Global art market ‘begins to calm down’, says latest Art Basel/UBS report

The art market can often seem out of step with the realities of war, inflation, recession and other political and economic crises, but some cracks have started to show in 2022, according to the latest art market report published today by Art Basel and UBS. Global sales rose just 3% to around $67.8 billion, largely thanks to a handful of high-end dealerships making multimillion-dollar sales. However, some segments, notably the auction market, contracted slightly last year.

At the end of 2022 in particular, the market appeared “overstimulated and began to cool, with reports of weaker bid And purchase at events,” writes Clare McAndrew, author of the report and founder of consultancy firm Arts Economics. She paints a diverging picture of an increasingly heavy market, with the US and UK posting positive results, but China’s performance marred by strict zero covid policies. Overall, growth has been “more moderate […] than expected,” says McAndrew.

Nonetheless, the market rebound outpaced its decline. Sales in 2022 were higher than before the pandemic and represent the second highest point reached in the market to date, with values ​​just below the 2014 peak.

The United States maintained its top spot in the global rankings, with its share of sales increasing 2% year-on-year to 45%. Driven by a major uptick in the high end of the auction sector, values ​​rose 8% to $30.2 billion, the highest level in the United States to date. China (including mainland China and Hong Kong) had a much worse year in 2022. Sales here fell 14% to $11.2 billion, their lowest level since 2009. As a result, the share of China fell (from 3%) to 17%, pushing it back into third position.

China’s loss was Britain’s gain. Back in second place with an 18% share of sales (+1% compared to last year), the United Kingdom maintained its momentum, with a 5% increase in value to $11.9 billion. . McAndrew says she was “set up” for poorer results with Brexit remains a thorn UK trade side – UK market value To fell 7% between 2013 and 2022, but while European trade was damaged, the report found the UK was the most international market, with 60% of dealer sales going to overseas buyers.

Auctions fall

At first glance, 2022 appeared to be an exceptional year for auction houses, with the first sale to surpass $1 billion. There was a lot more hype when the auction houses released their year-end results, which in the Sotheby’s case included real estate and classic car auctions, which skews the picture somewhat.

But all was not as it seemed. According to the report, auction sales actually plummeted last year, dropping 2% to $30.6 billion in both public and private sales (although that was up 11% from the pre-pandemic figure). of 2019). This was largely due to a poorly performing Chinese auction market, which saw cancellations in Shanghai in the spring and further closures that stalled major fall sales on the mainland, contributing to a 22% decline in 2022. Overall, global auctions accounted for 45% of the market in 2022, down 2%.

The air is thin at the top of the market, but enough oxygen is circulating to keep the expensive items spinning. In the auction sector, the high end performed the most in 2022, with works over $10 million being the only segment to have increased in value (by 12%). As is common in times of economic instability, wealthy buyers tend to gravitate toward more established artists and works they perceive to be less risky.

The United States regained its leading position in 2022 with 37% of sales. The majority of the most expensive artworks were sold in New York during the year, including 41 of the top 50 artwork lots. China fell back to second place (26%, down 7%) and the UK was the third largest auction market with a stable share of 13%, just ahead of France at 9%.

While online sales at Christie’s, Sotheby’s and Phillips accounted for 7% of total public auction sales, down 4% year-on-year, the importance of digital technology in supporting sales has continued to grow. Sotheby’s reports that 91% of bids placed at their auctions in 2022 were online (up from just 44% in 2017 and just 18% in 2012). Similarly, at Christie’s, 75% of auctions were online, compared to 45% in 2018.

The report also highlights some potential issues ahead for the auction industry, which may have already contributed to its declining share of global sales. For example, financial tools such as guarantees are becoming increasingly complicated; last May, New York City abolished the rules introduced 30 years ago to regulate the auction industry, which experts say could cloud the issue.

As an anonymous dealer puts it in the report: “Over the past two years, we have again seen a resurgence of investment schemes and the use of inappropriate financial tools in the art market. When these things start to proliferate, it’s always a sign of trouble ahead.

