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Confidence in world’s fastest-growing luxury asset already ‘ebbing away’

picasso painting
Picasso's 1932 Femme à la montre sold last year for $139m (£113m) in Sotheby's New York - Alexi J. Rosenfeld/Getty Images North America

Art was the only luxury asset to hit double-digit growth last year, jumping 11pc in value, with a Picasso painting exchanging hands for £113m.

The most expensive piece of art to go on sale last year was the Spaniard’s 1932 Femme à la montre (Woman with a Watch), a painting of his teenage mistress, which fetched an eye-watering $139m (£113m) in Sotheby’s New York.

It also became the second-most expensive Picasso ever sold at auction, after the Spanish artist’s 1955 Les femmes d’Alger (Women of Algiers, Version O) generated a record $179.4m at Christie’s in 2015.

Art soared 11pc in value in 2023, but all of the gains were made in the first half of the year before values started to slide significantly, according to Knight Frank’s annual Wealth Report.

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Other luxury asset classes which rose in value last year included jewellery (by 8pc), watches (5pc), coins (4pc), colour diamonds (2pc) and wine (1pc).

A Bleu Royal ring with a 17.61 carat vivid blue diamond went under the hammer for $43.8m at Christie’s – the most expensive piece of jewellery sold at auction last year, followed by an eternal pink 10.57 carat diamond which fetched $34.8m.

The most expensive watch to find a new home at auction was a two-crown world time wristwatch for $8.5m.

Not all luxury asset classes saw values rise. Price tags on rare whisky fell 9pc, followed by a 6pc drop in values of classic cars. But that didn’t stop a 60-year-old Macallan whisky going for $2.7m, and a 1962 Ferrari 330 LM securing $51.7m.

Simon Gammon, managing partner at Knight Frank Finance, said: “From equities to art, the outlook for asset values is brighter. We expect investors to grow increasingly confident that they can secure returns that beat the cost of any mortgage debt they take on.

“For 2024, I would seek to utilise finance to free up liquid capital, positioning myself to capitalise on new opportunities the moment they emerge.”

In 2022, art as an asset class grew by a record-busting 29pc – after no growth in 2021 and a 13pc slump in 2020.

Last year, art as an asset class maintained 11pc annual growth. But art sales at Sotheby’s, Christie’s and Phillips in the principal categories – Old Masters, Impressionist, Modern and Contemporary art – fell by 27pc in 2023 from 2022 to $5.74bn.

Sebastian Duthy, of AMR – the firm which supplies Knight Frank with data on the asset classes it tracks – said the auction year traditionally begins with sales of Old Masters.

Last season started with some notable sales, including a record for a work by Bronzino, but the same could not be said for other key sectors.

Mr Duthy added: “It was telling that in May, Sotheby’s inserted one of its top Old Master lots – a Rubens’ portrait – into a 20th Century Modern evening sale. But by then, it was clear that the confidence among sellers, set by the previous year’s record-busting figures, was ebbing away.

“In the same month, modern and contemporary works from the collection of the late financier Gerald Fineberg sold well below pre-auction estimates. With all but five lots selling, it was clear the market had swung in favour of the buyer.”

There was even less appetite for the ultra-contemporary or “red-chip” sector, which experienced the biggest contraction in 2023.

Mr Duthy said works by a growing group of artists born after 1980 have been heavily promoted by mega galleries and auction houses in recent years – so with freshly painted works in excess of £100,000 almost doubling in 2022, it was little surprise that this sector was one of the biggest casualties last year.

“There is a risk there are now simply too many fresh paint artists with none really standing out.”

Christine Li, of Knight Frank’s Asia-Pacific research team, warns that a growing emphasis on sustainable investing could fuel further declines in art as an asset class this year.

She said: “Traditional investments like art, wine or jewellery may give way to a preference for those with a more positive impact on society, such as contributing to food security, mitigating climate risk and healthcare.”

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