Art Basel/UBS report: Global art market bounces back to above pre-pandemic levels—but recovery is uneven

As the art world calendar filled once more with events, the global art market bounced back to above pre-pandemic levels in 2021, after shrinking by almost a quarter to $50.1bn at the peak of the Covid-19 crisis.

According to the sixth edition of the Art Basel and UBS Global Art Market Report, published today, sales by dealers and auction houses reached an estimated $65.1 billion in 2021, up 29% on 2020 and even nudging past the $64.1 billion made in 2019.

So what does the “new normal” look like? Not much different to the old one, according to the report, which confirms that recovery was heavily skewed in favour of major auction houses and the very top level dealers trading in a relatively small number of very high-priced pieces.

“As demand and sales gained momentum again, it became clear that the digital shift had done little to reduce the market’s hierarchies, and the high end began once again to pull away from the rest of the market, with an even denser concentration on fewer artists and businesses in most sectors,” writes the report’s author and cultural economist Clare McAndrew.

Having incorporated remote bidding into sales for decades, auction houses found it easier to pivot to new business models as the pandemic lingered into 2021, and the auction sector consequently showed the strongest growth, with public auction sales increasing by 47% to an estimated $26.3 billion.

In times of uncertainty, collectors often plump for the safety of private sales over riskier public auctions and this area of business continued to flourish last year, with private sales expanding an estimated 32% reaching close to $4.1 billion, over the $3.1 billion reported for 2020.

Dealers, meanwhile, suffered disproportionately from the long drought of fairs and museum shows. Overall, gallery sales rose 18% to an estimated $34.7 billion in 2021, but still below the level of 2019. Across the sector, 61% of dealers reported an increase in sales values compared with 2020, 13% were stable and 26% experienced a decline. Those with a turnover of between $5m and $10m saw the biggest gains (35%), while smaller dealers (with turnovers of less than $250,000) grew the least (just 6%).

One of the biggest losses to dealers’ income (but also one of their biggest expenses) during the pandemic came with the cancellation of art fairs, which in 2019 accounted for 43% of all sales made by galleries. That figure shrank to 13% in 2020, rising to 29% last year. Data suggests that at least 35 art fairs have closed since the start of the pandemic including Art Monaco, PAD Monaco and Geneva, Art New York, Art BAB in Bahrain, ARTBO, Art Berlin and Sunday Art Fair in the UK.

Regional breakdown

After losing almost one quarter of the value of its sales in 2020, the US art market recovered robustly in 2021, with sales increasing by 33% to just over $28 billion, just below its historic peak of almost $30 billion in 2018. As a result, the US market retained its leading position, with its global market share swelling to 43%.

Greater China maintained its share of 20% and was the second-largest art market, pushing ahead of the UK. According to the report, at least 25 new auction businesses have opened in China since 2020, and around 30 new galleries with dedicated exhibition spaces launched in 2021. Meanwhile, at least seven new art institutions were established in 2021 in Hong Kong and Mainland China. These additions, along with strong sales by existing players, contributed to strong growth in the market in Greater China—up 35% to $13.4 billion. However, sales still remained more than 30% below their peak in 2011.

UK decline

In 2021, ongoing problems to do with Brexit meant the UK slipped back into third place. Having been on par with Greater China in 2020, the UK’s market share fell by 3% to 17%, its lowest in a decade. Nonetheless, overall, the UK market grew by 14% in 2021, though sales were still below 2019 levels ($12.2 billion).

Historically London has been heavily reliant on the import of art, as well as the seasonal influx of international buyers. But, according to figures releases by HM Revenue and Customs, the value of art and antiques imported into the UK in 2020 was $2.1 billion, down by one third on 2019. Last year, imports fell a further 18%, leaving them at almost half the value achieved in 2019.

As McAndrew tells The Art Newspaper: “All the high end pieces are already shifting towards New York and Hong Kong.” She notes how live-streaming auctions have meant that works can effectively be bought and sold in different markets. She says: “A work might be sold in Hong Kong, but, down to the vendors wishes, it can be recorded as a sale somewhere else. If that arbitrage is going to continue, it really puts pressure on places that don’t get the regulatory balance right, because people will have more and more choice about where to buy and sell—and they’ll go with whatever benefits them the most at the time.”

While hubs outside of Europe benefited most from London’s lost trade, markets in France and Germany may have also picked up some of the slack. After a drop of over 30% in 2020, sales in France had a particularly strong uplift in 2021, increasing in value by 50% to $4.7 billion, bringing the market to its highest point in ten years.

Online sales and NFTs

E-commerce is here to stay in the art world, though, as to be expected with the return to more in-person events, online sales dipped 5% compared with 2020, but grew overall by 7% last year to reach an estimated $13.3 billion.

The market for digital art is also growing, particularly among younger collectors. While traditional mediums continue to dominate in terms of value, 11% of high net worth (HNW) collectors’ spending was on digital art last year. Over half of HNW collectors surveyed (56%) were planning to buy digital art in 2022, and this was highest for millennial collectors (61%), and in Taiwan (71%), Singapore (62%) and the UK (61%).

NFTs were the newest, if not biggest, craze of 2021. For the first time, they have been included in the Art Basel/UBS report, which reveals that the market for art-related NFTs expanded more than one hundred-fold in 2021 to reach $2.6 billion, with even greater growth in collectibles, to $8.6 billion. Much of this money has been made outside of the traditional channels of auctions houses and galleries.

The exceptional growth was driven by short-term trading: in 2020, 75% of the art-related NFT market was primary sales, but, in 2021, 73% of this market’s value came from resales. Remarkably, on average, art NFTs are owned for just over a month before being resold.

The report highlights some of the legal issues surrounding NFTs, including “wash trading” (artificially increasing the value of an item by being on both sides of the transaction), money laundering and IP theft. Nonetheless, collectors appear unperturbed. In 2021, 74% of HNW collectors surveyed by Arts Economics and UBS Investor Watch had purchased art NFTs, with median expenditure totalling $9,000 each.

All too often, the enormous wealth and exclusive nature of the art market can feel at odds with the world at large. Indeed, the beginning of 2022 has been overshadowed by the war in Ukraine, something Art Basel’s global director Marc Spiegler addresses in his foreword. He says the “human tragedy” unfolding in Ukraine “has shocked and enraged us not only as individuals but also as members of a global art community whose values—humanity, pacifism, freedom of expression, cultural understanding, and dialogue—stand in stark contrast with such an unprovoked act of aggression”.

Apart from the economic fallout from the war, which is likely to be far-reaching, it is not yet clear how sanctions on Russian oligarchs will affect the art market. There have been questions over whether legal loopholes will be exploited, allowing Kremlin-linked cash to be laundered through less regulated markets including NFTs.

McAndrew thinks surging oil shocks and inflation rises are likely to have a trickle-down effect, but notes that sentiment can weigh heavily on the art market. “We saw it after the global financial crisis, it’s just not perceived as an appropriate time to be making really high-end purchases, or to be telling people about what you’ve just bought,” she says. “Everyone went into 2021 optimistically, there was a positive feeling to the year. The first few months of 2022 have changed that sentiment dramatically.”