The South Korean art market reached its peak early this year, and some market watchers say it has begun to experience a downturn. Experts analyzing local art auction market indicators have pointed out that Korea should no longer remain optimistic about its art market.
The “Art Market Report for the First Half of 2022” published by the Korea Art Authentication & Appraisal Research Center (KAAARC) on August 13 mentioned that “the Korean art market has currently slammed on the brakes without any seatbelts or airbags,” and added, “during the booming market, which has lasted for a year and a half, artworks that skyrocketed to its highest price in auctions are now being re-evaluated with strict standards.” The purchasing pattern has already started to change.
On August 11, the “Korean Art Market Seminar in the First Half of 2022” hosted by the Korea Arts Management Service (KAMS) also lowered its expectations for the future Korean auction market. Jo Sang In, an art market specialist reporter and one of the presenters at the seminar, said that the artworks of popular young artists, which had previously shown a sharp price increase at auctions, are now in a downturn. The numbers of resales of works by Woo Kuk Won, Moon Hyeong-tae, and Kim Sunwoo have shown a steep price decline between March and April of this year.
Seoul Auction and K Auction are the two largest Korean art auction houses, and it is reported that their August auctions have been downsized. Compared to the same period a year ago, the size of the August auction at Seoul Auction decreased from 17.3 billion KRW to 12.5 billion KRW, while that of K Auction decreased from 9.7 billion KRW to 6.1 billion KRW. The downscaling of the auctions could be one of the strategies targeting the upcoming inaugural Frieze Seoul. Since the event is just around the corner, collectors will hold back any purchases until the art fair opens. Nevertheless, signs of a slowdown were already evident in several large artworks by blue chip artists since last May. This slowdown significantly impacted the total sales number, while some of these artists did not make any sales.
The cooled-down art market could be related to the current economic downturn. The collapse of cryptocurrency and stock prices as well as the sharp increase in living prices and interest rates dampen consumer desire for luxury goods, such as artworks. In addition, many collectors who are acute investors are already predicting that the recent bubble bursts will mark down the value of artwork, leading to a decline in art consumption.
However, other market watchers view this from a different standpoint and partly see signs indicating the slowdown is due to excessive price distortion in the auction market.
As KAAARC pointed out, “the auction market, which dominated the sale of works during the boom period, has been focusing on auctioning works and creating a sharp price increase, only concentrating on popular artists whose works ‘make sales.’” It added that “when the price of these artists’ works rose, these auction houses set the estimated price based on the increased amount at the next auction thus creating rapid price bubbles.”
Frequent price distortion in artworks that do not fit the size of the art market may mislead young and emerging artists and cause them to lose opportunities to develop their careers. High estimates can be detrimental to work outcomes for artists because once the price increases, it is difficult to lower it back. Too many art pieces released to the market during a boom could also be a problem.
Whenever the economic situation changes and the market stagnates, the demand for works by obscure artists will likely decrease because collectors hesitate to make risky investments. These types of issues make it difficult for galleries to work with young artists commanding high prices but having low demand, thereby limiting the opportunities for these artists to hold exhibitions and make sales.
This was also the case for young and emerging artists who experienced a boom around 2007. After Korea’s art market boom burst, many had to suspend their activities due to excessively high estimates and falling demand.
Nevertheless, we should not jump to the conclusion that the Korean art market has entered a recession.
According to KAMS, the total market size, including the auction trade, is predicted to reach 563.9 billion KRW in the first half of this year, and the sales volume is usually higher in the year’s latter half than in the first half. Furthermore, considering the Frieze and Kiaf art fairs, which will be held early next month, this year’s art market is expected to reach 1 trillion KRW—the largest size ever.
Plus, the international art world is flocking to South Korea while numerous exhibitions at leading art galleries and museums around the world are introducing Korean modern and contemporary art. It is therefore expected that the market will continue to grow gradually.
However, it would be important to remember that one of the next tasks for the Korean art market is to learn from past mistakes and build a solid foundation and structure for its long-term growth.