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The levels of uncertainty that the Covid pandemic initially insinuated into economic and social spheres have quickly been replaced by rising inflation, a war in Europe, and locally, an unstable electricity supply. The art market has recovered since the recession the pandemic created but how resilient is it in face of these new challenges and have there been new areas of growth, given the NFT market has dwindled?
Most of the art market reports that came out in 2022 – produced by UBS and Art Basel, Credit Suisse/Deloitte and Art Price – largely reflected on the gains made since the pandemic hit in 2020. The figures are positive – the global art market grew by 29% in 2021, according to the The Art Basel and UBS Global Art Market Report 2022. However, this growth was constrained by challenges in China and reliance on Asian collectors makes the western art market vulnerable to the impact of events in the East. Amidst this context, 2021 and 2022 saw the rise of what has been termed Red Chip art – works produced by artists below the age of 40 who are commanding huge auction prices in a very short space of time.
In short, contemporary art or the ultra-contemporary as some tag it, is booming. As many African artists have made it onto the must-have lists of Red Chip art, this bodes well for the art market on the African continent, though the benefits at grass-roots level might be hard to quantify. Given that African dealers and auction houses on the continent are not reliant on Asian buyers, they have been less impacted by the negative developments in the East. However, the rise of Seoul as the new Asian art hub suggests that African dealers will eventually need to turn their attention east and cultivate buyers in that part of the world.
Next month African art dealers will have their attention focussed on the stream of international art collectors expected to attend the 2023 edition of the Investec Cape Town Art Fair, which will include many new dealers from the global South – such as Turkey and Egypt but also from Portugal and Spain. Undoubtedly, this event will shed light on buyer confidence.
Ukraine conflict has not had as much impact on the art market as commentators initially thought
Internationally, the current state of the art market is tricky to track, given most art market reports are retrospective and most researchers agree that the impact of economic events on it takes time to be felt – many speak of a 12-month lag. The outcome is often surprising or at least seemingly counter-intuitive given that the art industry relies on High Net Worth (HNW) individuals to support it, who often don’t feel the pinch of an economic slump. As Axel P. Lehmann, Chairman of the Board of Directors Credit Suisse Group observes in their June 2022 report on Collectibles, when economic growth is not assured, investors often look at alternative ways to diversify their assets, such as fine art. In short, he suggests that times of uncertainty can cultivate interest in investing in art.
It was expected that the art market would be negatively affected by the war in Ukraine, particularly due to a perceived reliance on Russian Oligarchs who patronise the arts. Yet Credit Suisse reports that this has not been as substantial as commentators initially thought.
“Russian collectors do not represent a large share of collectibles markets compared to Americans, Western Europeans and Asians. So the sanctions on Russia are unlikely to have any direct impact on the collectibles market.”
However, the rise in inflation, which is tapering the growth of the global economy, and limiting wealth expansion, this may translate “into a delayed compression of returns".
Arts businesses in Europe will be more directly impacted by the war in Ukraine, the report suggests. However, the Asian market has its own challenges – particularly China, not only due to new waves of Covid but also due to “a real estate market correction, which is also not favourable to consumer sentiment.”
Asia a drag on growth in the global contemporary art market
The Asian market on the other hand has its own challenges – particularly China, not only due to new waves of Covid but also due to “a real estate market correction, which is also not favourable to consumer sentiment," says Credit Suisse. Sales in the Chinese contemporary art auction market dropped by a staggering -33% in the 2021/22 period, according to the The Ultra Contemporary Art Market in 2022 report from Artprice.
The Western art market has come to rely on Asian buyers and investment. In the first half of 2022, 39% of the lots offered by Christies auction house went to Asian bidders, according to the Collectibles report.
At Sotheby’s, the other major auction house, Asian buying represented USD 1.3 billion in 2021 and 43% of all bidders were Asian. The auction house reported that 1/3 of all their bids originated in Asia.
The inaugural Frieze art fair (originally a London-based fair) was staged in Seoul in 2022 and highlighted how evolved the art scene is in that Korean city and potentially how it may be taking over from Hong Kong as a major hub where western and eastern art worlds are converging. According to Art Price’s Ultra Contemporary report, contemporary art turnover in Seoul grew by an astonishing +344%.
Given African dealers and artists have stronger links to the European art market, the impact of this shift is unlikely to be felt – unless African dealers find a foothold in Asia or the Asian galleries and collectors become more interested in African expression, which does appear to be gradually building given the auction results for works produced by African artists offered in Hong Kong sales and the number of artists topping the Red Chip art list.
The impact of the Asian market on the contemporary art market can’t be underestimated. If it wasn’t for China’s zero-covid policy the global contemporary art market would have grown by 9%, according to the Art Price report.
