Art Market Dip Last Year Reflects Lack of Supply, Not Demand

The global market for art may have been softer last year against a more volatile economic backdrop, but trends detailed within the latest annual report from Art Basel and UBS released earlier this week continue to show collectors are willing to buy.

Scanning a chart within the report of sales since 2009 reveals an ebb-and-flow in the overall market, but surprising consistency in the value of transactions and an uptick in volume.

The year-to-year differences, such as the 4% dip in market value to US$65 billion last year, are mostly driven by the number and outcome of big-ticket sales, which declined across auction houses and galleries in 2023.

How many high-value works of art come to market in a given year, however, often has less to do with buying interest from collectors during shaky economic conditions and more to do with the willingness of sellers to part with paintings or sculptures during a time of perceived weakness, according to Matthew Newton, art advisory specialist at UBS Family Office Solutions in New York.

“I don’t think we see an unwillingness to buy those works when they do come to market,” Newton says.

When the economy is weak, estates with less discretion over timing often are the main consignors of expensive art. For example, last fall in New York, Sotheby’s sold works owned by Emily Fisher Landau , a long-time patron who amassed a collection bursting with masterpieces that hadn’t appeared at an auction before.

Sotheby’s single-owner auction of the Fisher Landau collection led to the US$139.4 million sale of Pablo Picasso’s Femme à la montre (the second highest price for a Picasso work at auction); the US$41 million sale of Jasper Johns’ Flags ; and the record US$18.7 million sale of Agenes Martin’s Grey Stone II —prices that were within or exceeded expectations.

“People are still willing to make trophy purchases,” Newton says. “I don’t think there’s a lack of demand, it’s about a lack of supply.”

Rising interest rates since 2022 arguably could be another factor in slower high-end sales, since wealthy individuals finance about 29% of their art collections, on average, while the ultra-wealthy (those with a net worth above US$50 million) finance as much as 39%, according to a separate report on global collecting trends published late last year from Art Basel and UBS.

But Newton doesn’t believe higher rates played a significant role in the art market last year. The wealthy typically borrow money for business or investment opportunities; if they have a US$500 million art collection on their walls, borrowing against it can be a good source of liquidity. Any impact it has on the market would be “within the margin of error,” Newton says.

Another chart in the report tracks sales growth from 2009 through 2023 in five segments of the auction market, from works sold below US$50,000 to those achieving US$10 million or more. The results show the performance of most works of art that are sold—that is, those that fall below the US$10 million level—has been “relatively flat over a decade plus,” Newton says. “It’s really those works that are over US$10 million … that’s where we see growth in the art market.”

At auction, the US$10 million-plus segment fell a substantial 25% in 2023 from the previous year, but overall, the sales trend for those ultra-expensive paintings since 2009 has been on an upward trajectory. That’s no accident, considering the population of billionaires who fuel those sales has also continued to rise, with their wealth doubling over the last 10 years to about US$13.1 billion, according to the report.

“It’s a relatively very small group of people who can spend over US$10 million on artwork,” Newton says. Of those who can afford to, not everyone does, meaning a few individuals can alter total sales for the whole market.

In part, that’s because global art sales are relatively small even at US$65 billion. Consider the global private-equity market—another place where the wealthiest individuals place their money—was estimated to reach US$16.3 trillion last year, according to London data firm Preqin.

“$65 billion … that’s obviously a lot of money,” he says. “On the other hand, that’s the entire art market—it’s like less than half the net worth of a few individuals.”

Newton says he often reminds clients that not that much art that exists in the world is sold. “What is traded is a very, very small percentage of the work that’s out there.”

Former New Hampshire Gov. Chris Sununu delivered a warning to Treasury Secretary Scott Bessent during a recent visit to Washington: Already-high airfares will surge if the war in Iran doesn’t end soon.

Sununu, a Republican who represents some of the biggest airlines as president of the industry group Airlines for America, has for weeks sounded the alarm to Trump administration officials about the economic fallout from high jet fuel prices. The war, Sununu has argued, must come to a close soon, or things will get worse.

Administration officials have gotten the message.

Privately, President Trump’s advisers are increasingly worried that Republicans will pay a political price for the rising fuel costs, according to people familiar with the matter. Many of those advisers are eager to end the war, hoping prices will begin to moderate before November’s midterm elections.

