Economics Market Maastricht Netherlands

US retakes top spot in art sales from China

The economist Clare McAndrew releases her annual global art market report at Tefaf Maastricht

Sales of post-war and contemporary art, especially of safe, blue chip artists such as the $75m Rothko sold at Sotheby's in November 2012, helped put the US back on top as the world's art market leader

On Friday, 15 March, the art economist Clare McAndrew is due to present the findings of her annual art market report at a panel discussion held during Tefaf in Maastricht. Focusing on the emerging market of China and Brazil, the report reveals a shuffle in countries leading the market, with the US regaining the top position, above China. It takes the temperature of the international art economy, which McAndrew finds to be resilient but closely tied to wider financial events. In advance of the published report, we asked McAndrew to summarise her findings.

While art has shown relative resilience to the recent global financial crises compared to other asset markets, its fate as a whole is increasingly tied to wider economic events, in particular the expansion and distribution of global wealth. Poor and variable economic growth along with political uncertainties encouraged investors to retreat to the safest and most low-risk areas of many asset markets over the past year, such as bonds and blue-chip stocks. In the art market, this was exemplified by cautious buying and selling in many areas leading to a strong polarisation of the market, with the best performance seen at the top end of the best quality works and the most well known artists.

Last year was fraught with economic worries in many parts of the world, and this filtered down to parts of the art market. In 2012, global sales of fine and decorative art and antiques contracted by 7% in value, reaching €43bn. This contraction eliminated the gains recovered over 2011, but this was still a less dramatic change than the previous boom and bust years. This is due to the fact that many sectors have been recovering at different rates. Unlike the boom years from 2005 to 2007, when nearly everything did well, or the two that followed, when virtually nothing did, the past two years have seen mixed fortunes for different countries, sectors and individual businesses, leading to more stability in overall sales figures. This has protected the market’s downside risk, reducing the possibility of more extreme and protracted booms or busts.

The fine art sector has dominated growth and it continues to be where many record prices are achieved. Post-war and contemporary art had the strongest sales, with a 43% share of the fine art market’s value. Within this sector, the “flight to safety” among art buyers was obvious, with the heaviest buying concentrated on well-established artists who have a proven track record achieving the highest prices. Auction houses have been successful in securing some of the best works for sale for the small number of blue-chip contemporary artists, which has forced some dealers to start looking at a wider range of artists, including new or “higher risk” artists in the primary market.

Different national markets have also shown mixed performances. The rise in sales during 2011 was buoyed in part by Chinese auction houses, however after two years of exceptional increases, growth slowed significantly last year. The value of sales in the Chinese market decreased by 24% to €10.6bn as demand cooled and lower priced works of a lesser quality came on to the market. However, counterbalancing this sharp decline to some degree, sales in the US experienced an uplift of 5% over the past year, reaching a high of €14.3bn.

Most European markets performed poorly in 2012. Sales were virtually stagnant in the UK, while nearly all the other large markets such as France, Germany and Italy experienced declines, and overall sales in the EU down by 3%. This result is in part due to the fact that most sales in Europe are for middle to lower priced art, which has shown the most weakness in the market. The continuing economic problems in the Eurozone, which slipped back into recession in 2012 after two years of low growth, have also led to declining consumer confidence and a cautious investment climate in many markets, including art.

These mixed performance levels also affected market share with the global reshuffle for premium position continuing. Strong US sales, particularly for fine art, and a slowdown across the board in the Chinese market, meant that the US again regained its number one ranking. The US accounted for 33% of the overall art market in 2012, up 4% from the year before, while China took a 25% share, a drop of 5%, although it remained ahead of the UK, which was in third place with 23%.

Notwithstanding its decline, the Chinese market remains the most important of the emerging markets, both in terms of the size of its domestic sales and the international significance of its buyers. The dynamics of its wealth continue to show great potential for future growth in art sales, with a rapidly rising number of wealthy consumers and a growing middle-class. This, combined with a rich cultural heritage of art and antiques, has produced a huge domestic market and ended the duopoly held by London and New York for over 50 years.

Smaller incomes in China in addition to recent excessive prices led to less participation by mainstream buyers and risk-averse investors. For the market to develop depth, both of these trajectories need to change. Incomes are already on the rise and prices may become more accessible, if the trend started in 2012 continues.

Mountains in Red by Li Keran, sold for $40m in Poly International in March 2012, was one of only five works that made over 100 million RMB last year, compared to 23 in 2011
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