World Art Market - 2024
World Art Market is Slipping - What About Indigenous Art?
Sources
https://www.theartnewspaper.com/2024/09/02/global-turmoil-and-rising-taxes-tilt-art-trade-towards-new-era
https://www.theartnewspaper.com/2023/10/13/sothebys-the-now-contemporary-frieze-week-london-sales-market-downturn
https://www.artnews.com/art-news/opinion/november-sales-new-york-art-market-christies-sothebys-1234684742/
https://www.sothebys.com/en/articles/tipping-point-pandemic-propels-art-market-into-a-new-era-1
https://confluence.cornell.edu/display/tam2011/The%2BSotheby%27s%2BPrice%2BFixing%2BScandal
https://news.ycombinator.com/item?id=39249350
https://www.artnews.com/art-news/news/sothebys-earnings-drop-first-half-2024-report-1234716568/
https://www.visionsarts.com/sothebys-sees-art-market-bottom-profit-declines-87/
The art market is currently experiencing a significant downturn, with major auction houses like Sotheby’s reporting a sharp decline in sales. In the first half of 2024, global auction sales at Sotheby’s, Christie’s, and Phillips fell by 27%, with post-war and contemporary art sales specifically down by 25.8% in value. This decline is reflected in the Contemporary Art Market Confidence Report, which noted a confidence indicator of just 22 out of 100, marking a four-year low, and indicating that pessimistic sentiment has dominated for five consecutive readings
Several factors contribute to this slump. Rising taxes and global economic uncertainties are prompting wealthy art collectors to reconsider their investments. The proposed scrapping of the non-domiciled tax status in the UK could result in substantial tax liabilities for many collectors, leading some to relocate their assets and themselves to more tax-friendly jurisdictions like Florida, Dubai, and Monaco. Additionally, Sotheby’s has faced challenges in its recent auctions, struggling to meet expectations. For instance, a contemporary art auction in June 2024 saw total sales drop by 56% compared to the previous year, with the top lot, a Jean-Michel Basquiat piece, achieving a much lower price than anticipated. The overall sentiment in the market suggests that many collectors are adopting a more cautious approach, with a notable decrease in demand for high-value artworks. The situation is compounded by broader economic trends, including rising interest rates and inflation, which have affected the disposable income of potential buyers. These economic pressures have led to a market correction, with many insiders acknowledging that the post-COVID art market boom is fading, resulting in a more challenging environment for auction houses
In summary, the art market is currently in a state of decline, characterized by reduced sales, negative sentiment among collectors, and broader economic challenges that are reshaping the landscape of art trading. So why is tis happening? Several key factors are contributing to the current decline in the art market:
* Economic uncertainty: The global economy is facing its worst conditions since the 2008 financial crisis, with rising interest rates and inflation putting an end to the era of cheap money
* This economic instability is causing art investors to be more cautious with their funds.
* Lack of quality supply: While art demand has remained relatively stable, there is a shortage of high-quality artworks available for sale
* This imbalance is partly due to collectors holding onto works during the pandemic, leading to market saturation in subsequent years.
* Changing buyer demographics: The market is shifting, with Asian buyers now accounting for more than half of purchases at some recent auctions
* This change in the buyer landscape is creating unpredictable market dynamics.
* Decline in private sales: Major auction houses like Christie's and Sotheby's have reported significant drops in private sales, even as their auction sales have increased
• This suggests a shift in how art is being traded.
• Market correction: The post-COVID art market boom is fading, leading to a correction in prices and sales volumes
• This adjustment is particularly affecting small to mid-sized galleries, which are struggling to sustain their business models.
• Oversaturation of sellers: There are currently more sellers than buyers in the market, creating a supply-demand imbalance that is driving down prices
* Shift in collector behavior: Wealthy collectors are reconsidering their investments due to rising taxes and global economic uncertainties. Some are even relocating their assets to more tax-friendly jurisdictions.
* Reduced disposable income: Rising interest rates and inflation have affected the disposable income of potential buyers, leading to a more cautious approach to art purchases.
These factors combined are creating a challenging environment for the art market, resulting in lower sales volumes, decreased confidence, and a general slowdown in the industry. Okay so how are the galleries and auction houses adjusting to the changing conditions
Auction houses like Sotheby's and Christie's are adapting to current market conditions through several key strategies:
* Digital transformation: Both houses have rapidly accelerated their shift to online platforms. Sotheby's increased its online-only sales from 54 to 165 during the first 4.5 months of lockdown in 2020, while Christie's increased from 37 to 89 online-only sales in the same period
• Glossy catalogs except in special situations are a thing of the past
• New sale formats: Auction houses are experimenting with innovative approaches, such as: Hybrid online/live sales, Pop-up events, Single-item "events" (e.g., Sotheby's sale of Michael Jordan's Air Jordans)
• Targeting younger audiences: They're featuring artists who appeal to younger, often Asian, collectors like Kaws, Mr Doodle, and Yoshitomo Nara
• Expanding into new markets: Both houses are consolidating their presence in emerging markets, particularly in Asia
• Improving online platforms: They've enhanced their online auction capabilities and business intelligence systems to support digital sales
• Adapting fee structures: Christie's announced a new fee structure, raising buyer premiums while reducing seller commissions for high-volume customers
• Focusing on high-value items: Despite the shift online, there's still an emphasis on prestigious live sales for the most valuable pieces
• Enhancing marketing strategies: Auction houses are evolving their marketing tools, especially digital ones, to shape public perception and achieve better results
• Global expansion: Both Sotheby's and Christie's are looking to strengthen their positions in fast-growing markets
• Collaborations: Christie's, for example, announced a collaboration with China Guardian Auction to create cultural dialogues between East and West.
