The international art market is gaining momentum this month with a series of major auctions in Hong Kong, London and Paris, including the sale of the contents of the Hôtel Lambert in Paris amassed by the Qatari royal family, and the collection of American billionaire Gordon Getty and his late wife Ann in New York. Fairs include Frieze London and Frieze Masters and the new Paris+ by Art Basel in Paris. But the global economic outlook is deteriorating.
On 26th September the Organization for Economic Co-operation and Development (OECD) revised down its economic forecasts for the United Kingdom, the euro zone, Japan, the United States and China. All this worries auction houses, galleries and the artists who depend on them. Accompanying a comprehensive analysis published in the October issue of Apollo, Jane Morris asks six leading economists and art advisers for their views on the outlook for the art market over the next few months.
We find ourselves in a very strange place in the global economy. We had the extraordinary event of the pandemic and the response to it, as we go through the fourth industrial revolution – automation, robotics, digitization, Internet of things – which is the biggest structural change in the economy in 250 year . We have the lowest unemployment rates in 40 years, but at the same time the most negative real income growth, in the case of the United States, since records began in the 1950s. It is difficult for economists to predict whether different regions will experience a downturn, a recession, or a really bad recession. This uncertainty is expected to continue into the first part of 2023, after which things should stabilize.
The art market is traditionally classified as a luxury product. For the very wealthy, art has extraordinary brand value, just like, say, Gucci. There’s also an element of the art market that’s akin to the high-end travel industry because it’s very experience-driven – going to art fairs, meeting people. But we also experienced considerable volatility in the financial and real estate markets. The wealthy have certainly been affected, reflecting the general economic situation, but not as much as those at the bottom of the income scale. After the pandemic, regardless of your income, the attitude was, “After the past two years, we deserve to treat ourselves. And if you are someone who is passionate about art, art will be your way. But there’s going to be some moderation: it was one thing to say “we deserve it” in 2022, it’s a little harder to carry on like that until 2023.
Paul Donovan is global chief economist at Swiss financial services firm UBS Wealth Management.
Although there are various pools of buyers across Europe and Asia, the largest market for art remains the United States: they have by far the greatest influence on the art market in all levels, so a lot depends on what happens there. Even if sophisticated collectors at the upper echelons of the market aren’t hit hard, trust remains a major concern. Half of the art market – the major galleries and major auction houses – are market makers and platforms. Trust is very important to them because a marketer builds trust [around your product] is your job.
In a downturn, art under $200,000 tends to be the most affected level, and this is where the majority of trades take place. Collectors at this level are more often passionate about art and artists: this remains a luxury or a discretionary expense for them. Art above $10 million tends to hold its own, the artwork that appears in evening sales at major auction houses. These are works of art with proven value for money, liquidity and international appeal.
These sales also tend to grab headlines and can give an overall impression of the health of the market, even if they represent only a fraction of the market and a small pool of buyers. It’s worth remembering that even the top of the line doesn’t always hold up, especially if you overpay. Think of the bubble of Post-Impressionism and the artists of the School of Paris provoked at the end of the 1980s by Japanese buyers; 30 years later, the prices of some of these works have still not recovered.
Ben Clark is Managing Director of the Gurr Johns Art Advisory Group.
Over the past 20 years, there are two really remarkable things about the art market. The first is that it doesn’t really react to the economy anymore – it reacts to inequality. There is no market that I can think of that has benefited from the increase in very high level wealth quite like the art market. It’s amazing how much art prices essentially follow the situation of high-income people. The pandemic has exacerbated this. Small businesses, like your typical restaurant, have been crucified. Big business has done well – and the art market has done well because the wealth of the very rich tends to be tied to big business.
The second thing is that art is different from yachts, for example, in that art is not just something to be consumed, it is also an asset. Even in circumstances where the stock market begins to crash, people will think, “Hey, maybe I’ll buy a painting. Contemporary art has finally become a commodity of globalized status in a way it never has before and that makes it very difficult to determine if the recession is going to have any effect.
Canice Prendergast is the W. Allen Wallis Distinguished Service Professor of Economics at the University of Chicago Booth School of Business.
There are two types of people in the art market right now. There are people who see art as a luxury and probably won’t buy if there’s a bad recession. Then there are those who are wealthy, who see art as an investment and a hedge against inflation. These include people who spend $10 million and above – the tiny percentage of people who normally get rich in a crisis. There will also be people who are not in this bracket who will be forced to sell trophies that have belonged to their family for years. This will mean incredible work that will come to market with all the promotion that comes from the auction houses and the press, which will feed the high end of the market.
Buying will also remain strong for young artists who are attracting all the current speculation. It’s like a wild horse out of the stable, it’s a way for collectors who can’t afford the trophy to get involved in something super exclusive and hard to get and play the game.
The market that will be most affected are artists in the middle, people with a good track record and an institutional history, but there is still stock at the gallery. Despite this, the art market is changing a lot. Previously, only a very small portion of the population bought art, but new buyers are coming to market every day. It’s harder to predict their taste and how future generations will consume the art, but that means that while we’re going through a tough time, it’s not as tough as it could have been.
Sibylle Rochat is the founder of the art consultancy firm Rochat Art Consultancy, in London.
London galleries had a good run-in as autumn approached, although some collectors were clearly hoping for a bargain, so sales proceeded with more negotiation: who pays for transport? Who pays the artist’s resale rights? Who pays for storage? Auction houses and dealers generally reduce risk at the high end, involving third-party financing [in top works] where they can.
The pandemic has been good training, ironically, with many more galleries realizing the importance of managing overhead. The main concern is the “feel good factor”. When this happens, the contemporary market in particular tends to suffer. But it’s usually temporary. I think the core is solid, but around the edges it could get a little more jagged. Lots of things revolve around events such as Frieze in London next month and the big auctions in London and New York in November.
Paul Hewitt is the Chief Executive of the Society of London Art Dealers (SLAD).
A bad recession affects everyone. We have two difficult years ahead, which will certainly be difficult for some people in the art world. But tough times are usually a great melting pot for new art. And we have this weird phenomenon in the art world: we’re soaring, but in tough times, art can also be a hurdle.
The important thing to remember is that the art world continues to grow. When my father founded the Pace Gallery in 1960, he will tell you there were about 25 collectors of contemporary American art. Today, Pace has over a million Instagram followers and 5,000 customers. The visual arts are proliferating and it has a lot to do with how society evolves. What people need to understand is that we are the smallest branch of the arts economy: music, film and dance are huge and mature industries. We have nothing but blue skies ahead of us in terms of our ability to impact millions of people.
Marc Glimcher is President and CEO of Pace Gallery, which has eight galleries in the US, UK, Continental Europe and Asia.