China Is Wilting, Brazil Is Blooming, and Other Trends Shaping the Art Market

Photo: Loraine Bodewes

TEFAF 2013

by Shane Ferro

Published: March 20, 2013

Art economist Clare McAndrew’s unveiling of the annual TEFAF market report has become a tradition —  generally giving the art world the most in-depth industry analysis it will get all year. This year doesn't disappoint. Overall, the report is focused on the shrinking of the market (by 7 percent, to €43 billion or $56 billion) and the sharp decline in Chinese sales (the market fell by by 24 percent to €10.6 billion ($13.8 billion). However, there is plenty more detail past the executive summary providing insight on where and why the market is shrinking (and where it is growing). There are juicy details about the primary market (a rarity!), China’s maturing market, and the growing purchasing power of Brazilian collectors.
Here are the three things you need to know from the report:

 

The Primary Market Is Immoderately Lopsided
If you are a large dealer, last year was probably one of your best. The primary market has ticked slightly upward to 52 percent of the total art market, up from 50 percent last year. If not, you may be screwed. Inequality in the broader economy is increasingly apparent in the art world. However, much of the discussion (including here at ARTINFO) has been focused on the stagnation of the “middle market.” McAndrew’s report, however, really highlights the plight of the lowest end of the market. While the middle may not be growing, commerce at the smallest galleries is actively shrinking. Consider these facts:

Dealers with sales under €500,000 in 2012 reported that average turnover fell by 17 percent year-on-year.
Dealers with sales of between €500,000 and €2 million reported a decline of one percent.
Those with sales between €2 million and €10 million also had a decline of two percent on average.
The top end of the market, where dealers generated sales of over €10 million, reported an average increase in turnover of 55 percent.

McAndrew also points out that 76 percent of dealers had turnover of less than €2 million (and most transactions are made below the €50,000 mark) — therefore, the vast majority of galleries are struggling, vying for space in a much smaller market. Dealers also sold fewer works last year than the previous year. The median number of artwork sold per dealer in 2012 was 75, down 6 percent from 80 works in 2011. Adding these things up, and adding in the fact that dealers are feeling pressure to attend more and more art fairs (fair transactions are up 5 percent to 36 percent of all primary market transactions) the situation for your average dealer looks pretty grim.
China Is Down, But in a Good Way
It wasn’t a huge surprise that the Chinese art market fell by 24 percent. Both the number of transactions and the average prices of works are down in the country. However, McAndrew draws the conclusion that the dip is largely due to a decline in speculative investment. Many of the art funds that cropped up in the late 2000s left the market, taking with them much of the hot air swirling around Beijing and Hong Kong auctions.
Many of the other Chinese art market trends continue, however. Chinese painting and calligraphy — akin to the Old Master category in western auctions — continues to dominate the market, with 48 percent of the sales. Ceramics takes up another 27 percent of the market. Oil painting and contemporary art accounts for less than 10 percent of sales in China (although the category does have the highest average price per work in China).
Brazil’s Star Is Rising
Interestingly, McAndrew devotes an entire chapter of the report to the Brazilian market, which has not really been studied on a large scale before. Sales in Brazil only account for €455 million, or one percent of the global art market, but the country is nevertheless leaving its mark. Part of the Brazilian issue is high taxes, which keeps dealing very local (the vast majority of dealers do less than €25,000 in sales per year, and not one reported bringing in more than €350,000). In the near-to-medium term, McAndrew predicts that Brazil will be known for its collectors — it is a country with a high number of billionaires per capita — but not for its domestic market.
As an aside, McAndrew also notes that Brazil has a high number of women working in its domestic galleries — 55 percent of the gallery workforce is made up of women, versus 47 percent globally.