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Fine Art Buyer Optimism in 2023-2024

Updated: Dec 29, 2023

The Art Basel and UBS Survey of Global Collecting in 2023 presents the results of research on the activities and attitudes of high-net-worth (HNW) collectors in mid-2023,when continued economic uncertainty in many major art markets was a significant factor weighing on buyer optimism. Higher interest rates were a particular focus, with concerns over their potential effects on the demand for art. However, there has been little comprehensive research on how these and other economic and social trends impact the decisions and spending plans of collectors. To address these and other questions, this report details the outcomes of a survey of HNW collectors from around the world, examining their attitudes, behaviors, and outlook for the art market in2023. It reviews trends in spending, as well as the motivations for their activities in the market, and how they interact with artists, galleries, institutions, and their environment. The survey is the tenth of a series conducted in collaboration with UBS and covers11 markets with responses from 2,828 collectors, the largest of its kind to date.


Art market sales reached an estimated $67.8 billion in 2022, their second-highest-everlevel. After a strong rebound in 2021 of 31% following a pandemic-induced low in 2020, this represented much slower and more uneven growth of 3% year-on-year.1 Regions varied in terms of their sales growth, with the US leading the major markets, and the top end of the market performing better in terms of aggregate changes in sales versus 2021. While the art trade was cautiously optimistic in many regions at the end of 2022, in early 2023, views were more divided as to whether the performance of the market was due to a normal slowing of growth after strong post-recovery spending, or signs of a more significant downturn in the market for 2023.


Although art and other luxury sectors have proved to be more resilient than some other consumer goods, they are not immune to macroeconomic dynamics, and are particularly susceptible to changes in the financial confidence of buyers. How well art performs compared to other luxury goods has also come under more scrutiny, with these industries increasingly serving some of the same consumer bases globally. The personal luxury goods market remained buoyant in 2022, with a reported increase in sales of 6% (to $363 billion)2, and as with the art market, the high end of jewelry, watches, luxury handbags, and other segments, performed significantly better than the lower tiers, with consumers reported

as looking for ‘less but better’. Estimates vary on how these markets will perform this year, with growth forecasts in the first half of the year ranging from 5% to 13%, depending largely on views on the continued strength of the restart in China and confidence of US consumers despite economic uncertainty. Much like the art market, key growth clusters have been identified as the wealthiest tiers of luxury consumers, millennial and Gen Z buyers, and buyers in Asia, notably driven by ‘Chinese post-pandemic spending euphoria’.


Although art and other luxury sectors have proved to be more resilient than some other consumer goods, they are not immune to macroeconomic dynamics, and are particularly susceptible to changes in the financial confidence of buyers


Art is classified economically as a luxury good, having a high-income elasticity of demand: as people become wealthier, demand for normal goods increases, but for luxury goods, this effect is magnified: the demand for goods such as art increases more than proportionally as income rises. In other words, as people become richer, they spend more overall, butcan also afford to spend proportionally more on luxuries. This implies that positive influences on incomes and wealth should increase demand, sales, and prices of luxury goods. However, there are many important characteristics which separate art from other luxury goods, from production to purchase, consumption, and use. While they display some similarities, the scarcity, uniqueness, and illiquid nature of art sales are distinguishable from those in luxury markets, which, while being focused on exclusivity and differentiation, have appealed to and served a more mass-market audience with a more replenishable supply. Luxury consumers range from young, aspirational buyers to high-end, or so-called ‘true-luxury consumers’, with the latter having driven growth in the last year and with the most optimistic spending plans in 2023.4 While some of the drivers and motivations for collecting art are similar to those driving luxury buyers, others are built around very different psychological and social triggers. The specific motivations and drivers of art collectors is another of the key subjects dealt with in this report, alongside an analysis of cross-collecting in luxury and other collectibles markets.


All of the collectors surveyed for this report are high-net-worth individuals (HNWIs), which are defined here as those with disposable household financial assets (excluding real estate and any private business assets) of over $1 million in 2023.


Looking at the context of wealth creation and distribution in recent years, aggregate household wealth generally held up well during the pandemic, with government support and low interest rates helping to raise asset prices. However, this changed in 2022 and 2023 as factors such as the war in Ukraine and its inflationary influence prompted increases in interest rates, which, in turn, slowed growth and depressed asset prices. 2022 saw the first fall in total net private wealth since the global financial crisis of 2008, with a decline of 2% (in dollar terms).


