Before the sub-prime stock market crash of 2007 and 2008, and the subsequent credit crunch, the global art market had hit the heights. In the crash, the art market dropped neither as far nor as fast as stock and shares and recovered far more quickly.
Driven by an interest in the 20th century and contemporary art the highs are once more being reached. One measure is the success of the 2015 autumn contemporary art auctions by Sotheby’s and Christie's – between them, they saw total sales of almost a $billion – $937 million. Nor were those the only remarkable sales the auction houses recorded in the year. With the number of buyers steadily increasing, art as an alternative investment is in focus for investors and their advisers, globally.
Of as much interest as the prices being achieved on the secondary markets is the increase in scope and number of the artists appearing in the auction catalogs. The appearance of mid-career artists shows that buyers are prepared to look beyond the security of blue-chip names.
Because their results are almost always published, auctions are the only easily analyzed barometer of the art market. However, gallery sales, private treaty deals, and business done at art fairs account for about 70% of total art sale revenues, and these sources are also reporting booming business. New galleries open, and new fares are launched seemingly every month.
In May 2015, the Financial Times reported that “the total value of the global art market surpassed €51bn in 2014, a 7% increase on the previous year and its highest ever level, per estimates in the 2015 Art Market Report published by the European Fine Art Foundation.” At current exchange rates, €51 billion is equivalent to £36 billion.
Global demand is an increasing factor: buyers from China, the Middle East, and India play an increasing role in driving the market. In previous years, Russian buyers too were in evidence, but political and economic factors meant they kept a lower profile in 2014. No doubt, though, they will be back.
Globalisation and, indeed, the developing part played by the internet will be key factors in the art market, short, medium and long-term. Another growth area is the phenomenon of the international art fair – 61 fairs are listed on ArtUpDate’s website for 2015. The fair is a particularly important way of exposing artists with a national reputation to an international audience, a sure way of exposing, marketing and promoting the value of their works.
At the high-end – works selling for six, seven and more figures – wealthy individuals and institutions dominate the auction rooms. Below that level, a substantial number of those with more modest means are allocating part of their capital to acquiring art and building portfolios that help insulate them from the fluctuations of mainstream financial markets. In the opinion of market experts, the financial future for good art looks assured.
In the art world, the headlines are grabbed by big-ticket auction sales. A Lucian Freud goes for US$33 million, or a Renoir for US$15 million. Results like those get the salesroom cheering but – be assured – profitable disposals are being made a very long way below that level; they just don’t make the headlines.
Galleries heavily control the market for fine art and dealers who commit with the astonishing discipline to keeping artwork prices predictable and pegged to signals of quality like the prestige of the gallery selling the artist's work. You could say the market for art is "rigged"; a more charitable explanation is that galleries and dealers act as tastemakers, deciding which art is good and therefore expensive. The result is to turn artists into brands, which introduces enough certainty for the market to function.