These adaptations demonstrate the auction houses' flexibility in responding to market challenges while maintaining their positions as key players in the global art market. The shift towards digital platforms and new sale formats has allowed them to continue operating effectively even during challenging times, while also appealing to a broader, younger audience of collectors.
While the overall art market is experiencing a downturn, certain genres and styles are showing more resilience or even growth:
* Contemporary art: Despite the general decline, contemporary art remains a strong performer. Younger collectors, particularly from Asia, are driving demand for contemporary pieces
* 20th-century art: There's a growing interest in 20th-century masters, especially among new enthusiasts. For example, Pablo Picasso's works have seen renewed interest, with his "Femme à la Montre" selling for $139 million in November 2023
• Textured art: There's an increasing trend towards artworks with deep texture, as they communicate a sense of originality and humanity that digital art can't replicate
• Folk art and craft: This genre is gaining popularity, likely due to its authenticity and connection to cultural heritage
• Textile art: Similar to folk art, textile art is seeing increased interest, merging art and craft in intricate patterns and textures
• Portraiture: Modern portraiture, especially with vibrant and luminous styles, is experiencing a resurgence
• Female artists: Previously overlooked female artists from the 20th century are garnering significant attention. For instance, Leonor Fini's work, rooted in Surrealism, has been popular among young collectors
• Vintage and antique pieces: New collectors are increasingly drawn to vintage and antique artworks with compelling backstories and originality
It's important to note that while these genres are showing relative strength, they are still affected by the overall market conditions. The art market remains challenging, with reduced sales volumes and decreased confidence across most sectors. Rising taxes are likely to have significant long-term impacts on the global art market:
* Shift in collector behavior: Wealthy collectors may become more hesitant to buy and sell art due to increased tax liabilities. This could lead to reduced market liquidity and slower turnover of artworks
• Increased use of tax avoidance strategies: Collectors may seek more creative ways to minimize their tax burden, such as:
* Borrowing against art rather than selling it to avoid capital gains taxes
* Using art as collateral for loans to purchase more art
• Exploring "like-kind exchanges" to defer taxes
• Growth of tax-friendly jurisdictions: There may be a migration of art assets and collectors to areas with more favorable tax policies, such as Florida, Dubai, or Monaco
• Rise of private museums: More collectors may establish private museums or foundations as a way to gain tax benefits while maintaining control of their collections
• Impact on market dynamics: The high-end art market may experience reduced sales volumes and potentially lower prices, as sellers become reluctant to trigger large tax bills
• Changes in acquisition strategies: Buyers may shift towards purchasing art through corporate entities or trusts to optimize tax treatment
• Increased scrutiny and regulation: Governments may implement stricter reporting requirements and anti-money laundering measures in response to perceived tax avoidance in the art market
• Market resilience and adaptation: Despite challenges, the art market is likely to adapt to new tax realities. For instance, the focus may shift from rapid expansion to sustainable, profitable growth strategies
• Geographical market shifts: Changes in tax policies could alter the balance of power among global art markets. For example, China recently surpassed the UK as the second-largest art market, partly due to differing economic and regulatory environments
• Impact on cultural institutions: Increased taxes might affect donations to museums and cultural institutions, potentially altering the landscape of public art access and preservation.
In the long term, these tax-driven changes could fundamentally reshape the art market, influencing everything from collecting habits and market liquidity to the geographical distribution of art assets and the strategies employed by auction houses and galleries.
Global political events will play a role in the fluctuations of the art market
Rising taxes are likely to have significant long-term impacts on the global art market:
Indigenous - Contemporary
There appears to be growing interest and market activity around contemporary indigenous art, particularly from Australia, the United States, and Canada. Here are some key points about the current trend:
* Increasing institutional interest: Major museums and galleries are giving more attention to indigenous artists. For example, the Metropolitan Museum of Art is discussing plans for a new exhibition space for Aboriginal Australian art, and the Tate Modern extended its exhibition on Australian art due to positive response.
