A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future releases straight to your inbox.
May’s main art sales at major auction houses are expected to be down on last year as wealthy buyers and sellers take a breather from the frenetic prices of 2021 and 2022.
Art auction sales at Christie’s, Sotheby’s and Phillips over the next two weeks are expected to total $1.2 billion, down 18% from a year ago and nearly half the total for May 2022 sales. according to ArtTactic.
It extends the recent decline for the art market since its post-Covid peak, when cheap money, a stock market boom and fiscal stimulus saw record sales. Last year, global fine art auctions fell 27% from 2022 – the first contraction of the art market since the start of the pandemic in 2020 – and the average price fell 32%, the biggest drop in seven years, according to the ArtTactic.
During the first quarter of this year, sales in the contemporary and postwar category — the big money maker and growth driver for the art market in recent years — plunged 48 percent, according to ArtTactic.
Auction houses say demand from buyers remains strong. The problem, they say, is supply, as collectors delay selling their trophies for a better buying environment. This spring, there are also no major one-owner collections for sale, such as the Macklowe or Paul Allen Collections that have helped power sales in previous years.
“We’re seeing what people perceive as less supply this season,” said Brooke Lampley, global president and head of global fine art at Sotheby’s. “The proof is in the pudding. It’s the buyers who show up and what the work sells for will determine our perception of the art market right now. And I expect the results to be strong.”
Price pressure
Art dealers and experts say the auction art market has stalled on price, with sellers unwilling to take a lower price than they could have fetched at the market’s peak in 2021-2022. Buyers, meanwhile, are seeking discounts amid rising interest rates, an uncertain election year and geopolitical uncertainty.
“Sellers want 20% more and buyers want 20% less,” said Philip Hoffman, CEO of Fine Art Group, an art consulting and financing firm. “There is an impasse.”
CNBC’s Robert Frank before an Andy Warhol and Jean-Michel Basquiat collaboration at Sotheby’s.
Crystal Lau | CNBC
Dealers say today’s buyers lack the confidence they did two or three years ago: persistent inflation, higher interest rates, fears of an economic slowdown, upcoming elections and geopolitical crises are causing many collectors to hold off on their purchases .
“People feel hesitant,” said Andrew Fabricant, office chief at Gagosian, the mega-gallery and dealership. “It’s an election year, there’s the situation with the Fed, are they going to cut or not. The cost of money is relatively high compared to a few years ago.”
Even buyers who have the cash and are willing to pay aren’t buying because there’s a dearth of top-level art coming up for auction, experts say.
“Our customers have a lot of cash,” Hoffman said. “The question they’re asking is, ‘Should we buy the art market now?'”
Fewer pieces
While spring sales usually have more than a dozen projects on offer for more than $30 million each, this year there are only a handful.
The most expensive works this auction season include Francis Bacon’s 1966 “Portrait of George Dyer Crouching” — part of a series of 10 famous and monumental portraits Bacon made of Dyer between 1966 and 1968. Sold at Sotheby’s for around 30 million dollars to 50 million dollars.
(LR) ‘The Italian version of Popeye has no pork in his diet’ by Jean-Michel Basquiat, 1982, and ‘Portrait of George Dyer Crouching’ by Francis Bacon, 1966.
Crystal Lau | CNBC
Sotheby’s also has a collection of four Joan Mitchell paintings, with two expected to fetch more than $15 million.
Christie’s is showing a large work by Brice Marden, who died last year, called “Event,” estimated at $30 million to $50 million. It also has an iconic 1982 work by Jean-Michel Basquiat, called “The Italian Version of Popeye Has No Pork In His Diet,” estimated at $30 million.
But art collectors and consultants say there are few, if any, “masterpiece” works generating excitement this season.
“They just don’t have the marquee stuff this season,” Fabricant said. “Unless you have something really unique and special, I don’t think you’re going to get the same excitement that you’ve had in previous sales.”
At the same time, art experts say now is a good time to hunt for bargains, given the long-term outlook for the art market.
“I think if you can bid on prices before 2022 and if there’s something of good quality, now is the time to buy,” Hoffman said. “My outlook on the art market for the next 10 years is that it will be a great investment. It’s a great time to buy, not the best time to sell.”
While auction sales are weak, sales at private markets and galleries remain strong, consultants say. Gallery sales of new works are less dependent on investment returns and therefore less susceptible to economic and stock market volatility. Auction houses are also seeing strong growth in their private sales, where they directly broker a deal between a buyer and seller without a public auction.
“With private markets, you can be very targeted in terms of who you’re reaching, the type of buyer you’re reaching,” said Drew Watson, head of art services at Bank of America. “You can be very targeted about the price you go out and ask in the market. There’s a lot of discretion so you can go out in the market and test a price and adjust based on the feedback you get.”
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