◊ Half-year results signal positive momentum for the art market
As the art-world heads into the summer break, uncertainties persist on many fronts (covid variant resurgences, debates about inflation intensity and its impact...).
But auction results for the first half of the year, as well as independent surveys, point to a bounce-back for the art market in general:
- Auction sales at major auction houses rebounded to pre-pandemic level
Auction sales were up 230 per cent in the first half of 2021, according to a recent article in the FT, the first evidence that the industry has bounced back quickly from the impact of the Covid-19 crisis. Data from the London-based analytics firm Pi-eX finds that art auction sales at Sotheby’s, Christie’s and Phillips reached a total $5.8bn by June 30, up from $1.75bn in 2020, which is slightly above H1-2019 results.
- Christie's impressive half-year results are up 13% from pre-pandemic H1-2019
Christie's is the first auction house to report their half-year results and their CEO, Guilllaume Cerruti, announced $3.5 billion in sales (both auction and private sales, all collecting categories) for the first half of 2021, which is up 13% from the pre-pandemic first half of 2019 and the best result since 2015. Much of the gain comes from the record participation of clients in Asia who purchased 39% of live and online auction sales spending in total $1.04 billion. Furthermore:
- Hong-Kong total sales volume is up 40% compared with the same period in 2019.
- Overall sell-through rate for the semester was a whopping 87% on all lots (5% above pre-pandemic levels).
- Christie’s leadership in the NFT market ($93.2 M in total sales this year) attracted a newer, younger audience. 73% of NFT sales registrants are new to Christie’s, at an average age of 38 (13 years younger than the average age for clients in other sales).
- Private sales have already reached $850 million so far this year. That’s a 41% rise from 2020, which was already a record year, and a 238% increase from 2019.
- ArtTactic's Contemporary art market Confidence indicator is at the highest level since January 2014
The latest ArtTactic Confidence Indicator reading has come in at 80.6, up from 44.6 from the last reading in November 2020. This is the highest reading ever recorded since January 2014*.
Additionally, 51% of experts surveyed said they believed the market for established contemporary artists will continue to strengthen over the next six months, compared to just 24% saying so in November 2020.
*The ArtTactic Art Market Confidence Indicator was launched in May 2005 and is now in its 34th edition. The survey is modelled on a similar methodology to the CEO confidence Survey that was launched in 1976 by the Conference Board in the US.
The 2021 COVID-19 Impact Survey, conducted in June and released recent by the Art Dealers Association of America (ADAA), suggests that the majority of dealers are on their way to recapturing the business they lost during the long months of lockdown and the concomitant financial crisis.
- ADAA report suggests majority of dealers is on their way to recapture lost business
Two-thirds of those surveyed said they plan to expand their roster of artists this year, while three-fourths will return to in-person art fairs. Forty-nine percent of respondents reported that gallery earnings exceeded expectations in the first quarter in 2021.
◊ Outlook for the second half of the year
The dynamics that explain the strong performance of the art market in the first half of the year will persist for several months as least, unless we have major restrictions hitting our economies:
- an influx of wealthy millennials that are creating their own asset classes (crypto-currencies, sports memorabilia, ultra contemporary artists..)
- the value of alternative investments as a potential inflation hedge
- the search for diversification as across asset prices reach record levels, such as equity markets, prime real estate
- art market's embrace of digitalization (online auctions, NFTs) that favors the entry of a wider audience of buyers
This context is conductive to a very healthy second half of the year. Another strong evidence of the improved market conditions is the return of the single-owner collection sales, which had mostly disappeared last year, amidst collectors reluctancy to sell their collections during the covid-crisis.
Contemporary and ultra-contemporary artists have clearly been the big winners of the first half of the year and will most likely continue to attract interest, but we also see a lot of opportunities ahead for some artists caught up in a counter-cyclical momentum. Being a 'contrarian' art collector, who does not necessarily follow the flock, has proven to be a successful strategy in the past.
Of course distinguishing profound and lasting changes of taste from mere cyclical trends with temporary momentum reversals is an art in itself.
◊ Damien Hirst's: art as a currency or how collectors must choose between physical art or an NFT
The British artist has devised a new conceptual project, titled 'The Currency', using NFTs to question notions of brand, worth and value.
He has created 10,000 unique but almost identical spot paintings, each on an A4 sheet of special paper. The paper is not only signed and numbered in the usual way of multiples, but also treated and watermarked with an embedded hologram and other devices that make each sheet very difficult to copy or forge. Just like a banknote.
Each physical work corresponds to one non-fungible token, that can be bought (on application) for $2,000 apiece. The NFTs are immediately tradeable, but here’s the twist: two months after issue, owners of the NFTs have a choice. The buyers will have to make a decision on whether to keep the NFT or whether to keep the physical artwork: they can’t keep both. If they decide on the NFT, or fail to make a choice, the corresponding piece of art will be destroyed. If the physical work is chosen, the NFT will then be deleted from the blockchain.
At the end of a few months, “The Currency” could consist of either 10,000 NFTs in existence, or 10,000 paintings, or most likely, a mixture of both. It’s a system with multiple challenges. The most obvious one is the challenge to the buyer, especially buyers with investment in mind. Will it be the NFT that appreciates most, or the original piece of artwork signed by Hirst? Which one will they prefer to own over time? Whereas the art world is always trying hard to cut all bridges with speculative behaviors, Hirst likes to present himself as an artist-business man, challenging conventions, even supporting buyers who acquire his work to flip it for profit.
The interesting aspect of this concept lies in the exploration of the complex relationship between art and its economic value.
Art builds its value around the notion of trust in a similar way as money does, the only difference being that a collector trusts an ever-changing ecosystem, composed of historians, artists, curators, galleries, museums, well-established collectors and advisors whereas citizens build trust in a currency in relation to public institutions: a state, a central bank, and their ability to control the intrinsic value of a currency trough their respective fiscal and monetary policy.
To make his point even clearer, he managed to drag the former Bank of England governor Mark Carney in a discussion around his latest stunt: https://www.youtube.com/watch?v=SQWrY8E5blU
More to follow next month !
The LINK Management team