While HNW wealth was relatively insulated from the economic stresses of the pandemicin 2020 and 2021, there are signs since then that even this top segment has come under pressure. As many of the top wealth holders continued to gain during the pandemic, wealth inequality increased in 2020 and 2021, but in 2022, it was this top segment that dragged on growth. The millionaire segment declined both in number (by 6%) and in wealth (by 5%) year-on-year, while lower tiers experienced stable or low positive changes.6 The declines in millionaire wealth were mainly due to falling financial asset values, which make up a much higher concentration of the wealth portfolios of HNWIs. These changes marginally reduced income inequality, with a reduction in the share of world wealth owned by millionaires, from 48% in 2021 to 46% in 2022. However, the share accounted for by this highest top 1% segment has risen substantially over the last decade, from just 36% of world wealth in 2010.




According to UBS (2023), of those individuals with wealth of over $1 million, most (95%) have wealth of under $10 million. An estimated 243,000 of the 59.4 millionaires recorded in 2023 had personal assets worth over $50 million, with a smaller subset of 7,016 having assets over $500 million. The US is the largest center of global wealth at this level and had the highest number of millionaires (38% of the worldwide population), significantly ahead of China (in this case including Mainland China and Hong Kong) at 12%. However, Asia (defined here as Asia Pacific, India, and China) is now marginally ahead of Europe, with a share of 29% of the global millionaire population (versus 27% in Europe). As wealth levels rise, Asia also accounted for a higher share of wealth, including a larger share than North America in 2022 of those with wealth of over $500 million (with China and Hong Kong accounting for 20%, just behind the US at 23% in this segment).






At the very highest level of the wealth spectrum, the last few years have seen some interesting changes for the world’s billionaires, many of whom have a significant impact on aggregate sales in the art market. In stark contrast with previous recessions, the wealth of billionaires grew steadily during the pandemic, increasing by 64% from March 2020 to March 2021 as tech, e-commerce, and health industries all flourished. However, according to Forbes’ annual compilation of the wealth of the world’s billionaires, figures published in March 2022 showed a contraction in both the number of billionaires (down by 3% on 2021) and their collective wealth (also decreasing by 3%). This continued over 2022 and into 2023, with the March 2023 figures revealing a further drop of 1% in the number of billionaires over 12 months (to 2,640), while their wealth fell a further 4% to $12.2 trillion. Although this represents a fall of 7% from the peak of billionaire wealth in 2021, a longer view in Figure 1.3 shows that the wealth owned by this small segment has rapidly expanded over the last decade, more than tripling in value since 2010.


The top 10 billionaires of 2022 saw their wealth shrink by 12% year-on-year to March 2023, each losing money, apart from Bernard Arnault of LVMH whose estimated wealth grew by one third to $221 billion to make him the wealthiest billionaire in 2023.







The US still had the most billionaires (735) with a collective $4.5 trillion in wealth, accounting for a stable 37% of the total. China (in this case including Mainland China and Hong Kong) remained the second-largest region, with 560 billionaires and just over $2 trillion in wealth, also relatively stable in terms of global share year-on-year. Both regions saw declines in wealth in this segment year-on-year with the US down by 5% and China by 14%. European billionaires on the other hand, partially buoyed by improving exchange rates, saw a rise in wealth of 3%, but with mixed fortunes, including growth in France (up by 7%), a stagnant picture in the UK, and a fall of 4% in Germany.


Not all billionaires are art collectors, but most participate in art and other luxury markets at some level. While the lower wealth tiers represent a very diverse set of individuals, those belonging to the highest tiers often have more distinct similarities in their personal circumstances, residences, lifestyles, and purchasing behaviors. There is no method to definitively evaluate how much art is owned by HNWIs and billionaires, but estimates have ranged from between 5% to over 20% for allocation to art and other investments of passion in HNW investor wealth portfolios. In surveys of HNW collectors conducted by Arts Economics and UBS over the last few years, of those regularly participating in the market, allocations to art ranged from around


20% to 25%, with shares increasing with the level of wealth. (Allocations in 2023 are discussed in Section 2.2.) The spending and preferences of collectors in this segment are therefore pivotal in shaping some of the bigger trends in the art market.

While higher levels of wealth may give individuals more confidence to withstand what the economy may throw at them, they are not immune to factors such as inflation or interest rate changes which can affect their net income, leverage, investments, and spending, as well as the way they allocate their wealth between different options. While art is often purchased from current income in middle and lower wealth tiers, the use of leverage to purchase art and the use of art as collateral for lending is more prevalent for those in higher wealth brackets. The ability of HNWIs to leverage their wealth, borrowing against their assets to both pay for expenses and reinvest in other assets which return more than the cost of borrowing, has been key for many to expand their wealth and finance their investments and lifestyle. Studies have shown that the use of credit in HNW portfolios is widespread,8 and over 40% of the collectors in this study had used credit to finance purchases of art. Although debt levels have increased significantly in some regions such as North and Latin America, rising interest rates and their knock-on effects on lending rates have meant that some collectors have become more concerned about leverage.9 (How interests rates and inflation have interacted with the art market is explored in Exhibit 2, and the topic of credit and interest rates is investigated further in Chapter 4.)


