Wealthy collectors seem undeterred by global turmoil

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You might think that, with upheavals that have hit the world economy in the past few years, the very rich might be losing their appetite for expensive art. After all, while wealthy people aren’t much affected by the cost of living crisis, it does influence the investment outlook — and therefore their future income flows.

But not a bit of it. Rich collectors do not seem to have been much deterred by the economic turmoil, war (Russia’s invasion of Ukraine), or even pestilence (the pandemic).

According to a recent global survey of wealthy art buyers, collectors were spending more last year than they did pre-Covid, including more at the top end of the market, on works costing $1mn and over.

The research, published this spring by Swiss bank UBS and Art Basel, a leading art fair, says that the share of art buying devoted to $1mn-plus works has risen from 18 per cent to 31 per cent, with a jump from 6 per cent to 12 per cent for buying in the $10mn-plus bracket.

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The collectors surveyed remain optimistic about the global art market in 2023, with 77 per cent of respondents reportedly positive about the outlook, and only 6 per cent pessimistic. The respondents were not a random sample — they are active art buyers with net worth (excluding property) of $1mn and more. But still, the survey shows that there is no lack of enthusiasm among such people, or lack of funds.

Recent auction results have been solid rather than spectacular, say dealers but, nonetheless, there have been some eye-popping prices — such as the £37mn paid in March for Wassily Kandinsky’s semi-abstract “Murnau with Church II”, a record for the artist.

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Indeed, as the UBS/Art Basel report says, it is precisely the top of the market that shows the greatest energy. You might call it competition among billionaires and multimillionaires for the rarest treasures.

As the authors put it: “The escalating growth at the top of the market has been driven by the scarcity of the highest-value works,” which represent a tiny fraction of the works sold each year.

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Meanwhile, rising global wealth has financed ever more collectors, who tend to often focus on a “small number of unique lots, creating an excess of demand over supply”. The rise of the Chinese buyer has rightly made headlines in the past decade, but the real strength of the market comes from the US’s seemingly inexhaustible capacity to create wealth.

How much longer can this go on? The report’s tone is positive — not surprisingly: UBS and Art Basel both benefit if clients are in a good mood. However, the authors do allow a note of caution, saying the market’s future will be influenced by economic developments and by wealth distribution within countries.

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Recession and/or swingeing wealth taxes could yet upset the art applecart. Drastic change doesn’t feel imminent, but the number of billionaires faltered last year for the first time in more than a decade.

The report also warns of the threat from “increasing regulatory barriers to cross-border trade and escalating administrative burdens, due diligence and other legal requirements”. This is clearly a reference to Brexit, which has complicated London’s role in the European market, to put it mildly.

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In addition, collectors’ tastes change. Surging purchases of contemporary art in the past two decades have eclipsed the buying of previous market favourites, not least the Impressionists. There is a keen interest in digital art and non-fungible art tokens, which may or may not last.

Even so, it’s hard to avoid the conclusion that as long as there are rich people, there will be rich art buyers. Especially for the irreplaceable. After all, nobody is making Kandinskys any more . . . 

This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment