Art Market Loses Shine Amid Tough Economic Conditions

Tom Burroughes Group Editor March 14, 2024

Art Market Loses Shine Amid Tough Economic Conditions

The annual report on the world's art market tracks regional and sectoral changes, including the relative significance of online and in-person auctions and sales channels.       

Higher interest rates, inflation and political instability appear to have taken the gloss from the world’s art market, with sales falling 4 per cent in 2023 from a year before to an estimated $65 billion.

The eighth edition of the annual report co-published by Art Basel and UBS said, however, that all sales dropped last year, but values held above the pre-pandemic 2019 level of $64.4 billion.

The volume of sales last year managed to rise, however, up to 39.4 million (+4 per cent), the study said.

The state of the world market for fine art can be a barometer for the wealth management sector because it illuminates the spending habits that ultra-high net worth and HNW individuals are most passionate about. Clients are drawn to the sector both emotionally and because of its investment potential. UBS is among a cluster of major banks, such as Deutsche Bank and Bank of America that advise clients about art investment.

“The art market continues to prove its resilience. Alongside the strength of financial markets, expected declines in interest rates, and weakening inflation, this offers hope for 2024. We are observing a shift in the luxury market away from goods purchases toward spending more on ‘having fun’– leisure travel, entertainment and socializing,” Paul Donovan, chief economist, UBS Global Wealth Management, said. “Art is so much more than possessing physical objects and the events, experiences, and social networks associated with collecting should provide support for the sector.”

Both public auction and dealer sales fell in 2023, although the decline in auctions was more severe, falling by 7 per cent versus a 3 per cent drop in dealer sales, and saved from a deeper contraction through the injection of postponed 2022 sales in China early in the year. Private sales at auction houses went against the declining trend, increasing by 2 per cent year-on-year.

Ronald Varney, principal of his eponymous firm, Ronald Varney Fine Art Advisors – based in the US – commented on the report to this publication. 

"The Art Basel and UBS Global Art Market Report 2024 is a fascinating and deeply comprehensive analysis of the current art market, examining buying and sale trends, developments with the auction and private dealer markets, and the shifts in collecting interests worldwide.  And while it shows that art market growth in 2023 slowed overall, the volume of transactions increased considerably, especially with transactions at lower price levels.  And while the US maintains its lead as the worldwide market leader, mainland China and Hong Kong have become the second-largest market.

"And while the report stresses that the art market seems to have returned to a state of `normalcy' after the ravages and dislocations of Covid, in some ways it fails to capture the enormous enthusiasm that new and emerging collectors have shown for all things `luxury,' such as wine and whiskey, vintage cars, collectibles of all sorts, watches and jewelry.  One has only to see the great emphasis the major auction houses put on such luxury items to know they are striving mightily to reach younger audiences for the art market, which remains largely a realm for older high net worth enthusiasts," Varney said.

US remains number one
The US maintained its position as the leading market worldwide, accounting for 42 per cent of sales by value, down by 3 per cent year-on-year. China, including mainland China and Hong Kong, became the second-largest global art market, with its share rising to 19 per cent, while the UK fell back to third place with a share of 17 per cent. France remained in a stable fourth position at 7 per cent.

After a robust recovery to reach a record high of $30.2 billion in 2022, the US market contracted 10 per cent to $27.2 billion in 2023. The US remained the key center worldwide for sales of the highest-priced works of art, and while 2022 was a record year for high-end auction sales, the decline in 2023 reflected thinner trading at the top, leaving the market just below its level in 2019.

Sales in China rallied against the declining trend, increasing by 9 per cent to an estimated $12.2 billion. As the economy reopened in January 2023 following strict Covid-related lockdowns in 2022, there was a surge of activity in the art market in the first half of the year, with postponed auction inventories sold to enthusiastic post-lockdown buyers, while Hong Kong’s major fairs and exhibitions returned to their full-scale programs.

The second half of the year was considerably slower, however, with projections of weaker economic growth and a persistent real estate slump weighing on demand and indicating that some of the outperformance in 2023 may have been driven by the unique reopening.

After showing much resilience to intense economic and political pressures in 2021 and 2022, sales in the UK market fell by 8 per cent to $10.9 billion in 2023. The UK is an important hub globally and within Europe for sales of the highest-priced works. As these works thinned out and imports of art to the UK declined, the market fell to 11 per cent below its pre-pandemic level ($12.2 billion in 2019).

Following a strong recovery, with sales growth of 62 per cent over 2021 and 2022, sales in the French market fell by 7 per cent in 2023 to $4.6 billion, although remaining just above their level in 2019. There was mixed performance in the rest of Europe, and sales in the European Union fell by 2 per cent to an estimated $8.6 billion.

Online sales continued to grow despite the downturn in the market, reaching an estimated $11.8 billion in 2023, a rise of 7 per cent from 2022. Although down from a pandemic-induced peak in 2021 of $13.3 billion, sales remained almost double the level of 2019 or any year before that, and accounted for 18 per cent of the market’s total turnover.

While there were many examples of transactions at high prices in online-only sales, the tendency for the most expensive works to be predominantly sold offline remained.

Data from the fine art auction sector in 2023 showed that, like offline, the vast majority (over 95 per cent) of transactions in online-only auctions were for prices below $50,000. However, unlike offline sales which were heavily dominated by value in the $1 million-plus segment, 58 per cent of the value of the online-only fine art auction market in 2023 was for sales below $50,000 and over 85 per cent was works sold for less than $250,000.

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