The global art market encountered substantial challenges throughout 2023, marked by a downturn in auction sales on both sides of the Atlantic and a noticeable absence of significant estates up for sale. However, despite these hurdles, the market experienced a modest decline of only 4 percent in value, estimated at $65 billion, according to the annual art market report jointly published by Art Basel and UBS. Notably, this figure exceeded the pre-pandemic estimate of $64.4 billion reported for 2019.
Clare McAndrew, the economist behind the report, attributed this decline to several factors including heightened interest rates, inflationary pressures, and geopolitical instability, all contributing to a deceleration in sales, particularly at the upper echelons of the market (artworks priced at $10 million or above). McAndrew highlighted that apart from the fewer sales in the eight and nine-figure range, the escalating operational costs posed a significant challenge in 2023. The surge in interest rates impacted collectors' purchasing power at the top tier, prompting dealers to pivot from a focus on sales volume to prioritizing profitability and sustainability.
An analysis of regional dynamics revealed that the United States maintained its position as the leading global art market, commanding 42 percent of sales by value, albeit experiencing a 3 percent decline year-on-year. China, surpassing the UK, emerged as the world's second-largest market with a 19 percent share. Sales in China witnessed a 9 percent increase to an estimated $12.2 billion, attributed to relaxed Covid-19 restrictions, a burgeoning auction scene, and the introduction of several new art fairs across Asia.
Conversely, the UK slid to third place with a 17 percent market share, experiencing an 8 percent decline in sales to $10.9 billion in 2023. The report indicated that the decline in high-value evening sales, typically reserved for auctions in London and New York, contributed to the UK's diminishing global position, with France holding a 7 percent share, placing it in fourth position.
The US art market, which peaked at $30.2 billion in 2022, witnessed a 10 percent decline to $27.2 billion in 2023. Despite this contraction, the US retained its status as a pivotal hub for high-value sales, albeit slightly below pre-pandemic levels in 2019. This emphasis on quality was evident in one of the most notable auctions of the year, featuring Agnes Martin's Grey Stone II (1961), which fetched a remarkable price at Sotheby's Emily Fisher Landau sale in New York in November.
Public auction sales declined by 7 percent to $25.1 billion, with a significant decrease in high-value lots, offset by growth in middle- and lower-priced works. Dealer sales also slowed by 3 percent to $36.1 billion, with smaller dealers experiencing an 11 percent increase in average sales, while larger dealers saw a 7 percent decline, reflecting a shift in collector behavior.
Art fairs accounted for 29 percent of dealer revenues, down 6 percent from 2022 but notably higher than the Covid-era low of 2021. Larger dealers expressed optimism for 2024, with 50 percent anticipating increased sales at art fairs, while overall, 39 percent of art dealers shared this sentiment.
Online sales surged by 7 percent to $11.8 billion, underscoring the growing significance of digital platforms in facilitating art transactions. Although slightly lower than the peak of $13.3 billion in 2021, online art sales remained substantially higher than pre-pandemic levels, driven notably by dealer-owned channels and websites. Despite a decline in sales of art-related non-fungible tokens (NFTs) outside the art market, interest in NFTs persisted, with sales remaining significantly elevated compared to pre-pandemic levels.
Looking ahead to 2024, the report expressed cautious optimism among dealers, with 36 percent anticipating increased sales and only 16 percent foreseeing a decline. However, uncertainties surrounding political and economic factors, coupled with concerns regarding the costs associated with maintaining client relationships and participating in art fairs, cast a shadow over the market's future outlook.