1.3 Art Market Indicators in H1 2023

Research at the end of 2022 showed that the art trade was relatively optimistic about the year ahead in 2023. Just under half (45%) of dealers surveyed expected a better year in sales, and a further 39% felt they would remain stable, although anecdotally many were bracing themselves for a slower period ahead. Similarly, a survey of mid-tier auction houses around the world revealed that while about one quarter (24%) feared a drop in sales, most thought they would be stable (28%) or improve (48%).10

With the higher end of the market being the key driver of growth in both the dealer and auction markets in 2022, much focus in assessing how the market is faring so far this year has been on the results from the major international auction house sales, which are often used as a barometer of the higher, global end of the market. Some results indicated that parts of the market were off to a slower start than in the previous year, with aggregate sales at the multinational auction houses of Christie’s, Sotheby’s, Phillips, and Bonhams down

by 16% in the first six months of 2023 on the same period in 2022, however, still exceeding their pre-pandemic level (being 6% higher than in 2019). There was also some mixed performance between these major auction houses.


Christie’s reported that their total sales (at $3.2 billion) were down by 23% in the first half of 2023 on the same period a year previous, which included a fall in public auction sales (down by 24% to $2.7 billion) and a drop in private sales of 19% (to $484 million). The auction house reported fewer sales at the very highest end of fine art auctions, however, they noted strength in their middle market and in the luxury sector, which saw sales increase by 43% to $590 million. Sotheby’s did not announce their full earnings for the first half of the year, but their published public auction figures indicated a decline of 8% to $2.8 billion, bringing them roughly on par with 2021. Phillips also reported a decline of 39% for the first half of 2023, with aggregate sales of $453 million, from $746 in the first half of 2022. Public auction sales were down by 31% to $409 million and private sales fell by 72% to $44 million.

Bonhams were an exception among the international auction houses, going against trend to post a rise in sales of almost one third. The auction house, which acquired four other auction houses in 2022, posted public auction sales of $555 million, up from $419 million in 2022. While some of this increase ($114 million) was accounted for by their new businesses, even without these additions, Bonhams’ own pre-acquisition sales wereup by 20%, with the company citing their market consolidation, globally led growth, and consistent focus on digital sales channels as key to some of their success. Luxury sales also grew faster than fine art.


The relative success of Bonhams suggests that all buyers did not simply gravitate to the high end of the market, as is often the case in uncertain or less optimistic periods or a so-called ‘flight to quality’ by more risk-averse buyers. While the figures indicated that some sectors of the market were undoubtedly less buoyant than in previous years, the aggregate fall in value for these companies in the first half of the year does not also imply an inevitable downturn for the art market, particularly as dealer sales cannot be assessed until industry-wide surveys are carried out at the end of the year and major fairs have taken place. Furthermore, it is not yet clear that it means an irrevocable downturn in the auction sector, particularly given the dominance of high-value sales in the second half of the year and lack of important data from Mainland Chinese and other auctions. The 2023 figures are also higher than in the same period in 2019, 2020, and 2021, and represent 84% of sales made at this time in 2022, which was a record year for some of these companies.


Despite the decline in value, the number of sales conducted at these major houses was relatively stable at 725, just two more than the previous year. The number of sales rose each year since the pandemic-induced low in 2020, and in the first half of 2023, they conducted over one third more than in the same period in 2019. This growth is entirely attributable to the advance in online-only sales which have almost tripled in number, while live sales are now at around the same level as 2019. There were more online-only sales in 2023 at these houses than in any other previous period, at 307, up by 18% in number year-on-year. The peak in live sales came in the first half of 2022 at 463, before reverting to 418 in 2023, slightly below 2019 levels.


While online sales accounted for 42% of the number of sales at these multinational auction houses in 2023, they are only a minority of the value of sales, at 8%, up marginally in share year-on-year (by 1%). Their share of value peaked during the pandemic in 2020 (at 17%), and although it has scaled back since that point, it still represents a significantly greater share than before the pandemic in 2019 when they accounted for just 1%. All four auction houses have seen an advance in share on 2019, with some of the biggest growth at Bonhams, where online-only sales accounted for 19% of the total value of sales in the first half of 2023 versus only 1% in the same period in 2019.





1.4 The Cross-Border Trade in Art

Sales of art and antiques take place in an increasingly globally diverse market, with cross-border trade connecting buyers and sellers around the world. While data on imports and exports of art is available only with a significant lag in many regions, the changing value and composition of trade in 2022 and early 2023 offers some indication of how the market has and may continue to fare this year.


