Is the art investment market becoming more polarised?

15 May 2018|investment |James Nicholls

Is the art investment market becoming more polarised?

Over the past year or so, a handful of record-breaking auction sales have been the talk of the global art investment market. But what do they really mean for its overall health?

According to The Art Market Report 2018 by Art Basel and UBS, art market turnover grew by 12% to $63.7bn in 2017, reversing two years of decline. The UK art investment market alone rose by 8% to $12.9bn, accounting for a sizeable 20% of the global market.

While this seems like a positive headline, report author and economist Clare McAndrew argues that this top-line growth is accompanied by a continually growing gap between ‘the best and the rest’.

Why the art investment market has become top heavy

Record-breaking sales at auction have been highly publicised and extensively discussed. Just consider Leonardo da Vinci’s Salvador Mundi, which sold for $450 million, and Basquiat’s Untitled (1982) which sold for $110.5 million.

“Industry-wide gains were driven by sales at the top end of the market,” McAndrew recently explained in the Financial Times. In fact, her research indicates the art market has become significantly top heavy.

Indeed, works sold for over $10 million at auction have seen a 125% increase in total sales value over just one year. As a result, 1% of artists whose works featured at auction in 2017 accounted for nearly two-thirds of total auction sales.

Even without the de Vinci piece, auction sales at the ultra-high end of the market (works above $10m) saw the biggest gains year-on-year by far, growing more than 100%. Works hit unprecedented highs, with sales up in virtually all geographic regions.

However, according to McAndrew, it’s not all good news.

“This very thin market at the high end, consisting of a very small number of artists and sales, has a disproportionately large influence on aggregate figures,” she writes. “To maximise its economic impact, the market needs to be functioning well at all levels.”

The problem with a polarised art investment market

While multi-million dollar sales make the headlines and cause a huge buzz in the art community, too many can cause an imbalance in the art market as a whole.

Few individuals can afford a $100 million price tag, and this means that interest in art investment may be at risk of shrinking. Even the most passionate audience may find it hard to stay excited about the art market when the entry point is far beyond their scope.

A top-heavy art investment market also suggests a heavy reliance on established and blue-chip artists. For example, McAndrew’s research found that Andy Warhol was the most frequently shown artist at art fairs in 2017. While the artist is famed for his mass production in ‘The Factory’ Warhol is undoubtedly an established artist whose value has already risen.

The benefits of the emerging art investment market

Here at Maddox Gallery, we have a range of works by established artists such as Damien Hirst, Keith Haring and Mel Bochner, who each have a strong reputation and long history in the art market.

However, we’re especially proud to represent a number of emerging artists, whose careers are just beginning. We work to champion these new talents and introduce them to a wider audience, while also giving our visitors the opportunity to invest early in appreciating assets.

Emerging art is available at far more accessible price points than most works by Warhol and Basquiat, and offers real potential for huge value growth in the future. And while it may not make the headlines today, there’s a real chance it could be a top story in years to come.

If you would like further expert advice surrounding art as an investment asset, please write to James Nicholls

If you want to learn more about investing in contemporary art, take a look at ‘The Six Key Factors to Consider When Making an Art Investment.’ To find out more about any of our represented artists, please contact Maddox Gallery. Our Sotheby’s-trained art consultants will be happy to provide expert advice.

Written by James Nicholls, Chairman, Maddox Gallery.

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