Overview of 2011 first semester

Against a backdrop of slow economic growth during the first six months of 2011 and a spreading debt crisis that has amplified the panic on financial markets, the art market has enjoyed the best half-year in its entire history.

With total global auction revenue from Fine Art sales in H1 2011 amounting to 6.3 billion dollars, the art market has posted better dynamics than during its peaks in 2007/2008. Moreover, this latest total is already higher than the total 12-month figure for 2009.
Compared to the first semester of 2010, the market’s revenue total is up 34%, an exceptional growth rate driven by the rapid expansion of the Chinese market and structural choices made within the “old” market.

In 2010, China emerged as the leading global marketplace for Fine Art and this position has been confirmed in 2011. With sales amounting to $2.2 bn, China is again ahead of the UK and the USA (with 1.6 and 1.4 billion dollars respectively). Whereas Christie’s and Sotheby’s accounted for 72% of the market in 2008, in H1 2011 the historical duopoly’s combined market share had shrunk to 53% of the global market. Although they are both posting better revenue figures, the gains are not sufficient to maintain their leadership versus the Chinese market: 7 of the world’s 10 top auctioneers are today located in China, and their competition is upsetting the order of the last 40 years.

The crisis exit strategies used by the auction houses in 2009 are continuing to bear fruit. The end of guaranteed prices and the adjustment of the auctioneers’ offer to the market’s demand resulted in a historically low unsold rate in H1 2011. With just 34% of lots unsold, this was a lower rate than the 35% posted in 2006 when the art market was in full speculative swing and selling practically everything at prices considered exorbitant at the time. The market’s adjustment has also been seen in its more affordable price ranges with a more abundant offer to more limited budgets. In the first half of 2008, only 66% of the lots carried estimates under $5,000 compared with 72 % in the first half of 2011.
This has gone hand in hand with better results at the top end of the market: 3 years ago only 73% of the works proposed above the million-dollar line were successfully sold whereas this year more than 84% have gone. In total, from January to June, no less than 944 artworks went under the hammer at above the symbolic threshold of $1m. This was 200 more than in H1 2008 which, until this year, was the market’s most dynamic semester in history.

In 2008, art prices were boosted by an apparent financial frenzy. However a few months after the meltdown of the financial markets, the art market began a 31% contraction over 16 months. The emergence of China’s art market combined with the aggressive sales strategies adopted by auctioneers are two of the main factors in the subsequent recovery. Leaving aside the question of speculation, art prices have risen 36% since 2009, and by 15% over the first six months of 2011 alone.
In 2008, prices were driven by the Post-War and Contemporary art segment; since 2009 buyers have turned their preferences towards Modern and 19th Century art. Thus in 2011, of the 100 best auction results, only 8 rewarded Contemporary works where in 2008, 15 of the top best results were signed by Jeff KOONS, Damien HIRST, Takashi MURAKAMI and the other Contemporary stars.

Another effect of China’s emerging domination of global art sales has been the presence at the top of the provisional H1 ranking of the top 100 artists by auction revenue of two Chinese artists. This ranking’s first place currently belongs to ZHANG Daqian with $360m and its second place to QI Baishi with $274m, just ahead of the historical leader Pablo Picasso (who has occupied first place 9 out of the last 10 years). In the first half of 2011, 8 of the top 15 artists were Chinese. Zhang Daqian generated in just six months almost the same auction revenue as Pablo Picasso in the whole of 2010.

At a time when today’s art market is increasingly resembling the dynamic observed in 2008, will its structural adjustments be sufficient to prevent a correlation of art prices to the correction of financial assets? The second half of this year began well with the success of the London Old Master sales in July; the month of September will no doubt tell us how the market has reacted the summer meltdown of stock markets and the macro-economic debt crisis.