The art market is in a correction as big spenders decline

The global art market is set for a second consecutive decline as demand for top prizes declines and a new generation of buyers opt for lower-priced works, according to a new survey.

Auction sales at Christie’s, Sotheby’s, Phillips and Bonhams in the first six months were down 26% from 2023 and 36% from the market peak in 2021, according to The Art Basel and UBS Survey of Global Collecting. The number of wealthy collectors surveyed who plan to buy art next year has fallen from more than half in 2023 to 43%. At the same time, the number of people planning to sell rose to 55%; This means there are more sellers than buyers. Sunday.

“There has been a softening or slowing of the pace of spending by the biggest spenders,” said Paul Donovan, chief economist at UBS Global Wealth Management. “They take a more considered approach.”

As the art world prepares for major auctions in New York in November and Art Basel Miami Beach in December, dealers, galleries and auctioneers are hoping for a post-election recovery.

There are some bright spots. According to the survey, the majority of wealthy collectors (91%) are “optimistic” about the performance of the global art market in the next six months. This rate is higher than 77% at the end of 2023. This is a larger share of those who are optimistic about the stock market, at 88%. Only 3% of high-net-worth collectors are pessimistic about the short-term future of the art market.

According to the survey, the average spending on art by wealthy collectors remains steady at around $50,000 per year. More than three-quarters of wealthy collectors surveyed had purchased a painting in both 2023 and the first half of 2024.

But a wide range of metrics, from buyer interest to online sales, point to another year of declines or, at best, flat sales. Dealers and auction experts say geopolitical concerns (particularly in the Middle East and Ukraine) as well as economic weakness in Europe and China are weakening buyer confidence. High interest rates also increased the opportunity cost of purchasing art; because wealthy collectors could easily earn 5% or more on cash and Treasury bonds.

Just as classic car marketThe art market is going through a generational shift that creates a mismatch between supply and demand. Older collectors are downsizing their collections by selling expensive but not masterpiece-level works. Younger collectors, particularly Gen

“Rather than creating a supply-driven value boom as it may have done in other years, 2024 shows that the trend towards more sales will likely primarily impact sales volumes, with collectors tending to sell from the bottom of their collections, giving up access more but at a lower rate,” the UBS report said. “-valuable work is being done, and consultants are reportedly focused on ‘streamlining client collections’ by destroying more unwanted or unimportant works of art rather than trying to capture price appreciation,” it said.

Dealers say the different paths of different generations have led to an oversupply of seven- and eight-figure Impressionist and Abstract works. The upper segment of the art market, or works priced at $10 million or more, was strongest before 2022, according to the survey. Now this is the weakest one.

“Generation X, and to a lesser extent younger generations, are not necessarily going to go out and buy the most expensive works of art,” Donovan said. “They are more involved, but they also potentially have more budget constraints. “People who traditionally buy high-priced art are slowing down buying these artists.”

In fact, Generation X has quickly become the most important generation in terms of collectibles. According to the UBS survey, Gen

In general, the interest of wealthy collectors in art is decreasing. While the role of the arts as an “asset” is hotly debated, the report notes that the average allocation to the arts is 15% in 2024, down from the 22% of their portfolio in 2021. Granted, some of this decline may be due to the rising value of works of art. stocks and other assets in their portfolios. However, the decline suggests that many collectors are pausing their purchases.

The super-rich are the segment most exposed to art. Those worth $50 million or more have an average of 25% of their art assets; This rate is lower than 29% last year. The share of millionaires worth less than $5 million is about 12%.

Collectors who have been active in the market for decades have built large collections that will either be sold, passed on to family, or bequeathed to museums or non-profit organizations. According to the research, the average number of works owned by wealthy collectors worldwide is 44. While Generation Z collectors own an average of 33 works, collectors who have been purchasing for more than 20 years own an average of 110 works.

When asked about their biggest concerns about the art market, the largest majority (52%) mentioned “obstacles to the free international movement of art.” The second biggest concern was “the rise of legal issues in the art trade”, such as lawsuits for damages, forgery and forgery, and “ethical issues regarding artists”, such as how they are compensated and promoted. “Fluctuations in the art market” ranked fourth.

great wealth transferThis exhibition, which will see tens of trillions of dollars of wealth being transferred from older generations to younger generations, may also herald a major art transfer. According to the survey, 91 percent of wealthy collectors have works in their collections that were inherited or gifted through a will or other bequest.

Despite the expectation that families would sell the works they inherited, 72% of those surveyed kept at least some of the inherited artworks. Those selling inherited works of art were more likely to cite lack of exhibition space or taxes as reasons rather than taste.

“There’s always been an assumption that as art progresses down a generation, the younger generation will have different tastes,” Donovan said. “However, it is wrong to assume that this will lead to wholesale dispersal or sale of collections. “Art is something that stirs emotions, and some works of art can create a bond between your parents.”