High art as an investment

In two decades of the 21st century, the art market has changed dramatically. A large number of new millionaire buyers entered the market, and modern artists began to sell better than the old ones.

Growth by all articles

The art market is growing by all significant indicators.

The number of authors whose works were sold at auction in 20 years increased from 5,400 to almost 32,000. The number of works of art during the same period of time increased from 12,000 offered lots to 123,000. In 20 years, the number of countries participating in auctions from 39 reached 64, the number of auction houses, participating in the contemporary art market has almost doubled, the number of specialized sessions has tripled, and the number of lots sold has increased six times.

The growth of the auction turnover from 2000 to 2020 made up fantastic 2100%. China was the main catalyst. Togerther China and the United States account for 68% of the global auction turnover.

Contemporary art now accounts for 15% of the global art market compared to 3% 20 years ago. More than 60% of the contemporary art market is occupied by painting. In value terms, since 2000, works of contemporary art have generated 22.7 billion dollars.

The most dynamically developing segment is contemporary painting. It has become the most profitable in recent years. It used to be a very small segment, but now it accounts for 15% of the global art market with an auction turnover of almost $2 billion. According to this indicator, he overtook the works of old masters and works of the 19th century.

Auction record holder - Jean-Michel Basquiat (1960-1988). He is the owner of the first and last auction records for the last 20 years. He created the first contemporary work to sell for more than $1 million (in 1998) and the most expensive contemporary work ever sold ($110 million, in 2017).

In two decades, the average price of a piece of contemporary art has tripled from $7,430 to $25,040.

The Chinese factor

In 2007, the annual turnover of the contemporary art segment was more than $1 billion, reaching 15% of the global art market, and this share has remained more or less constant to this day.

One of the main factors for its growth was the relatively sudden arrival of Chinese buyers on the market, whose arrival also fundamentally changed it. With the explosion of the Chinese economy, wealthy entrepreneurs have become interested in collecting art, while others have started buying art in order to diversify their investments.

The emergence of the "art business" sector in China has been rapid and impressive, including the emergence of dedicated art investment funds.

Imitating the practice of the stock market, "stakes" in works were offered with the aim of obtaining a significant capital gain, as quickly as possible. Large sums of money were directed primarily to the works of Chinese artists, which significantly inflated their prices. In 2011-2012, the auction market in China sold contemporary works worth more than $100,000 twice as much as in all of Europe.

Over the years, a number of Chinese buyers have become formidable collectors, such as Jack Ma (founder of the e-commerce giant Alibaba), Adrian Cheng and Lin Han, who have also collected non-Chinese artists. Some of these collectors have set up private museums to house significant collections, such as Budi Tek with his Yuza Museum in Shanghai.

Factor of globalization

But the growth of the contemporary art market has not been driven only by China. It emerged as a general consequence of the ongoing globalization of the art market.

Prices for leading Indian artists (Anish Kapoor, Subodh Gupta), artists from the Middle East and, of course, Western artists have skyrocketed.

Jeff Koons achieved the status of the most expensive living artist after his "Hanging Heart (Magenta/gold)" sculpture was sold for $23.5 million in 2007. In the following years, Jeff Koons broke his own record seven times.

Prior to its first growth peak in 2008, the turnover of contemporary art grew by 1640% (2000-2008), but subsequently declined due to the US mortgage crisis and its global consequences.

The financial crisis had a strong but short-lived impact on the art market. In 2009, the contemporary art segment lost two-thirds of its auction turnover ($588,000 compared to $1.6 million in 2008). But the decline was as sharp as it was short-lived, and market indicators quickly began to recover. At the end of 2010, contemporary art rebounded to around $1.1 billion and subsequently reached $1.5 billion in 2011.

Confidence has returned ... luxury has come back too, and the market hit its second peak in 2014. The segment's global turnover grew by $1 billion in two years, reaching $2.4 billion. This new peak was reflected in the entire art market (all creative periods combined), which amounted to $16.4 billion in annual turnover.

Meanwhile, China began to play a much more active role in the world market. Driven by booming economic growth, it has become a new counterweight to the United States (which it first overtook in 2010).

Hong Kong, which was a minor market until 2000, quickly became the center of the global art market. In 2014, the peninsula accounted for 10% of the global auction turnover of contemporary art, and this figure is still relevant today.

Mighty Handful

Behind big numbers, it is important to discern one very important feature of the market. The economic health of the contemporary art market depends on the 0.3% of artists it represents.

Three-quarters of the global auction turnover in the contemporary art segment is accounted for by just 100 artists out of more than 30,000 whose works are put up for auction.

Moreover, almost 20% of the total global circulation of contemporary art over two decades comes from just four names: Basquiat, Koons, Hurst and Wool.

Major names in contemporary art draw crowds to museums and lend credibility and prestige to collections.