The Asian art market in numbers
Auction market bounces back post pandemic
The global art market has recovered since 2020 when the Covid pandemic hit. In that year the art market was valued at USD 50 billion and grew by 29% in 2021 to USD 65.1 billion, according to The Art Basel and UBS Global Art Market Report compiled by economist Dr Clare McAndrew.
It is interesting to consider where or what sectors of the market benefitted from the ‘recovery’. The auction sector enjoyed the most growth with public auction sales increasing by 47%, according to McAndrew. On the African front, the ‘recovery’ wasn’t felt equally across the continent or in the different categories of art, according to the Corrigall & Co Contemporary African Art Auctions 2020/2021 report. While the auction turnover for 2021 was up by 20%, the auction houses and departments dedicated to African art in the United Kingdom experienced a more substantial rate of recovery since 2020, when the Covid-19 first caused lockdowns.
Negative returns for modern and historical works
Locally, there was little change between Strauss & Co's turnover between January and June 2020 and the same period in 2021. Given that the South African-based auction house reported to have increased its client base during this time, suggests that what losses they have experienced in 2020 may have been mitigated by an increase in new international clients.
Some commentators assumed that modern and historical works would do better in times of uncertainty but the reverse seems to have been the case, not only on a global level but with African works too.
Modern art, impressionist works and those by old masters all recorded moderately negative returns in 2020, according to the Credit Suisse Collectibles report. Art Price dubbed the turnover in the contemporary art segment in 2022 as “exceptional” – given the USD 2.7 billion in global auction turnover (of which 38% from New York) which “reflects a market that is stronger, more diversified, and denser than ever”.
While the overall turnover of modern works offered on African-dedicated sales (on and off the continent) was substantially higher, the turnover of contemporary art (produced after 1980) had increased in 2021 by 20%, according to the Corrigall & Co's report.
Importantly, the Credit Suisse report drew attention to the fact that in the global market – and likely for African contemporary art too – there is higher volatility in the value of contemporary and postmodern art compared to 19th C or Impressionist.
The global art market in numbers
7 out of 10
The rise of red chip art and the fall of NFTs
This ties in with the rise of ‘red chip art’ – works produced by young artists – that are experiencing significant jumps in pricing on the secondary market which has been unprecedented. This new generation of artists (under 40 years of age) are generating works dubbed ‘Ultra-Contemporary’ or ‘Wet Art’ and are said to represent only 2.7% of the total art market, according to Art Price's 2022 report. It is suggested that this subsection of the art market consolidates the rising popularity of overlooked artists – women artists, African artists, Street or Urban artists and NFT artists.
Not all of these supposed ‘subsectors’ of the auction market are growing at an equal rate. Female artists are finding the most traction in the art market. If you take a look at Art Price’s Top 10 ranking of young artists under 40 there are seven young women – Ayako Rokkako, Flora Yukhnovich, Avery Singer, María Berrío, Anna Weyant, Christina Quarles and Loie Hollowell – who are all signed to the biggest global art galleries and are enjoying continued visibility in institutional (museum or biennale) exhibitions.
The African artists that make the top Ultra-Contemporary list are also doing consistently well and include the likes of Aboudia (4th place), Amoako Boafo (6th) as well as Ishmail Issahq, the Ghanian artist who has been staging sell-out shows at Gallery 1957. Other artists include Emmanuel Taku, Oluwole Omofemi, Cinga Samson, Serge Attukwei Clottey, Godwin Champs Namuyimba, Toyin Ojih Odutola, Kwesi Botchway, Portia Zvavahera, Marcellina Akpojotor, Otis Kwame Kye Quaicoe, Michael Armitage, Nelson Makamo, Annan Affotey, Raphael Adjetey Adjei Mayne and Simphiwe Ndzube.
The buzz surrounding NFT artists and this market, in general, seems to have died down somewhat. Of the five categories of NFTs – crypto art, collectibles, gaming, metaverses and utilities – the most liquid (in terms of the number of resales) is by far the gaming segment, according to the Credit Suisse Collectibles report.
Sales numbers have declined steadily from a million transactions per week for most of 2021 to 250,000 sales per week by the last quarter of that year.
However, the UBS Art Basel report found that the HNW individuals surveyed for their report had acquired seemingly double the amount of NFT works in 2022 compared to 2021 when the sales of NFTs had peaked in terms of values and the number of sales. There is some logic to this pattern – astute collectors have a preference for buying works when they are cheaper to acquire and there is less speculation driving up prices and generating unsustainable values.
2023 will undoubtedly see collectors embracing this approach, and perhaps identifying those Red Chip artists ahead of them reaching this status. African dealers, particularly those smaller ones based on the continent, will be hoping for this outcome.