Art Market in 2014 – Review

Mar 11th, 2015 | By | Category: Journal

The art market powered on through 2014 with gains in most areas. There is plenty of cash looking for a home at this stage of the economic cycle and art continues to gain traction as an alternative asset. Whether the art market needs further regulation has become of interest to mainstream economists and the subject was actually debated at the World Economic Forum in Davos for the first time. Artprice and AMNA have published their 13th annual art market report entitled ‘The Art Market in 2014’ which examines the art market by segment and by country. The following is an overview of the report published by the Art Media Agency or AMA :-

“Artprice and AMMA (Art Market Monitor of Artron) have published their 13th annual art market report, entitled The Art Market in 2014. The report, published in six languages through more than 7,200 international institutions and media outlets, provides a comprehensive summary and in-depth analysis of the year in the global art market. The report begins with a broad overview of the year, before presenting the characteristic of the Western and Eastern art markets, illustrating the segmentation of the art market by period and medium, examining important and emerging capitals in the international art market, and finally analysing key issues in the global art market in 2014. Throughout the report, all given prices refer to hammer prices before fees, all references to dollar refer to the U.S. dollar, and all sales of artworks refer only to Fine Art sales, excluding antiques and other cultural goods.

Overview of the market in 2014
2014 was a record year in terms of auction sales, with turnover of $15.2 billion, an increase of 26% on 2013’s total of $12.05 billion. This record high represents a 300% increase from a decade ago. The high auction turnover is largely due to the Chinese market and economy, in addition to strong results for the ultra-high end Western art market. The report cites factors such as the geographical expansion of the market, the growth of the major auction houses’ distribution networks, low interest rates, strong media interest in the art market, in addition to high confidence in the market, the result of improved transparency, as reasons for the high prices. The growth of a “museum industry” was also cited as a positive force in the art market, with an ever-increasing number of new museums springing up over the world, particularly in the Greater Asia region, where an average of one new museum opens every day. With each institution requiring a minimum of roughly 3,000 – 4,000 high-quality works to be considered credible, this demand for works should boost prices.

In terms of geographical distribution, China was the global leader for auction turnover, with a total of $5.66 billion, 5% lower than 2013’s result. The United States came in second, with auction turnover up 21% from 2013, putting the country’s total at $4.88 billion, $800 million lower than China’s. The United Kingdom remained in third place globally, with auction turnover at $2.87 billion. France, Germany, Switzerland, and Italy followed in fourth, fifth, sixth, and seventh place respectively. The report also showed a record number of auction results exceeding $1 million, which, at 1,679, is four times the total ten years earlier. Additionally, the ultra-high-end market has grown, with a record 116 works having sold for more than $10 million, up more than 500% on ten years earlier.

Amongst the top ten artists by total auction turnover, eight are Western and two Chinese. Andy Warhol leads the pack by a wide margin, setting an all-time record for annual total at $569 million, and is followed by Pablo Picasso, Francis Bacon, Gerhard Richter, Mark Rothko, and Claude Monet. The high-end market continues to be driven by American, European, and Asian players, with the addition of a growing number of players from the Middle East, South America, and Russia. Online sales have contributed to the continued expansion of the lower end of the market, with mobile Internet increasingly popular amongst collectors, particularly amongst wealthy over-50s. Christie’s and Sotheby’s, who have continued to dominate the lucrative high-end market, have both focused on expanding their Asian presence, with both firms operating in Hong Kong, while Christie’s opened a branch in Shanghai, and Sotheby’s in Beijing.

Characteristics of the Western art market
The USA dominated the Western art market in 2014, particularly in the ultra-high-end market, with sales over $1 million accounting for 75% of the country’s total auction turnover, and 83 sales generating hammer prices exceeding $10 million. New York continued to be the epicentre of the Western market, accounting for 95% of auction sales in the USA by turnover. In the United Kingdom, high turnover was largely due to the ultra-high-end market, with works over $10 million generating 67% of the country’s turnover, whilst representing only 1.3% of lots sold by number. Christie’s and Sotheby’s both posted new records, particularly in their New York premises, despite a somewhat turbulent year in terms of management, with Sotheby’s CEO Bill Ruprecht stepping down in November, only a year after the departure of the firm’s star auctioneer Tobias Meyer. Christie’s also waved goodbye to their CEO, Steven Murphy, at the end of the year.

Modern and Post-war works fetched the highest prices in 2014, with works from the Modern period generating 733 results above $1 million, with prices up 36% over the decade. Post-war art came in second in terms of turnover, with 385 results over $1 million, followed by Contemporary art, with 247 results over $1 million, and Old Masters, with 173 results above $1 million. Modern and Contemporary works account for the vast majority of results over $50 million.

Characteristics of the Eastern art market
Unlike its Western counterpart, the Eastern art market, centring around China, appears to still be in a state of adjustment, with total turnover at $5.83 billion, down 5.27% on 2013’s total. China accounted for 97% of Asian turnover, with a total of $5.66 billion. The Chinese market was relatively flat in 2014, factors such as a favourable investment market encouraging growth while contraction in the country’s lucrative gift market (mainly consisting of bribes) as a result of anti-corruption policies had a detrimental effect on the art market. A sharp contrast with the Western art market, works over $1 million accounted for only 22.37% of turnover, with 90% of works selling for under $50,000 and representing a market share in terms of turnover of 23.59%, slightly higher than in 2013.

The report also found an increase in numbers of entry-level art buyers and new collectors, quoting art market expert Gong Jisui: “Though there is no detailed data available, it is widely considered that each year the number of new art collectors increases by more than 20%. These collectors typically start by purchasing low-priced works of modern and contemporary art. Eventually, either the increase in purchasing power of new collectors or the expansion of traded new categories will bring the Chinese art market new points of growth.”

