(Bloomberg Opinion) – The rich live in a different economic world. You can see it from all the Dior bags and Cartier watches they buy – but it becomes even more evident when you look at all the art they collect.
Global art sales will rise to $67.8 billion by 2022, according to art economist Clare McAndrew’s latest industry report for Art Basel and UBS Group AG. That marked a 3% increase from 2021, which saw sales rise 31% from the pandemic-induced low in 2020.
As in the global luxury sector, it was the US market that drove the art industry last year. Andy Warhol’s Shot Sage Blue Marilyn, which sold for $195 million in New York in May, became the second most expensive work ever to sell at auction behind Leonardo Da Vinci’s Salvator Mundi, which sold for $450 million in New York in 2017.
Although the US retained its leading position in the global rankings, it is noteworthy that the UK also strengthened. The UK art market has not fully recovered to pre-pandemic levels, but it is still attracting international buyers post-Brexit. The drop in sterling last autumn didn’t hurt either.
Across all regions, the most expensive works of art were the strongest sellers, according to McAndrew’s Arts Economics. Pieces selling for more than $10 million were the only segment to increase the value of sales last year. This category includes Georges Seurat’s Les Poseuses, Ensemble (Petite Version), which sold for $149.2 million, and Paul Cezanne’s La Montagne Sainte-Victoire, which fetched $137.8 million. This peak reflects increasing stores of wealth among the very richest collectors.
In contrast, stagnant demand for lower-end pieces suggests that fears of recession, soaring inflation and rising interest rates curtailed the style of the merely wealthy. The market started to cool in the last quarter of 2022.
What happens in the arts reflects what happens in the luxury sector more broadly.
After soaring stock markets and cryptocurrencies increased prosperity in 2021, more people, especially in the United States, discovered the joy of exclusive shopping. But with the decline in tech stocks and Bitcoin, as well as higher borrowing costs, luxury companies including Britain’s Burberry Group Plc and Gucci owner Kering SA have noted that some younger, more ambitious buyers are reining in their extravagant purchases.
In art, this is obvious when it comes to non-fungible tokens, digital certificates of authenticity that run on blockchain technology. With crypto bros spending their winnings on NFTs alongside Audemars Piguet watches, sales of art-related tokens surged to $2.9 billion in 2021, from $20 million the previous year, according to Arts Economics, with data from Nonfungible.com. The boom was best exemplified by Beeple’s “Everydays: the First 5,000 Days,” which sold for $69.3 million two years ago.
After peaking in August 2021, demand for art-related NFTs fell as the price of Ethereum – the cryptocurrency of choice for trading tokens – fell. Sales of art-related NFTs roughly halved in 2022 from the previous year, although sales of collectible NFTs have continued to grow.
Some young people are buying art as much as before, but a separate report by McAndrew for Art Basel and UBS found that they were high-net-worth individuals, with more than $1 million in assets excluding real estate and private businesses, and had spent at least $10 000 on art in each of the last three years. So these millennial and Gen Z buyers look a little different than crypto bros.
The question now is: How will the recent banking turmoil affect the art market? In troubled times, art can be seen as a tangible store of value. But volatility in the stock market and layoffs in the technology sector and beyond could hurt demand. External crises can also deter sellers of valuable works from bringing them to market, another important factor in determining the strength of art sales.
However, with the US cooling off, China now holds the key to transforming both art and luxury.
Arts Economics notes that after the 2008 crisis, a booming market in China was one of the key factors behind the recovery, with sales picking up again in 2010. The signs there are already promising. Art Basel Hong Kong last month was busy, indicating significant pent-up demand for art. This adds to positive signals from brands including Prada SpA and Moncler SpA that luxury buyers are also back in force. Analysts at Bernstein even noted that some Chinese fashionistas had started traveling abroad again.
For sellers of creations by Balenciaga and Basquiat, Chinese shoppers unleashing a new wave of revenge spending can’t come too soon.
More from Bloomberg Opinion:
Want more Bloomberg opinions? OPINION
To contact the author of this story:
Andrea Felsted at [email protected]
