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|How Investment Helped the Art Market Weather the World Economic Crisis|
Sonia Delaunay (Ukraine 1885 - Paris 1979), "Scène d'intérieur", 1922. Gouache, signed and dated lower right, 25 x 26 cm.
HELVOIRT.- A change in luxury spending habits caused by the recession has helped the international art and antiques market weather the global economic storm, reveals a new report commissioned by The European Fine Art Foundation which organises The European Fine Art Fair (TEFAF) to be held in the Dutch city of Maastricht in the MECC (Maastricht Exhibition and Congress Centre) from 12-21 March 2010. The report The International Art Market 2007-2009, Trends in the Art Trade during Global Recession has been prepared by Dr Clare McAndrew, a cultural economist specialising in the fine and decorative art market and founder of Arts Economics. The price of the report is 15 and can be ordered at www.tefaf.com (click on shop).
Shift in luxury spending habits
Wealthy buyers have been switching away from expensive cars, yachts and jets in favour of assets with long-term tangible value such as art and antiques. These investments of passion have meant that, although the world market in art and antiques has suffered during the economic downturn, it has performed far better than expected.
As economically recessive conditions in many countries have led to a reduction in incomes, demand for and consumption of many luxury goods has also contracted, says the report, the latest in a series of important annual studies commissioned by TEFAF. It adds that the world financial crisis produced a drop in the number of High Net Worth Individuals (HNWIs) people with investable assets of at least US$1 million, excluding their primary home, collectibles and consumer items.
While outright global demand was weaker for luxury collectibles and consumables, there has also been a shift in luxury purchasing habits, as many HNWIs looked to secure their wealth in assets with long-term tangible value, says the report. This has worked strongly in favour of the art market, with art now recognized as a viable alternative investment asset.
Although purchases of luxury cars, jets, yachts and other collectibles fell sharply, the share of art in HNWIs investments of passion actually rose from 20% in 2006 to 25% in 2008 as investors looked to find assets that had a more enduring value.
In 2009, there was a major shift in the purchasing behaviour of the most affluent buyers as many began focusing on intrinsic quality and on the durability of luxury items instead of fashion content. Luxury buyers are also spending much more discreetly. Ostentation is out with regard to what they buy and how they shop.
New global buyers in the art market
The geographical distribution of wealth has also worked in favour of the art market. The emergence of new global buyers in the international art market has been driven primarily by economic factors, specifically by the increasing wealth of their populations. While most of the older Western economies are currently in recession, many of the new art markets are still showing positive growth, with China and India at rates of 9% and 6% respectively in 2009.
Motivation of art collectors
Although a survey of existing major collectors by Arts Economics showed that many are primarily motivated by aesthetic, decorative, intellectural or historical reasons rather than money most felt that their investment in art had out-performed inflation and in many cases had done better than their investments in financial and property markets.
It seems likely that as the financial crisis has created a much more cautious investment climate, assets such as art which offer long term stability with potential for risk diversification will continue to gain more mainstream interest in the investment community.
Among the key findings (p. 15-17) of the report are:
In 2008, total sales in the global market for fine and decorative art reached just over 42.2 billion, down over 12% from its peak in 2007 of 48.1 billion. In 2009, sales are estimated to have slipped further, dropping by about 26% to 31.3 billion as the effects of the global recession filtered down to some sectors of the art market.
However although the fall in sales from 2007 to 2009 represents one of the biggest contractions in the art market since its previous recession in the early 1990s, sales in 2009 are still well above any year of the arts markets history before 2006.
Global sales of art and antiques are divided between auction houses and dealers, which shared approximately 45% and 55% of the market respectively. Auction houses have been slightly worse affected by the downturn than dealers.
Just under 50% of the value of all transactions in the global market took place in the EU in 2008, which achieved a total market turnover of 20.7 billion in 2008. The UK continues to dominate the EU art trade, with a majority share in 2008 of 69%.
The US and UK continued to dominate the global art and antiques market in 2008, with a combined share of just over two thirds of the value of all transactions. The US has retained its leading share of the market over the last ten years, however its margin has declined, as its art market has been more affected by the global recession. In Euro values, its global market share dropped 11% from 2006 to 2008 reaching a level of 35%, while the UK has made relative gains in share over the same period from 27% to 34%. In 2009, the market shares of the US and UK further declined to a combined 59% (with the UK at 29% and the US at 30%).
China has continued to gain share in the global market. In 2007, it achieved the third largest sales worldwide, and in 2008 maintained that position with a share of 9% (ahead of Frances 6%). The Chinese art market, including both mainland China and Hong Kong, reached a total of 3.8 billion in 2008. The Chinese art market bucked the trend in the rest of the world and increased aggregate sales in 2009 by 12%, boosting its share of the global art market to 14%, and reaching a high of 4.2 billion.
The EU was a net exporter of art in 2008, with exports of 5.5 billion exceeding imports of 4.9 billion. The US is the largest global trader of art and a net exporter in 2008 with 5.2 billion in exports and 4.9 in imports.
Average prices in several sectors of the art market dropped during 2008 and 2009. Just as a small number of very high priced sales helped to inflate averages in 2006 and 2007, the reduced number of high value works sold over the next two years was reflected in a drop in average prices.
Within the fine art market, different sectors of the market have different (and often independent) trajectories in terms of prices, volume of sales and sales values.
The middle market (in terms of prices) appears to have been one of the worst hit by the global recession in 2008 and 2009, while the very high and very low ends of the market have fared better.
The auction market for Contemporary art grew from 92 million in 2002 to 915 million in 2008, or just under a tenfold increase in value. Just as it had been a leader in the expansive phase of the art market, the Contemporary sector has also fared worse than other sectors.
More traditional categories have performed well throughout the last few years. Old Master paintings, for example, are now regarded as a strong sector in which to collect and invest.
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