Imports

The movement of art across borders has maintained consistent growth since its low point during the pandemic in 2020, with imports having reached their highest-ever recorded level in 2022. The aggregate value of global imports of art and antiques had previously peakedin 2019 at $30.5 billion, having grown by over 600% in nominal value since the mid-1980s. After falling by 38% in 2020 as the pandemic halted some of the sales and exhibitions which drove international exchanges of art, values have grown in each year since. In 2021, imports bounced back by 41% as international trade rebounded, and in 2022, a rise of 15% brought values to an historic peak of $30.7 billion. This was also a relatively higher increase in value compared with some other industries, with global imports across all categories of goods remaining stagnant year-on-year (falling slightly by 1% from 2021 to 2022).

Figure 1.6 Aggregate Global Imports of Art and Antiques 2000-2022




Import and exports statistics are reported by some regions with a considerable lag, however, based on the countries reporting in both the first quarter of 2023 and the same period in 2022, global imports of art and antiques were up by 35% in 2023, with increases in major markets, notably Hong Kong (up by 50%), the UK (by 38%), and the US (by 15%). This increase was again considerably higher than aggregate global imports across all industries which, based on the sample of 74 countries that reported their figures for the first half of the year, fell by 4% in value in the first quarter.


Reflecting their importance as both domestic markets and key hubs for international sales, the three main art markets of the US, China (in this case including Mainland China and Hong Kong), and the UK together accounted for 69% of the value of global imports of art and antiques in 2022. While they have maintained this majority since the 1990s, the distribution between these three markets has changed considerably as China gained share.


The US remained by far the largest importer of art in 2022 (and in the first quarter of 2023), with a 34% share of global imports, a rise of 3% year-on-year. As noted in previous reports, rather than import demand being fueled solely by national wealth, imports into an art hub such as New York are driven by the existence of the market itself and its ability to facilitate trade and bring together enough desirable art for sale to attract both local and international buyers. Works sold in New York, for example, are often just as likely to be bought by buyers outside the US as they are by US collectors, and therefore the combination of wealth, trade-friendly regulations, and the market’s knowledge and institutional infrastructure have continued to secure its position as the headquarters for the cross-border trade in art.


These same factors have bolstered the position of Hong Kong as a trade hub in Asia, and its share of imports also increased to 20% by value, its highest-ever level. Combined with Mainland China, the Chinese region accounted for 26% of global import values, far surpassing the UK.12 While the UK saw an increase from 7% in 2021 to 9% in 2022, its share has declined over the last few years as more sales of the highest-value works have taken place in the US and Hong Kong.



Exports

Exports of art and antiques have also seen a strong increase in value in recent years, paralleling the growth of art sales, with the major peaks and troughs coinciding with art market booms and recessions. Exports declined to their lowest level in a decade in 2020 (to $19.7 billion, down by 47% year-on-year) but recovered strongly in 2021 to $28 billion. Their growth in 2022 at 19% was significantly greater than the uplift of sales in the art market. Like imports, this growth was also stronger than export growth across all industries globally, which fell by 7% year-on-year. However, the total value of global art exports in 2022 (at $33.4 billion) was still slightly less than the peak in 2019 at $37.4 billion.




Based on the countries reporting in both the first quarter of 2023 and the same period in 2022, global exports of art and antiques were up by 5% in 2023, again with Hong Kong showing the biggest uplift by far of the major markets (59%), while the UK and the US grew only marginally year-on-year. The increase in exports for this period was again considerably higher than the growth in aggregate global exports across all industries over the same period which, based on 74 countries that had reported their figures for the first half of the year, grew by 2% in the first quarter.


Like imports, the majority value of art exports comes from the three largest regional hubs of the US, the UK, and China (largely via Hong Kong). The share of these hubs has been as high as 82% in 1990 and accounted for 70% in 2022. The US is the dominant exporter of art, with sales in New York and other cities often to international buyers, while Mainland China and Hong Kong remain primarily buying markets with a smaller share. However, China’s export share has risen considerably and rivaled the UK by value in 2022, with the bulk of external trade via Hong Kong.



Cross-border trade is highly correlated with values in the art market, underling the global proliferation of sales, and the importance of international buyers and sellers in the key trading hubs. The peaks and troughs of imports and exports have coincided with many of the major highs and lows in global art sales, with deviations mainly due to the performance of regions that also support large domestic markets. For example, a factor contributing to the drop in art market sales in 2012 was the end of a boom in Mainland China’s art market. While this had a significant impact on art sales, its effect on cross-border trade was less evident due to the relatively low share of trade from China and the domestic focus of its market at that time.


Although they have not grown at identical rates or even in the same direction in some years, in the period from 1990 to 2022, there is very high correlation between aggregate global trade and global sales: the correlation between imports and sales of art and antiques was 94% and for exports was 93%. While they do not predict sales, data on trade from the first few months of 2023 suggests that there continues to be a vibrant exchange of artworks, particularly indicated by strong inward flows to major markets. The cross-border trade in art has also continued at a stronger pace compared to many other industries in early 2023.




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