Segmentation of the Western market
In terms of period, 2014 saw a shift in the Western art market towards 20th century works. Old Master works brought in the lowest turnover at auction in 2014, with a total of $650 million, representing a market share of 6% by turnover. Whilst the market share of Old Masters works is shrinking, they remain important in the market, with the power to confer prestige on auction houses despite relatively low prices. 19th Century works, a museum favourite, remained stable with turnover of $1.1 billion, representing 12% of market share by turnover. Modern works continued to dominate, with turnover of $4.1 billion, and a market share of 43%, whilst Post-war works saw turnover of $2.46 billion, an increase of 33% on 2013. Contemporary works fetched a total of $1.2 billion, with high prices for works by the likes of Jean-Michel Basquiat, Peter Doig, and Jeff Koons. By category, paintings continued to dominate, particularly in the high-end market, accounting for 76% of turnover, with drawing coming in second, followed by sculpture, and prints.

Segmentation of the Eastern market
The Chinese Fine Art market remained relatively stable in 2014, with total sales down 5.72%. The oil painting and contemporary market shrank the most, down 14.39% on 2013, whilst the Chinese calligraphy and painting market saw a smaller decrease in sales at 3.91%. Chinese calligraphy and painting represented 84% of market share with turnover of $4.77 billion. In the Chinese calligraphy and painting segment, works from the modern period fetched the highest turnover at $206 million, followed by ancient works, with a total of $104 million, and contemporary works, with a total of $34.1 million. Of these works, the medium and high-end segment shrank the most, with a 17.02% decrease in turnover for works above $1 million, likely due to limited supply of such works, with collectors tending to hold onto valuable works rather than offering them at auction.

Oil painting and contemporary works accounted for only 16% of market share and, after steady sales in spring, saw shrinking following disappointing results at autumn auctions due to a lack of interest from big buyers, and a limited supply of blue-chip works on offer. In the oil painting and contemporary segment, early-period works were popular, with collectors showing caution towards the more speculative contemporary works. Moreover, with Chinese contemporary artists yet to gain international recognition, high-end collectors increasingly turned to foreign works. Nevertheless, Chinese auction houses such as Poly International, along with Chinese branches of Western auction houses, were active in promoting young Chinese talent in 2014, with such artists fetching relatively high prices.

Capitals of the global art market
The major capitals of the global art market cemented their dominance in 2014, with New York and London in first and second position, with a combined turnover amounting to almost half of the global total with $7.5 billion. Next was Beijing, with $2.6 billion, Hong Kong, with $906 million, Paris, with $425 million, and Shanghai a close 6th with $422 million. It was in New York that the highest prices were fetched; the city continued to dominate the ultra-high end market, with fierce rivalry between Christie’s, Sotheby’s, and Phillips. Though New York was home to the most important Post-war and Contemporary sales, London consolidated its position as the premier destination for ‘classical art’, and remained the city of choice for buyers of museum-worthy works by the likes of Rubens, Raphaël, Gris, Bacon, and Giacometti, with particularly impressive sales in February 2014.

Beijing led China’s art market both in terms of primary sales and auctions, with a high and growing number of galleries, and healthy sales both from leading Chinese auction houses such as Poly International Auctions Co. Ltd. and China Guardian Auction Co. Ltd., and also from Western auction giants Christie’s and Sotheby’s. Nevertheless, though the Beijing market generated the highest turnover, it was in Hong Kong where more expensive lots were sold, with average prices consistently higher than in the capital. Hong Kong remained a popular destination with collectors in part due to the presence of major art fairs and a more international art scene, in addition to favourable conditions for buyers as a result of the free tax policy. Other Chinese cities that played an important role in the art market in 2014 included Shanghai, Guanzhou, Hangzhou, and Nanjing.

In Europe, Paris came in second for auction turnover, attracting high-end buyers and a number of important sales. However, the success of the French capital in 2014 was tempered by extremely high rates of unsold work at 45.4%. Germany, Italy (in particular Milan), and Switzerland followed, whilst elsewhere in the world, emerging cities included South Africa’s Johannesburg and Cape Town, with a national turnover totaling $18 million.

Key trends in the art market
Young artists, including a growing number of artists born after 1980, saw both commercial success and critical acclaim in 2014. In the Western market, the most important artists under 35 were Tauba Auerbach, Lucien Smith, Alex Israel, Oscar Murillo, David Ostrowski, Jacob Kassay, Israel Lund, Dan Rees, and Parker Ito, all of whom live and work in either the United Kingdom or the United States. U.S.-based Auerbach, born in 1981, was the most successful artist under 35, with three sales at over $1 million in 2014, and a total of $7.2 million. Smith came in second, with a total of $3.2 million. Young Chinese artists have also had a successful year, with specialised sales dedicated to young artists at both Poly International Auctions and Sotheby’s. No Chinese artist born after 1980 broke the $1 million mark in 2014, although the top seller in this age group, Hao Liang, came close with a sale of $954,245, and total turnover of $1.9 million.

Free ports played an increasingly important role in the art market in 2014, in part due to the ever-growing number of international art fairs. Free ports are zones where goods can be unloaded, stored, and shipped under the control of customs authorities without being subject to certain taxes and duties. Artworks are often held in such areas during fairs and exhibitions, when they may change hands several times, however it is only the final owner who must pay taxes in the destination country. The largest free port in the world is located in Geneva, and 2014 saw the creation of two new free ports, one in Luxembourg, and another in Beijing. Chinese dealers hope that the Beijing free port, in addition to the Shanghai pilot free trade zone (SHFTZ) and the Hong Kong free port will boost the Chinese art market, at present suffering from excessively high taxes and duties.

Tags: AMNA, art market, Art Media Agency, Artprice review, The Art Market Review 2014

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