Polarization between dealers

The dealership industry grew 7% to $37.2 billion in 2022, although growth and profitability were generally seen only at the high end. Those with the highest sales figures over $10 million saw some of the largest increases in average sales value, at 19%. According to dealers operating in this segment, purchases were “strong but thin at the top”. They note that many of their wealthiest buyers had expressed a preference to buy privately in order to engage in a “more considered transaction” and retain the ability to negotiate with greater opacity.

As one dealer put it: “We’ve found the high end alive and well and there seems to be a better appetite to buy privately this year.” Where it used to be about confidentiality we now find that collectors at this level want to avoid being manipulated by guarantees and having third parties for a transaction and prefer the simpler approach of a private sale .

Part of the uptick in sales in 2022 was due to an increased volume of transactions. The median number of works sold over the year has increased from 65 to 75. The largest dealers, with a turnover of over $10 million, sold a median of 225 works in 2022, compared to 15 for those whose turnover is less than $250,000.

Smaller businesses have struggled with more cautious buyers, causing exposure costs to skyrocket and sales to stagnate, leading to steeper discounts. Those with sales of less than $250,000 reported a 3% drop in sales. Dealers in this segment noted that, unlike high-end buyers who may be more impervious to general economic conditions, their buyers had tighter budgets and were generally more cost-conscious in 2022.

The rising costs of art trading also drastically reduced dealers’ profits. The report notes that shipping in particular explodedwith some dealerships pricing it at 40% of spend, up from 20% in 2021.

Art fairs have also become a bone of contention, with some dealers noting that in 2022 they spent at least 15% to 20% more than in the pre-pandemic era on art fairs and their associated costs. As they say: “After the pandemic, the costs of attending art fairs have skyrocketed and it is no longer economically viable for us to exhibit as they do not bring in enough business to justify the high cost of exhibiting. ‘a stand.

Another says the art fair model is being tested “partly because of pandemic-induced shifts in shopping habits and preferences, but also because of transport and travel challenges and rising general cost”.

As for the broader trends, there seems to be a power shift towards artists working more directly with collectors, largely driven by advances in technology and a greater focus on social media. When primary market dealers were asked about their level of concern about artists bypassing their galleries, 35% said they were “extremely or moderately” concerned and only 20% were not concerned. Nearly 40% of primary market dealers predicted an increase in direct selling by artists in the coming year.

As a result, McAndrew notes, some dealers “feel pressure on their programs both from the top down from the big, high-profile galleries and the risks of poaching artists, and from the bottom up from the artists themselves as their practices mature”.

The wet paint market is drying up

One of the biggest trends of recent years has been the flourishing ultra-contemporary market or “red-chip” artists. Driven in large part by a frenetic auction market, this trend now seems to be reversing. In 2021, contemporary art (created by artists born after 1945) and works made in the last 20 years have doubled in value at auction, thanks in large part to strong sales by ultra-contemporary artists. However, in 2022, the older post-war art segment performed better, with values ​​up 3%, compared to declines of 26% for contemporary art and 17% for works created. over the past 20 years.

When surveyed, some dealers said they believe parts of the primary market have become “overinflated” in 2021 and sales have not kept pace in 2022, fearing there may be a “difficult road to travel for some artists”. Comments were particularly directed at so-called “famous living artists” whose prices are already at the level of over $1 million relatively early in their careers.

Some dealers noted how “auction visibility was replacing museum acquisitions as a marketing technique for artists” with works moving from artists’ studios to auction in a very short timeframe, while others blamed an influx of “too many new galleries that have no integrity or knowledge of the business”, driving up prices.

Gender parity: when will it come?

Despite an ongoing discourse on gender equity, the representation of female artists remains consistently lower than that of their male counterparts. Price parity has also been slow to move. According to the report, the share of female artists represented by galleries was 39%, up from 37% in 2021. In the primary market alone, progress appears to have stalled over the past two years, with the share of female artists being now 42%. %, down slightly from the 44% reached in 2019.