The art market has a serious role to play in South Korea, and this is confirmed by more than just the buzz surrounding the debut of Frieze Seoul and international galleries setting up shop in the city. The recent publication of the 114-page Korea Art Market 2022—the first of its kind in the English language—is a testament to this Asian country’s determination to become a global art market player.
The detailed report published by Seoul National University and Paradise Cultural Foundation, with support from Korea Arts Management Service (KAMS), was written by industry veterans and academics. It also took a deep-dive into the history of Korea’s art market development, studies of art movements in different decades, as well as data analysis of recent market trends. Contrary to a tendency toward the “positive narratives” commonly found in some Asian territories, the report doesn’t just sing praises of the market boom; but objectively warns of potential risks and challenges despite the overwhelming optimism.
Here are five key takeaways from the report:
1. Korea’s Art Market Is Growing, Fast
South Korea’s art market may not be as big as that of China’s (including Hong Kong), which is still estimated to be the largest in Asia and the world’s second largest after the U.S., but it is rapidly expanding.
The trade volume of the Korean art market reached ₩922.3 billion ($748 million) in 2021, and this grew some 8.6 percent in 2022, surpassing ₩1 trillion ($812 million), a historic high. The growth has been attributed in large part to increased liquidity in the market as well as the influx of new individual buyers.
Frieze Seoul, 2022. Photo by Let’s Studio. Courtesy Frieze and Let’s Studio.
2. Art Fairs Are a Rising Force
Unlike many other markets in Asia, galleries, rather than auction houses, have played a dominant role in driving the art market development in Korea. As of 2020, there were 503 private galleries in South Korea, with half of them operating in Seoul. In 2010, galleries accounted for 76 percent of gross art sales, with auction houses, and art fairs making up 13 percent and 11 percent, respectively.
But this dynamic began to shift in 2015 as both sales at auction houses and art fairs began to surge. Prior to the pandemic, an average of 47.8 art fairs took place across the country annually—this number rose to 76 in the post-pandemic year of 2021, with these fairs welcoming 211,000 visitors. By this time, art fairs had increased their market share by 4 percent (accounting for 15 percent total), while the auction house share had grown by 22 percent (for a 35 percent total), reducing the market share accounted for by galleries alone to a total of 48 percent.
Art fairs’s share of gross sales revenue exploded to 26 percent by the end of June 2022, whereas auction houses accounted for 27 percent, and galleries’s share remained more or less the same. This was before the debut of Frieze Seoul in September 2022, and the return of the major international art fair later this year will likely impact the proportion of sales accounted for by art fairs further.
3. The MZ Generation Has Serious Buying Power
The cryptocurrency boom in 2020 and 2021 gave rise to the emergence of a younger generation of wealthy millennials and zoomers (nicknamed Gen MZ), many of whom began to collect art.
While Gen-Xers and baby boomers are spending the most on their purchases over all, Gen MZ are catching up with interesting spending habits—they tend to buy works by emerging artists that are more affordable, but at the same time, the top 20 percent of these big spenders surveyed by A Study of Korean Art Buyers in Generations Y and Z spent more on art than Gen-Xers and baby boomers combined. Millennials prefer foreign artists or artists who are active outside of their country, international galleries, and they are more inclined towards artists who are widely recognized. A report by Cape Research suggests that Gen MZ (ages 25 to 40) account for nearly 67 percent of all Korean art collectors.
Frieze Seoul, 2022. Photo by Lets Studio. Courtesy Lets Studio and Frieze.
4. Speculative Buying and Flipping Reign Supreme
The majority (more than 80 percent) of the collectors surveyed, regardless of their age, said that they bought a work of art because they liked it. But a significant number of them consider art as an investment, particularly Gen-Xers, baby boomers, and the top 20 percent of Gen MZ big spenders.
The report discovered that artworks are being resold in the secondary market at a rapid clip. ArtnGuide from art investment platform operator Yeolmae Company revealed that artworks were held for just 330 days on average before they are back the market, with a mark-up of 29.6 percent from original purchase price. Artworks are held for an even shorter period of 67 days according to another report by Seoul Auction Blue’s digital platform SOTWO, bringing in an average of 16.77 percent investment return.
Korea has also seen fractional investment in artworks gather steam. This sector has become one of the fastest-growing subsets of the art market, and had already accumulated a total investment of ₩100 billion ($81 million) as of May 2022. More than ₩31 billion ($25 million) of investment was already spent in this sector in just the first quarter of 2022. That said, industry players have warned of the potential risks and call for regulatory action to define fractional art investment as a new form of securities trading.
5. The Market Is Due a Correction
Expansion of trade volume, new art fairs, auctions, and collectors and even new artists are painting a rosy picture for the Korean art market. But not everyone is equally optimistic. A KAMS survey revealed that 26.7 of the respondents were pessimistic or somewhat pessimistic about the future of the Korean art market. Among them, 20 percent of them named the looming recession as to why they were pessimistic. Some 13.3 percent said the uncertainty over the global economy clouded the market’s future.
Analysis of the numbers on total spend at auction also suggests the post-pandemic art boom peaked in the third quarter of 2021, and paired with the recession, it is predicted that the Korean art market is bound for a phase of
corrections. But overall, industry players and collectors were confident that the Korean art market will continue to grow.