Fine Art

Bank of America Sees Brighter Days for Art Sales in 2021 and Beyond

Bank of America may be more known for economic outlooks and stock market reports, but the banking giant also issues reports on certain collectibles that have garnered attention. Fine art is definitely worthy when it is not uncommon to see some of the top modern art pieces command prices for millions and tens of millions of dollars.

According to BofA’s Art Market Update for the Spring of 2021, the pandemic’s impact on the art market will likely take another year or so to work its way through the system. Despite art market values having held up in 2020, the bank noted that the art market during times of economic crisis becomes supply-constrained. The views play out with buyers wanting markdowns. Sellers also refuse to sell and overall business activity drops. In their views of 2020, BofA noted that the art market saw a 30% to 40% reduction from 2019 in the total value of art transactions.

While there are more factors that will drive an expected art market recovery, the global wealth effect is expected to play a role. The post-vaccine reopenings will also play a role, as will new digital options.

One additional factor that is expected to drive art prices higher in 2022 and beyond goes beyond the reopening of economies and a post-vaccine world. This is an expectation for a period of continued low interest rates. According to BofA, the art market is highly correlated with interest rates. The report outlined this as follows:

As rates drop, the opportunity cost of owning art (a non-interest-bearing asset) and the cost of unlocking capital from your art via a line of credit also drops. The Fed has signaled that it will continue with its ultra-accommodative stance in combating the economic effect of the coronavirus and will seek to achieve an inflation rate of 2%. We believe this policy stance is bullish for the art market.

The Spring 2021 outlook also noted:

You might have thought that prices would drop to help supply meet demand. But instead, many collectors took advantage of low interest rates and a buoyant stock market to monetize their collection by borrowing against it. The few works that did come to market were met by strong demand, so prices have held steady. But given the overall market contraction in 2020, it was a challenging revenue year for auction houses, artists, galleries and museums. Collectors — and the value of their collections — came out unscathed.

Bank of America Art Services listed the artists with the highest internal rate of return (the annual rate of growth an investment is expected to generate) from 2010 to 2020, as follows:

Rank Artist                 Annual IRR
1 Banksy                           36%
2 Kazuo Shiraga             28%
3 Günther Förg              27%
4 Yayoi Kusama             26%
5 Pierre Soulages           24%
6 Mai Trung Thu           22%
7 Helen Frankenthaler 21%
8 Sanyu                            19%
9 George Condo             19%
10 Yoshitomo Nara       18%

BofA also listed the top 10 artists at auction in 2020 by value, as follows:

Pablo Picasso     $196.4 million
Sanyu                   $155.3 million
Zao Wou-Ki        $143.0 million
David Hockney  $125.2 million
Basquiat              $111.0 million
Francis Bacon    $106.0 million
René Magritte    $104.7 million
Gerhard Richter $87.8 million
Roy Lichtenstein $87.6 million
Andy Warhol      $77.7 million

BofA’s full report is available.

Categories: Fine Art

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