The sharp downturn may reflect a lack of confidence among collectors spilling over from the economic slowdown and weakening property sector in China, but it also reflects global trends, particularly at the top-end of the art market, says Anders Petterson, ArtTactic’s founder and CEO.

“London was down 15% in March, New York was down 22% (in May)—that doesn’t add to confidence,” Petterson says, referring to the marquee sales at the major auction houses this past spring. 

The softness at the top-end also points to something of a correction from the frothy price levels reached in 2021-22, Petterson says. That’s evident in sales of works that were bought in those years and recently sold.

At a Sotheby’s Hong Kong evening sale, Fishing for Steps, a painting by the young contemporary British artist Jadé Fadojutimi, sold for US$235,226, with fees, a 62% tumble from the US$614,085 it fetched on Nov. 30, 2021 at a Phillips sale in the city, ArtTactic said. 

Prices of works by young contemporary artists (those 45 and younger) had been pushed ever higher a few years ago. 

“When the market was at its most frothy, there was a feeling that art goes up quite quickly, and you could hold it for a short period of time,” Petterson says. The sharp price discrepancy seen in Fadojutimi’s work from 2021 to today is “testament to a period where the market went out of sync with reality.” 

The market is taking more of a “wait-and-see approach” today, with both buyers and sellers “sitting on their hands” amid uncertain economic and political conditions globally, says Jason Carey, senior vice president and art advisor at Citi Private Bank.

“The sense of urgency and the speculation—that’s gone in the marketplace,” Carey says. “That’s really replaced with more of a cautious approach.” 

This caution is likely to persist next week in London, when Sotheby’s and Phillips hold evening sales of modern and contemporary art. Christie’s will hold a “Post War to Present” day sale on Thursday. 

Overall, ArtTactic’s analysis from a separate report looking at the resale results of  Hong Kong’s evening auctions found nearly 61% of works up for sale that had been owned less than 10 years (33 in all) were sold at a loss. The average annual return of these works was a negative 11.3%, ArtTactic said. 

Of 47 artworks in all that the firm could document as “repeat sales” from previous auctions, the average annual rate of return on their purchase (not adjusted for inflation) was 1.4%, down from 10.7% a year earlier. For the 18 works that had been 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, says he always advised clients to own a work at least five years before selling it, but would caution against reading too much into repeat sales data from a relatively small sample size.

“You have to look over decades to get relevant repeat sale statistics, I think,” Carey says.” It’s also going to vary, very much, depending on which sale you’re looking at.” There’s also been too much change in the marketplace lately to determine specific trends yet, he says.

Still, worries among collectors that soft demand will tamp down bidding appears to be contributing to the lack of high-ticket art being put on the auction block. 

In Hong Kong, only 34 works sold for more than HK$10 million (US$1.3 million), down from 61 a year earlier. That dropoff accounted for nearly 86% of the decline in evening sales, ArtTactic said. There were also 13 works withdrawn that had a combined low estimate of HK$146.4 million.

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

A downturn in guarantees by the auction houses and third-parties—which ensure a work up for sale has a buyer—also suggests both auction houses and collectors who enter into those third-party agreements are avoiding making risky bets, the firm says. 

In May in New York, most of the action at the auctions took place behind the scenes through third-party guarantees. In a report at the time, ArtTactic said it appeared that guarantees accounted for 73% of the total hammer value of lots sold, up from 64% a year earlier. 

Fewer lots tend to be guaranteed in the Hong Kong sales, but even so, works that were guaranteed this spring made up only 42.5% of the sales value of all lots, down from 48.2% a year earlier, and representing the lowest level of guaranteed sales since the fall of 2019, ArtTactic said. 

At the evening sales of the three auction houses in Hong Kong, Sotheby’s fared the worst as sales dropped 52.5% from a year earlier; Christie’s sales declined 45.2%, while Phillips’ sales fell 16.4%.

The results don’t bode well considering all three auction houses have made big financial bets on the city. Phillips opened a new, large headquarters in Hong Kong’s West Kowloon cultural district a year ago, and Christie’s and Sotheby’s will move into gleaming new Hong Kong headquarters soon. 

Though high-end sales have teetered, Petterson says all is not lost. There is plenty of action in the market taking place at lower price levels. “There is health in certain segments of the market, US$1 million and below,” Petterson says. More works are being sold at those levels, the sales are just disguised by the downturn at the top. 

This follows a trend seen last year, as younger collectors continued to seek out art at lower price levels and online, instead of at live auctions, as prices of multimillion dollar works declined. “These trends are persistent, particularly in Asia—people are buying at a lower value and at a higher volume,” Carey says.