Will it never end? In the face of a deteriorating ecosystem, growing inequality around the world, persistent and increasing inflation feeding through into rising costs all round, geopolitical instabilities and a global drift away from democratic values, the art market remains stubbornly resilient. Yes, the total value of sales was down slightly in 2023, decreasing by 4 percent to an estimate of $65 billion; but the volume of sales was up, particularly for art below the stratospheric top-end, and the consensus is that 2023 represents little more than a slight correction for the art market after two years of post-pandemic catch-up boom.
The numbers come from the eighth edition of The Art Basel and UBS Global Art Market Report, the acknowledged authority for the state of the global art market. Written as usual by cultural economist Dr Clare McAndrew, and the team at her consultancy Arts Economics, the report provides a solid and well-documented macro-economic analysis of art market facts and trends from the last year.
Key takeaways:
Despite the 4% fall in value, the number of transactions grew in 2023 – by 4%, as it happens, to 39.4 million. The gains came from business at lower price levels for both dealers and auction houses, with a relative decline in the number of transactions at the high end.
Public auction sales were down 7% in 2023, and that might have been worse but for some carryover from postponed 2022 sales in China early in the year. Private sales at auction houses were up by 2 percent, though.
The US retained its position as the leading art market geographically, accounting for 42% of sales by value – down 3%, though. China became the second-largest global art market (19%) overtaking the UK (17%). Of those, the Chinese market is only one that actually grew in size over the year – though it too was slowing in the second half.
The predicted decline in the NFT boom continues. From a peak of $2.9bn in 2021, sales of art-related NFTs on NFT platforms outside the art market hit $1.2bn in 2023. And after outperforming art in 2022, the collectibles segment also saw a large fall in sales in 2023 to $6.3bn – down by 64% year-on-year, “with much of the purely speculative activity which has dominated these platforms losing momentum”.
The predicted decline in the NFT boom continues. From a peak of $2.9bn in 2021, sales of art-related NFTs on NFT platforms outside the art market hit $1.2bn in 2023. And after outperforming art in 2022, the collectibles segment also saw a large fall in sales in 2023 to $6.3bn – down by 64% year-on-year, “with much of the purely speculative activity which has dominated these platforms losing momentum”.
The life of the dealer:
Dealers saw a 3% drop in sales (to just under $36.1bn in total) after two years of growth. The good news – in magpie’s opinion, at least – is that smaller dealers, those with an annual turnover below $500,000, reported a significant increase in average sales of 11%. The bigger dealers, turning over $10m or more, took a 7% hit; “some buyers were more cautious and sales were thinner at the high end,” says the report’s commentary.
In the face of slower sales and higher costs, though, it looks as though profitability for dealers is declining. 40% reported they were less profitable than in 2022, 31% around the same, and 29% more profitable; and by comparison with 2022, that represents an increase in those who are less profitable (+8%) and a decrease in the profitable ones (-10%).
The average number of artists represented by dealers in the primary market increased to 23 in 2023 from 19 the previous year. Still, dealers report that a third of their sales came from their single-highest-selling artist; and more than half came from their top three.
Where the sales come from:
In 2023, dealers exhibited at an average offour art fairs apiece and made 29% of their sales there – 6% down on 2022 but a couple of points up on 2021. Dealers are generally optimistic about art fairs, though, with 39% predicting an increase in art fair sales in 2024: 46% expecting little change: and only 14% anticipating a decline.
So the trend back to direct sales by galleries continues. Sales made online or in-person have risen from 48% back in 2019 to 64% in 2023; about two thirds of that represents in-person business.
Predictably enough, online sales continued to grow – up by 7% on the 2022 total, reaching $11.8bn last year. True, that’s down on the $13bn+ peak in 2021, but that was pandemic territory when in-person activity looked a bad idea. Online now accounts for 18% of the market’s total turnover.
The best news for dealers would seem to be the increase in buyer numbers, which rose from an average per dealer of 57 in 2022 to 83 last year. Art fairs were named the best source of new buyers (30%) followed by walk-ins at the gallery (21%). Who needs Instagram?
Future prospects:
Looking forward, the market seems generally positive. Some 36% of dealers are expecting sales to increase and another 48% anticipate turnover remaining stable. Just 16% predict a decline. Among the auction houses there’s even less gloom – just 4% of respondents expect a drop in their own sales, a significant decrease from the 24% of pessimists in 2022.
One of the attractive aspects of the Art Market Report is the use of interpolated essays by professionals such as specialist lawyers. A particularly good survey of regulatory issues includes useful commentary on money laundering regimes; the need for a regulatory framework to deal with artificial intelligence in relation to text and data mining for training AI algorithms; and the rise of art-backed loans (“the use of art as collateral for loans generally is not straightforward,” notes the essay laconically).
Clare McAndrew concluded that “as in many other industries, rising costs were the key challenge for businesses in the art market in 2023, and profitability became a more closely monitored metric than sales. The focus for many in 2024 has shifted from rapid expansion at all costs to finding ways to achieve sustainable and profitable growth and stability as they continue to navigate an uncertain economic and political future”.
And Paul Donovan, chief economist at UBS Global Wealth Management, offered a broader take on how the rich spend their money: “We are observing a shift in the luxury market away from goods purchases towards spending more on ‘having fun’ – leisure travel, entertainment, and socialising. 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”.
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