2018 Auction Results
In 2018, the global annual fine art auction turnover reached $15.5 Billion. These extravagant results were mainly achieved during the first half of the year. This triggers important questions about the way the high-end market functions. The extreme competition between auction houses forced them to take on major risks with high guarantees to secure their star lots. These risks had a negative impact on their operating margins. According to CNBC, Sotheby’s share price dropped by 10% and earnings fell by 23% short because of their own guarantee strategy e.g. Nu couchée by Modigliani sold for $157 Million was not the best financial operations - a guarantee strategy is when Sotheby’s agree to pay the sellers a fixed price regardless of the price achieved at auction. The second half of 2018 records a high rates of unsold lots which demonstrate a clear market slowdown.
Top 15 auction houses by Fine Art turnover in 2018
Christie's - Turnover: $4,998,867,473 - Lots sold: 16,082
Sotheby's - Turnover: $3,932,490,788 - Lots sold: 13,307
Poly Group - Turnover: $654,304,640 - Lots sold: 8,000
Phillips - Turnover: $653,829,059 - Lots sold: 4,450
China Guardian - Turnover: $606,226,161 - Lots sold: 10,323
Council - Turnover: $328,964,829 - Lots sold: 2,656
Rongbao - Turnover: $246,871,078 - Lots sold: 6,895
Bonhams - Turnover: $171,110,342 - Lots sold: 7,531
Hangu - Turnover: $155,654,501- Lots sold: 454
Xiling Yinshe - Turnover: $132,962,259 - Lots sold: 3,386
Holly - Turnover: $118,142,000 - Lots sold: 1,319
Canton Treasure - Turnover: $103,393,032 - Lots sold: 2,798
Hanhai - Turnover: $80,175,039 - Lots sold: 5,366
Artcurial - Turnover: $80,175,039 - Lots sold: 5,366
Geographical segmentation of the Art world
Concerning location, the main geographical leaders are the United Kingdom, Italy, Japan and China. France’s secondary market was relatively low due to an offering that was not attracting big buyers.
London and New York remain the dominant cities in the West although Brexit could easily disrupt the health of the British capital.
In Asia, China has managed to impose itself as a global giant with major poles such as Beijing and Hong Kong. Furthermore, Chinese collectors have been quite active on the international scene. This is accompanied by the acknowledgement of several contemporary artist globally e.g. the amazing Louise Bourgeois or lately Kaws or JR.
A broad-minded sector, the cultural scene
In terms of the cultural scene, museums have become the temples of the 21st century . Over the last 20 years, the number of visitors has been multiplied by 10. This outstanding growth has been accompanied by the development of an exceptional entertainment market in which curation is becoming more and more tech-driven. This demonstrates that the Art Industry is truly opening itself to society. The Victoria & Albert Museum in London or the Atelier des Lumieres in Paris truly represents this shift toward a more immersive experience. We strongly recommend a visit !
In the same sense, affordable auctions are getting more popular, thus demonstrating that the art market is not only reserved for the elite. The auction collective, invaluables or live auctioneers are great examples of the willingness to democratize the industry. Furthermore, numerous co-ownership platforms have been created these past few years such as Feral horses or Maecenas.
Art as an alternative investment
In an era of negative interest rate, alternative investment strategies are becoming more and more popular. Nowadays, Art is more than ever a serious alternative to traditional investment. Similarly to real estate, Art has many benefits in terms of diversification but also in terms of returns generated. Inspired by stock indexes, the Artprice100 records the value of a standard portfolio composed of the top 100 artists on the secondary market. Created 5 years ago, it is rebalanced every year on January 1st and considers very specific artists within a strict liquidity criterion. Tracking the Artprice100 confirms that a simple investment strategy can offer significantly high returns - with an average return of 7% for a holding period of 11 years. For this kind of asset, the higher the purchase price the higher the profitability. It is considered as a long term strategy, since it takes an average of 15 years holding period to capture the best capital gains. The only exception to that rules are Old Masters which offers short term capital gain that are quite interesting. Indeed, due to a lack of transparency about old masters’ prices, mispricing is quite common and is used as a financial arbitrage e.g. acquisition followed by fast resales (within a year). Although, this kind of strategy will not continue in the future as technology/online platforms are bringing more transparency to the industry.
The analysis of the Art Markets presented in this report is based on results from Fine Art public auctions. Consequently, this report covers paintings, sculptures, drawings, photographs, prints, videos and installations and excludes antiques, anonymous, cultural goods and furniture. This report covers the period from 1 July 2017 to 30 June 2018.