* Auction house activity: Major auction houses like Phillips and Sotheby's have held dedicated sales and exhibitions of indigenous art. Phillips recently held a selling exhibition called "New Terrains" featuring works by about 65 contemporary Indigenous artists from the US and Canada.
* Rising prices: Some indigenous artworks are fetching higher prices at auction. For instance, a work by Emily Kame Kngwarreye sold for $596,000 at Sotheby's in 2019.
* Broader representation: Jeffrey Gibson will be the first Indigenous artist to represent the US with a solo show at the 2024 Venice Biennale, signaling increased international recognition.
* Market expansion: International collectors are showing more interest in acquiring indigenous art. The partial transfer of the Kelton Collection of Australian Aboriginal art to a Swiss collector in 2020 indicates growing global appeal.
* Integration with contemporary art: There's a push to integrate indigenous artists into the broader contemporary art market rather than siloing them in separate categories.
* Challenges remain: Issues like cultural gaps in understanding the works, concerns about authenticity, and the need for fair treatment of artists persist as the market develops.
Overall, the trend suggests a growing appreciation and market for indigenous art, driven by increased institutional support, collector interest, and a broader push for diversity in the art world. However, the market is still developing and faces some challenges as it continues to evolve.
Traditional historic and prehistoric indigenous art and artifacts
Collecting, buying, and selling of ceremonial cultural artifacts:
* Increasing ethical concerns: There's growing awareness about the ethical implications of collecting and trading ceremonial cultural artifacts. Many experts and institutions are advocating for more responsible practices.
* Legal and regulatory scrutiny: The market for cultural artifacts is facing increased legal scrutiny, with concerns about illegal trafficking, looting, and the violation of cultural heritage laws.
* Market segmentation: A two-tier market may be emerging, with well-documented, provenanced pieces commanding premium prices, while less documented items face challenges in the market.
* Institutional caution: Museums and major auction houses are becoming more cautious about acquiring or selling items without clear provenance, especially those dating before 1970 (a key date in UNESCO conventions).
* Repatriation efforts: There's an ongoing trend of repatriating cultural artifacts to their countries or communities of origin, affecting both institutional and private collections.
* Emphasis on provenance: Buyers and sellers are placing greater importance on documenting an object's history of ownership and origin to ensure legality and ethical sourcing.
* Rise of replicas and recreations: As an ethical alternative, there's growing interest in high-quality replicas or contemporary recreations of ceremonial artifacts.
* Shift towards contemporary indigenous art: The market is showing increased interest in contemporary works by indigenous artists, as evidenced by events like Phillips' "New Terrains" exhibition.
* Price volatility: Some indigenous artworks are seeing rapid price increases, with examples of pieces multiplying in value over short periods.
* Collector behavior change: Some collectors are focusing on building relationships with museums and considering long-term plans for their collections, such as eventual donations to institutions.
* Museums have had a reluctance regardless of the donor to accept gifts that potentially might attract unwanted social pressures, potential legal problems, or restrictions.
Overall, the trend is moving towards more ethical, legally compliant, and culturally sensitive practices in collecting and trading ceremonial cultural artifacts. There's a growing emphasis on contemporary indigenous art and ethically sourced items, while the market for historical artifacts is becoming more complex and scrutinized.
NAGPRA and the STOP ACT
Based on the information provided, the Native American Graves Protection and Repatriation Act (NAGPRA) and proposed STOP Act are likely to have significant impacts on the buying and selling of indigenous art:
* Increased restrictions: NAGPRA and the STOP Act aim to place more restrictions on the trade of certain Native American cultural items, especially those considered sacred or of cultural patrimony.
* Expanded scope: Recent changes to NAGPRA regulations have broadened the definition of what qualifies as a "sacred object" or "object of cultural patrimony", potentially affecting more items in the market.
* Consent requirements: New NAGPRA regulations require tribal consent for exhibiting, accessing, or researching cultural items in federally-funded institutions. This could impact the availability of items for sale or study.
* Market uncertainty: The evolving legal landscape is creating uncertainty in the market, which may deter some collectors and dealers from participating.
* Emphasis on provenance: There's likely to be increased scrutiny on the provenance of items, with well-documented pieces potentially commanding premium prices.
* Shift towards contemporary art: The market may see a shift towards contemporary Native American art, as these pieces are less likely to face legal challenges.
* Potential for repatriation: Some items currently in private collections could be subject to repatriation claims, affecting their market value and tradability.
* Increased due diligence: Buyers and sellers will need to exercise greater caution and conduct more thorough due diligence to ensure compliance with the law.
* Impact on smaller dealers: Smaller dealers and galleries may find it more challenging to navigate the complex legal requirements, potentially leading to market consolidation.
International market effects: While NAGPRA primarily affects U.S. institutions, the STOP Act could impact international trade in Native American art.
Overall, these laws are likely to make the buying and selling of certain types of indigenous art more complex and regulated, potentially reducing the overall market size for historic pieces while possibly boosting the market for contemporary Native American art.
