purchasing art from international dealers. There is an increasing reason to believe that to be a successful dealer or gallerist you have to expand to several venues.
There was a greater selection in the number of art-related events attended by potential collectors, and this can be witnessed by the diminished numbers at private views. Personal pleasure remained the primary reason that collectors attended art events; with 37% expressing this desire followed by 28% buying for financial reasons. Social networking came in third with a proportion of 14%. Many collectors are in fact dealers, trading in the marketplace. As much as 43% of HNW collectors used credit cards or loans to finance purchases of art in both 2022 and 2023 according to Art Basel UBS.
The outlook for 2024 suggests that 54 percent of collectors were intending to buy art with that number rising to 68% in China along with large majorities in Japan, Brazil and Italy. Japan remains a conundrum and the Tokyo art fair a largely domestic or regional affair. There is a tendency in the new fairs sprouting in Asia to favour Asian galleries over their Western counterparts, which will start to change the complexion of the global market going forward. According to ArtPrice the contemporary art market is robust, falling just short of the 20/21 season, but the question remains what type of contemporary art will sell in the future and will a new aesthetic take hold of the market? There is also a sense that multi-digit contemporary art is overpriced with 279 selling at auction from $1 million to $10 million. The UK and US contemporary markets still account for 54 percent of turnover compared to 65 percent ten years ago. Hong Kong is now the second largest market for contemporary art selling in large part Asian art, Zeng Fanzhi (b.1964), Zhou Chunya (1955), Chen Yifei (b.1946) and Liu Ye (b.1964). In 2022 and 2023 Hong Kong generated the best auction results for contemporary art in China with three sales above $10 million: Jean-Michel Basquiat (b.1960), Yoshitomo Nara (b.1959) and Yayoi Kusama (b.1929). Both Japan and Korea appear in the top sales for contemporary art. Continental Europe represents a fraction of the international art market with France leading the pack. But the price of its contemporary artists lies substantially behind its American and British counterparts. France only generates 2% of the global contemporary art market; $46.7 million compared to $857 million in the US, $744 million in China and $376 million in the UK. Ultra contemporary art has made great strides with Matthew Wong (1984-2019) setting a record of $6,662,115 at Sotheby’s Hong Kong in 2023 and two other works over $1 million.
The outlook for the art market in 2024 is heavily dependent on world political events, the wars in Gaza and Ukraine, political unrest in the Middle East and far right populism. Whenever political uncertainty enters the market the price of the region’s art falls. This was certainly true of North Africa and the Middle East after the Arab Spring of 2010 and it may well spread its influence to the crucial Gulf market if the conflict enlarges. Similarly, in Europe, the consequences of the war between Russia and Ukraine could escalate into a wider regional confrontation. Let us hope that political stability returns, interest rates remain low and a socio-political crisis is averted. The influence of COVID and historically low interest rates has also had a downward impact on HNW incomes and created a large gap between the top wealth holders and the rest. The increase in wealth of the billionaires actually grew during the pandemic and this has had a positive affect on the market. Finally, according to UBS Art Basel, many HNW individuals have borrowed against their other assets to purchase art that they believe may have longer-term higher dividends.
