The art market can seem elusive – but with the right data and analysis, it becomes much easier to understand. Start-up from Germany art trade dug into the Artnet Price Database to bring you five insights into how the art auction market is evolving — and what you need to know as an art investor to make the most of this dynamic, fast-changing industry.
1. The art market had its best year ever in 2021.
Total auction sales in 2021 reached $16.5 billion, making it the most lucrative year in the art market ever. The previous peak in 2014 generated total sales of $16.3 billion. (Our numbers don’t take inflation into account.) Last year was a remarkable recovery from the pandemic’s bottom, as the auction market collapsed to $10.2 billion, a low in more than a decade. The startling 62 percent rebound can be attributed to a number of factors: the rising stock market, an influx of cash the wealthy was hastily stockpiling in collectibles, fears of inflation and an almost unprecedented volume of high-quality collections hitting the market.
Even in 2020, the art market proved somewhat isolated from broader economic trends — total auction sales fell nearly 25 percent, significantly less than some experts had feared given the impact of the pandemic on other sectors.
The top of the art market also recovered faster than other asset classes, according to Artnet’s Index of 100 Top Performing Artists. In 2021, the blue-chip art market has outperformed the S&P 500 and MSCI World Index. (Artnet’s indices track the evolution of artwork prices over time, based on the performance of sales of paintings and works on paper by the top 100 selling artists in a given category over the past three years.) Looking ahead some suggest that art, too, could benefit ahead of runaway inflation hitting 40-year highs in the US, as it can be viewed as a safe store of value in times of financial volatility.
2. Ultra contemporary art is the fastest growing genre on the market.
No segment of the auction market is growing faster than ultra-contemporary art, our term for works by artists born in 1975 and later. Though it’s still a small portion of the overall market — less than five percent — it’s growing fast. As the only genre to continue growing during the pandemic, ultra-contemporary sales grew another 190 percent between 2020 and 2021 to $739.4 million. Many attribute this expansion to the entry of a new class of younger collectors, particularly in Asia where demand for new art has been particularly strong. The best-selling artists in this genre combine figurative painting and new media. These are: Adrian Ghenie (born 1977), Beeple (born 1981), Jonas Wood (born 1977), Matthew Wong (1984–2019), and Jia Aili (born 1979).
This sector is also volatile. Consider that during the previous market peak, 2013/14, the ultra-contemporary art market was dominated by the so-called ‘zombie formalists’, whose macho attack on process-based abstraction fetched prices up to 3,000 times their estimate – just two crash years later.
3. The growth of the contemporary sector is driven by volume.
Contemporary art, which we define as works by artists born between 1944 and 1975, also had its best-ever year in 2021, raising a total of $2 billion at auction. That’s 109 percent more than in 2020 and 40 percent more than before the 2019 pandemic value of the works on offer (the average price of a contemporary work of art increased by only $333 to $41,337 from 2019) than by an increase in sales volume. The number of contemporary lots sold increased by almost 40 percent to 48,736 between 2019 and 2021. This is likely due to both an increase in supply from sellers and the growing ability of auction houses to sell material through a combination of online strategies they developed during the pandemic and live sales, which have been restored following lockdown. unload.
4. The lockdown is over, but online sales continue to rise.
Auction houses, which were relatively slow to adapt to the internet revolution, quickly switched to the internet in 2020. While IRL sales were limited or impossible, online transactions surged. Sotheby’s, Christie’s and Phillips combined sold $1 billion worth of art online in 2020, up 1,007 percent from 2019. Miraculously, a year of lockdown seems to have permanently changed buyer (and seller) behavior, meaning overall online sales have continued to grow even after the world started to emerge from lockdown. In 2021, the combined value of art sold online by Sotheby’s, Christie’s and Phillips grew another 36 percent to $1.4 billion. The industry as a whole has become more efficient, NFTs have taken the art world by storm, and in this environment entirely new business models – such as Arttrade, designed to enable people to invest in art easily and indirectly – have emerged.
5. Art can compete with other asset classes.
While it’s too early to tell how the current stock market volatility will affect the broader arts and financial markets, it’s clear that fine arts are among the more volatile alternative investments — but also among the most potentially lucrative, and as such can serve as an asset in a diversified portfolio.
Art recorded a 20 percent volatility, on par with the DAX (Germany’s blue-chip stock index), but higher than the S&P 500 (15 percent) and gold (15 percent), among others. In the short term, the work of ultra-contemporary artists delivers the highest returns: the Emerging Art Index posted a 12-month annualized return of 36 percent, beaten only by US real estate’s 39 percent return. (Blue-chip art across all time periods and contemporary art both posted annual returns of 9 percent in 12 months.)
For an extended period of time, ultra-contemporary growth has slowed. All three categories we surveyed — blue chip art, contemporary art, and ultra-contemporary art — have settled at a compound annual growth rate of about 4 percent over a 15-year period. However, individual artists can significantly outperform the average.
In short, those with experience and good information can benefit from the booming art market in the short term, but as a long-term game, it’s a riskier proposition. However, if you choose carefully and have the right timing, art can generate meaningful returns.
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