The fallout from the U.S.-Israeli attack in late February has slowed traffic through the Strait of Hormuz, a vital shipping lane, triggering a sharp increase in oil, gasoline and jet-fuel prices.

That means consumers are grappling with high costs ahead of the summer travel season, as they consider vacation plans.

Sixty-three per cent of Americans said they put a great deal or a good amount of blame on Trump for the increase in gas prices, according to a new poll conducted by NPR, PBS and Marist.

More than 8 in 10 Americans said struggles at the gas pump are putting strain on their finances.

Jet-fuel prices roughly doubled in a matter of weeks after the war began, and they have remained high. Airlines have said that will add billions of dollars of additional expenses this year, squeezing profit margins.

U.S. airlines spent more than $5 billion on fuel in March—up 30% from a year earlier, according to government data.

Carriers have been raising ticket prices, hoping to pass the cost along to consumers, and they are culling flights that will no longer make money at higher price levels.

In March, the price of a U.S. domestic round-trip economy ticket rose 21% from a year earlier to $570, according to Airlines Reporting Corp., which tracks travel-agency sales.

So far, airlines have said the higher fares haven’t deterred bookings and they are hoping to recoup more of the fuel-cost increases as the year goes on.

Earlier this week, Trump said the current price of oil is “a very small price to pay for getting rid of a nuclear weapon from people that are really mentally deranged.”

Secretary of State Marco Rubio told reporters that if Iran got a nuclear weapon, the country would have more leverage to keep the strait closed and “make our gas prices like $9 a gallon or $8 a gallon.”

Trump has taken steps in recent days to bring the war to an end. Late Tuesday, the president paused a plan to help guide trapped commercial ships out of the Strait of Hormuz, expressing optimism that a deal could be reached with Iran to end the conflict.

Crude oil prices fell below $100 a barrel on Wednesday, after reports that Iran and the U.S. are working with mediators on a one-page framework to restart negotiations aimed at ending the conflict and opening the strait.

Sununu said Trump administration officials are conscious of the economic fallout from the war: “They get it…and I think that’s why they’re trying to get through the war as fast as they can.”

But he cautioned that it could take months for prices to return to prewar levels.

“Ticket prices won’t go down immediately” after the strait is fully reopened, Sununu said. “You’re looking at elevated ticket prices through the summer and fall because it takes a while for the prices to go down.”

Since the initial U.S.-Israeli attack in late February, Sununu has met in Washington with National Economic Council Director Kevin Hassett, representatives from the Transportation Department and senior White House officials.

A White House official confirmed that Hassett and Sununu have discussed the effect of increased fuel prices on the airline industry. The official said the conversation touched on how the industry can mitigate the impact of high jet fuel prices on consumers.

“The president and his entire energy team anticipated these short-term disruptions to the global energy markets from Operation Epic Fury and had a plan prepared to mitigate these disruptions,” White House spokeswoman Taylor Rogers said, pointing to the administration’s decision to waive a century-old shipping law in a bid to lower the cost of moving oil.

Rogers said the administration is working with industry representatives to “address their concerns, explore potential actions, and inform the president’s policy decisions.”

A Treasury Department spokesman pointed to Bessent’s recent comments on Fox News that the U.S. economy remains strong despite price increases. The spokesman said Treasury officials have met with airline executives, who have reaffirmed strong ticket bookings.

“We’re cognizant that this short-term move up in prices is affecting the American people, but I am also confident, on the other side of this, prices will come down very quickly,” Bessent told Fox News on Monday.

The war has already contributed to one casualty in the industry: Spirit Airlines. Company representatives have said they were forced to close the airline because the sustained surge in jet-fuel prices derailed the company’s plan to emerge from chapter 11 bankruptcy.

The Trump administration and Spirit failed to come to an agreement for the company to receive a financial lifeline of as much as $500 million from the federal government.

Transportation Secretary Sean Duffy has argued that the Iran war wasn’t the cause of Spirit’s demise, pointing to the company’s past financial struggles, as well as the Biden administration’s decision to challenge a merger with JetBlue.

Other budget airlines have also turned to the federal government for help since the U.S.-Israeli attack. A group of budget airlines last month sought $2.5 billion in financial assistance to offset higher fuel costs, and they separately wrote to lawmakers asking for relief from certain ticket taxes.

Art Market Dip Last Year Reflects Lack of Supply, Not Demand

Administration officials have spoken to the airline industry, which has voiced concerns about the rising costs.