Art Market Adjusts as High-End Sales Decline and Lower-Priced Works Gain Momentum

Modern and contemporary art sales at major auction houses worldwide continued to decline throughout the spring, as cautious sellers avoided putting high-value works up for auction.

Jonathan Crocket, Phillips’ Asia chairman and auctioneer, at the auction house’s evening sale of modern and contemporary art in Hong Kong. Courtesy of Phillips

This decline culminated in nearly a 40% drop in evening sales results at Christie’s, Phillips, and Sotheby’s in Hong Kong this spring, according to research by ArtTactic, a London-based data and analysis firm.

This sharp downturn may reflect a lack of confidence among collectors, influenced by the economic slowdown and weakening property sector in China. It also mirrors global trends, particularly at the high end of the art market, says Anders Petterson, ArtTactic’s founder and CEO.

"London saw a 15% decline in March, and New York was down 22% in May," Petterson notes, referencing the major auction house sales from the past spring. The softness at the top end may also indicate a correction from the inflated price levels of 2021-22, evident in the resale prices of works acquired during those years.

For instance, at a Sotheby’s Hong Kong evening sale, "Fishing for Steps" by contemporary British artist Jadé Fadojutimi sold for US$235,226, a 62% decrease from the US$614,085 it fetched in November 2021 at a Phillips sale, according to ArtTactic.

Prices for works by young contemporary artists (those 45 and younger) surged a few years ago. "When the market was at its frothiest, there was a belief that art prices would rise quickly, allowing for short-term holdings," Petterson explains. The significant price drop in Fadojutimi’s work highlights a period when the market deviated from reality.

Currently, the market is adopting a more "wait-and-see" approach, with both buyers and sellers hesitant amid uncertain global economic and political conditions, says Jason Carey, senior vice president and art advisor at Citi Private Bank. "The sense of urgency and speculation has been replaced with caution," Carey observes.

This cautious approach is expected to continue next week in London, when Sotheby’s and Phillips hold evening sales of modern and contemporary art. Christie’s will conduct a "Post War to Present" day sale on Thursday. According to ArtTactic, a separate report found that nearly 61% of works at Hong Kong’s evening auctions, owned for less than 10 years, were sold at a loss, with an average annual return of -11.3%.

Of the 47 artworks documented as "repeat sales" from previous auctions, the average annual return was 1.4%, down from 10.7% a year earlier. For works owned for more than 10 years, the annual average return was 5.6%.

Carey, formerly the international director of impressionist and modern art at Christie’s in London, advises clients to hold onto a work for at least five years before selling it. He cautions against drawing broad conclusions from the repeat sales data, which comes from a relatively small sample size. "You need to look over decades to get relevant repeat sale statistics," Carey suggests, noting that the marketplace has undergone significant changes recently.

Despite worries among collectors that soft demand will dampen bidding, leading to fewer high-value works being auctioned, there is still activity in the market, particularly at lower price levels. In Hong Kong, only 34 works sold for more than HK$10 million (US$1.3 million), down from 61 a year earlier. This accounted for nearly 86% of the decline in evening sales, according to ArtTactic.

"There is a hesitancy among collectors—‘why should I sell if I don’t need to,’" Petterson says. "At the same time, buyers are scrutinizing prices more closely."

A decline in guarantees by auction houses and third parties, which ensure a work up for sale has a buyer, also suggests a cautious approach by both auction houses and collectors. In May in New York, most auction action took place behind the scenes through third-party guarantees, which accounted for 73% of the total hammer value of lots sold, up from 64% a year earlier. In Hong Kong, guaranteed works made up only 42.5% of the sales value of all lots, down from 48.2% a year earlier, the lowest level of guaranteed sales since the fall of 2019, ArtTactic reported.

At the evening sales in Hong Kong, Sotheby’s experienced the most significant drop, with sales down 52.5% from a year earlier. Christie’s sales declined by 45.2%, and Phillips' sales fell by 16.4%. These results are concerning, given the significant investments all three auction houses have made in Hong Kong, including new headquarters and expanded facilities.

Despite the downturn in high-end sales, Petterson notes that there is still robust activity at lower price levels. "There is health in certain segments of the market, particularly for works priced at US$1 million and below," Petterson says. More works are being sold at these levels, although the overall sales are overshadowed by the downturn at the top.

This trend was also observed last year, as younger collectors increasingly sought art at lower price levels and online, rather than at live auctions, as prices for multimillion-dollar works declined. "These trends are persistent, especially in Asia—people are buying at lower values but higher volumes," Carey notes.