What’s driving the rise of affordable art?
While news about art sales tends to focus on the most expensive pieces, the biggest growth in transactions is happening at far more modest price points. But dealing in this affordable segment is hampered by a lack of data and the difficulty of aligning personal taste with investment goals.
Affordable art has driven a surge in activity in the contemporary art market in the past 20 years, with a particular increase in the number of artworks sold for less than USD5,000 (see figure 1). Many of those pieces will never be worth much more, and many buyers will not care about that. But a portion of the market is driven by the hope that art that is cheaper today could be much more valuable in the future.
Collectors with an eye for investing will hope they have picked those winners. After all, there is a long list of artists, particularly among the so-called great modern masters, who died poor and unrecognized but achieved huge acclaim posthumously. Vincent van Gogh, for instance, was often criticized during his lifetime for creating works that were too dark and lacking in energy, but after his death in 1890 his sister-in-law had the foresight to preserve his works for posterity. They now regularly fetch over USD100 million at auction.
As renowned art collector and patron of young artists Charles Saatchi commented in an interview with The Art Newspaper: “Who’s to say what will one day appear to have been trendsetting? Sometimes artists who receive breathless acclaim initially, seem to conk out. Other artists who don’t register so keenly at the time, prove to be trailblazers.”
Lacking data
There is no standard definition of ‘affordable’ art. Context matters: what is affordable for Saudi Arabia’s Crown Prince Mohammed bin Salman — who forked out USD450 million in 2017 for Leonardo da Vinci’s Salvator Mundi despite its contentious authenticity — is clearly out of reach for nearly everyone else.
But affordable art is often broadly taken to mean the art that people buy when they have just started collecting, and USD10,000 is frequently used as a threshold. Affordable art can also be taken to mean the work produced by artists who have just started exhibiting their works.
One of the biggest obstacles faced by investors eyeing the art market, and the burgeoning affordable segment of it in particular, is a lack of transparency and data to demonstrate that fine art can be a mainstream investment. Unlike with traditional assets such as equities, there is “no one index that is recognized as the benchmark for fine art,” said Adriano Picinati di Torcello, Global Art & Finance Coordinator for Deloitte. He added that “the fine art market is composed of many different segments with limited liquidity and specific risks to correctly handle.”
A handful of providers have developed art indexes, but these are limited by their methodology. For instance, they generally focus only on the top end of the market, reflecting the sales at the major auction houses (see Figure 2).
But auction sales constitute less than half of the overall art market, according to estimates derived from the Art Basel and UBS Survey of Global Collecting. The remainder comes from dealers, art fairs and online sales, which is where most affordable art changes hands.
The latest edition of the survey, covering 2023, estimated that total art market sales fell 4% year-on-year to USD65 billion. Within that, however, there were pockets of growth, including in some middle- and lower-priced segments. Public and private auction sales were down 5%.
A matter of interpretation
What figures like these actually say about the strength of these respective segments is open to interpretation. Some see the growth in lower-priced segments as reflecting a blossoming of affordable art, though it could also be a function of dealers driving sales with aggressive price reductions.
The decline in higher-priced segments, on the other hand, could reflect a reluctance to sell among collectors who are holding out for a return to the high prices of 2021 and 2022. These collectors may be emboldened to hold on until exuberance returns to the art market because they’ve benefited from a positive wealth effect following the stock market’s strong performance.
Sentiment also complicates the picture. “Unlike with traditional investments, collectors are deeply influenced by their emotional connection to the works they purchase,” said art advisor Megan Fox Kelly. “Art that doesn’t fit their taste or vision often won’t make it into their collection, no matter how financially promising it may be.”
“The emotional satisfaction of ownership is a critical factor, which often makes it difficult to treat art like a purely transactional asset unless it is purchased solely for storage and future sale,” said Kelly. “People want the works they love to also be good investments, and they hope the works that are good investments will align with their tastes,” she added. “Unfortunately, that’s not always the case.”
What lies ahead for affordable art?
Only time will tell which among the flood of pieces now selling for less than USD5,000 will prove worthwhile from a financial point of view. Learning comes from experience. “For new collectors, I emphasize patience and education: developing an understanding of the market, the artists, and their own tastes takes time,” said Kelly.
It also helps to have a long-term horizon. In 2023, the highest-grossing category of fine art auction sales was works by postwar and contemporary artists (see Figure 3), such as Banksy, who began spray-painting his stenciled designs around Bristol in the UK in the early 1990s.
Meanwhile, sales in the ultra-contemporary category, consisting largely of artists younger than 40 who are not yet established, saw a marked decline. Experts put that down to the retreat of speculators who were drawn to the work of ultra-contemporary artists during the period of ultra-low interest rates in the wake of the pandemic.
Can’t afford it? Share it instead
There is also an alternative: new technology means that today an artwork doesn’t necessarily have to be cheap to be affordable. One way to change the entry point into the market is through fractional ownership, which can be enabled by blockchain-based platforms. Through digital tokens, multiple owners can each own a portion of a piece of art, like shareholders in a company, rather than any one individual paying for the entire work.
Picinati di Torcello said that these platforms could potentially be set to take off because the younger generations that came of age after the advent of the sharing economy are more open to co-ownership than their forebears.
Admittedly, such platforms have so far generally met with limited success, but Picinati di Torcello believes this could change as an efficient and liquid secondary market develops. “As it becomes easier to resell these fractional stakes, this approach is likely to gain more traction if a solid investment track record can be demonstrated,” he said.
Looking further ahead, other innovative art investment models could develop in response to changing societal norms and needs.
“If museums want to buy iconic art objects at a time when governments are reducing their budgets, there could perhaps be a social impact investment mechanism, with public-private co-ownership of art objects that will be displayed forever in museums,” said Picinati di Torcello. “This could maybe be a new kind of philanthropic model.”
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