Citi Private Bank

Browser Requirement

To best view Citi Private Bank's site and for a better overall experience, please update your browser to a newer version using the links below.

Perspectives

The outlook for art

Suzanne Gyorgy

By Suzanne Gyorgy

Global Head, Art Advisory & Finance

June 9, 2016Posted InWealth Advisory

Fine art has displayed more than just aesthetic appeal over recent years. The global art market has grown at an average rate of 13% a year since 2000. Low interest rates and an influx of new buyers from Asia and the Middle East have helped to drive returns over this time. But after more than a decade of intense activity and generally rising prices, there are signs that the market may be levelling off. In 2015, the art market contracted for the first time since 2011 by 7% to $63.8 billion, compared to $68.2 billion in 2014.*

The adjustment in 2015 was largely due to a decrease in art buying in China. However, star lots performed, such as Amedeo Modigliani’s painting Nu couché of 1917-18, which achieved a record price at auction of $170.4 million. Another Modigliani nude was reported to have sold privately for $118 million, while his Portrait de Paulette Jourdain fetched $42.8m at Sotheby’s. Other prominent sales included Cy Twombly’s Untitled (New York City) 1968 for $70.5 million and Roy Lichtenstein’s Nurse for $95.4 million. Additionally, Bloomberg** reported on a discreet private sale of $500 million for two paintings – a Jackson Pollock and Willem de Kooning – that took place in the US last summer.  

Below the surface, however, the state of the market appeared more nuanced. While New York auction houses sold a total of $2.35 billion of art in November 2015, this substantial figure was down from the May 2015 figure of $2.74 billion. This trend continues in 2016 with the most recent round of auction sales this May in New York, where sales totalled $560.6 million, substantially down from the prior year.*

Despite the contraction, we continue to see the global art market in a fundamentally healthy state. Art professionals agree that the reduction in volume does not signal a market crash but rather a healthy correction. Rather than suffering a major loss of momentum, it is undergoing various internal shifts. Greater selectivity is in evidence. Aggressive marketing to international clientele and the accessibility of information and images has led to changing tastes. This is particularly evident in the modern and contemporary market. According to some traditionally-minded art historians, the works that command high prices are not necessarily those that are most important in an artist’s oeuvre.

We also expect the Chinese economic slowdown to have an impact on the top end of the impressionist, modern and contemporary markets. China is the second-largest market in the world after the US, accounting for more than a quarter of all sales, and around one-third of the market’s 450% growth since 2000.* Meanwhile, Western and international buyers may also be saturated with work in the $30 million to $80 million range, and at the same time there are many opportunities among lower-priced works, both new and historic.

Even if prices and activity continue to see something of a plateau in 2016, as we expect, we look for certain other trends to persist within the market. One of these is financialization, whereby more buyers treat fine art as an illiquid asset class alongside their other investments, as well as something to be enjoyed. Another is internationalization of the market, with new buyers from regions such as India, Africa, Latin America, and Southeast Asia. It is trends such as these that are likely to have enduring effects on the art market over time.

*Clare McAndrew, Art Economics, March 2016.

**Bloomberg, February 18, 2016

FINRA's BrokerCheck - Learn more about Citigroup Global Markets Inc.'s background