Art Market
Veena McCoole
Inflation is the rate at which the prices of goods and services increase over time. It occurs when the cost of production rises, which drives prices up, or when demand outpaces the economy’s ability to produce additional goods and services. It influences the cost of living for individuals, as well as interest rates and macroeconomic growth.
Since the COVID-19 pandemic, economies around the world have been contending with rising inflation rates. In the U.S., for example, inflation rose by as much as 9.2% year-over-year in June 2022. In June of this year, it climbed by 2.7%.
These rising costs can affect different industries in many ways, and art is no exception. “The macroeconomic position inevitably impacts people’s decisions about art,” said Simon Oldfield, a curator, art dealer, and lawyer. “We’re all connected to the wider picture, including inflationary pressures, and we don’t leave those thoughts and concerns at the door when it comes to art.”
Art’s relationship to inflation is multifaceted. A historical stability in artwork values has gained recognition among some investors as a safeguard asset against broader price rises in the economy. But like any asset, art itself can also be subject to inflationary behavior. Here, we disentangle the factors relating to art and inflation.
Why art is viewed as a hedge in inflationary periods
In recent years, art has gained a reputation as an inflation hedge, meaning that it is viewed as offering protection for investors against a decline in the purchasing power of money (when the same amount of money buys fewer goods and services).
One of the primary reasons for this is that artwork prices are viewed as stable over time, unlike cash or securities, which can lose purchasing power during inflationary periods.
Unlike other major assets, art is a non-fungible, illiquid asset: Each work of art is a unique object. Its value is also based on factors such as taste, reputation, and rarity, which also set it apart.
Dirk Boll, deputy chairman of 20th and 21st Century Art at Christie’s, says that an artwork’s price stability is correlated with its assumed artistic quality. “Even when prices go down, prices go down last and least for artwork of the highest quality,” he said. “The question becomes who defines quality, and how much of the quality assessment now comes from public opinions and the community rather than art critics and institutions.”
During pre-sale estimations at Christie’s, Boll says sellers often come with expectations of how a work should be priced. These include factors such as the price when they bought the piece, buyer’s premiums, import costs, and exchange rate information. “Sadly, the present value of a piece is not influenced by what was previously paid,” Boll shared. “The value of art follows other criteria, not financial historical data.”
Purchasing art is also driven by many factors that make it different from other asset classes. “Behind every work of art, there is a creator, and most collectors are respectful of their relationship with the artist and aren’t in it to make a quick buck,” said Oldfield.
How inflation can impact artwork prices
Despite art’s reputation as an inflation hedge, works of art themselves can also be subject to inflationary factors. The cost of creating, exhibiting, insuring, transporting, and selling art goes up with inflation. These higher costs are often passed on to buyers, resulting in price rises that affect both the primary and secondary sides of the art market.
According to Maddox Gallery co-founder Mario Zonias, rising material and production costs have become a “serious challenge” for artists working today. “These pressures have grown steadily over the past two years, and tend to hit emerging artists the hardest,” he said.
Bianca Bonifacio, art investment associate at Anthea Art Investments, also noted that shipping is another of the most prominent areas to see prices rise. “In the last two years, we have seen an increase in the cost of shipping, which has an impact on the global market,” she said.
But the relative importance of this depends on the cost of the work: for lower-value works, shipping fees can be a larger proportion of the work’s value, but more akin to a rounding error for a seven-figure work. At the top end of the market, it’s more likely that collectors’ individual circumstances—rather than macroeconomics—will dictate how they respond. . At the top end of the market, it’s more likely that collectors’ individual circumstances—rather than macroeconomics—will dictate how they respond.
“Prices may be up, but if money coming in is also up, that doesn’t necessarily mean a downturn in art purchasing for some,” noted art advisor David Shapiro. “People in the market for a Pablo Picasso, perhaps, aren’t as swayed by inflation and day-to-day costs.”
Sometimes, increased shoots in demand for certain artists can lead to major price rises for their artworks within a short space of time. The last period of major price inflation in the art market began after the COVID-19 pandemic, from 2021 to 2023, when factors such as fiscal stimuli and pent-up consumer demand caused some artwork prices to skyrocket. Many artists saw their prices for their artworks rise to extreme highs, sometimes within the space of months.
The sudden and often aggressive spikes in prices for artworks in parts of the art market proved unsustainable in some cases. “Even though inflation then was not as high as it is now, the value of [some] artists’ work achieved unreasonable highs in record time, and fell just as quickly afterwards,” said Arushi Kapoor, an art advisor and founder of The Agency Art House.
But while inflation impacts the demand for and pricing of art, there is a limit to the role that market forces can play. Art is an industry where buying decisions are based on a variety of emotive factors that are not always purely financial.
“People don’t make art because the economy is good, they make art because they are artists,” said Simon Oldfield. “Collectors buy art because they need it in their lives.”
This article is part of Artsy’s Collecting 101 hub, which features resources on everything you need to know about buying art. Explore more of Collecting 101.