The State of the

Canadian Art Market 2018

LEt's Get Into It
This report was produced in conjuction with ArtTO 2018 and aims to identify the challenges and breakthroughs of all stakeholders in the Canadian art world.
By ArtVenture
Table of
Contents
1
The ArtTO 2018 Fair
Profile of Dealers
1.1
Dealers’ Overview of ArtTO in 2018
1.2
Sales at ArtTO
1.3
Collector and Dealer Attendance
1.4
2
The Canadian Art Auction Market
Canadian Auction Landscape
2.1
Review of Recent Live Auctions
2.2
Market Breakdown
2.3
3
Canadian Art Dealers
General Info
3.1
Dealer Sales
3.2
Dealer Margins and Financing
3.3
Supply and Inventory
3.4
Challenges, Future Trends and Solutions
3.5
4
Canadian Art Market Wealth
Profile of Art Buyers
4.1
Art Collector’s Journey
4.2
Financial Institutions Involvement
4.3
Expert Opinion: Art Secured Lending
4.4
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01
Chapter

The ArtTO 2018 Fair

An overview of ArtTO 2018 at the Metro Toronto Convention Centre from October 26-29, 2018. Through our comprehensive research of collectors and dealers at the fair, we've compiled an overview of
Profile of Dealers
1.1
Dealers’ Overview of ArtTO in 2018
1.2
Sales at ArtTO
1.3
Collector and Dealer Attendance
1.4

1.0 Key Findings

The average cost for art dealers attending Art Toronto is around $25,000.
Due to international shipping and staff expenses, the most frequent cost of attendance for 30% of dealers at Art Toronto fell within the range of $10,000-20,000, and 20% reported costs of $20,000-30,000.

Art Toronto serves as the most important art fair in Canada, with dealers’ positive outlooks.
Art dealers hold positive outlooks on the value in attending Art Toronto, as 95% responded that they would return to future fairs. Moreover, 70% of the art dealers are confident about the future potential of this event.

Lack of presence of international fairs by Canadian dealers remains a key issue.

60% of art collectors and 36% of art dealers at Art Toronto have never attended international fairs. This lack of participation in international fairs reflects the tendency of Canadian art collectors and dealers to focus on the acquisition and sale of artworks within the domestic scope.

Art Toronto is successful in retaining a significant amount of loyal regular attendees and encouraging first-timers to return.
52% of art collectors are attending Art Toronto for the second time, and 10% have attended more than 10 times, 31% of art dealers have attended the fair more than 10 times and more than one-third are returning for their second or third time.

$50,000-$300,000 is the most popular total value per booth, with over 7 artists presented on average.
Among the 57% dealers at Art Toronto in 2018 held over 7 artists per booth, 45% of the art dealers’ total value of their corresponding art booth are ranged between $50,000-300,000.

1.1 Profile of Dealers at ArtTO

Geographic Composition
The geographic composition of Canadian art dealers appears to be unevenly split, with Ontario, Québec, and British Columbia taking up the top three proportions in the number of art enterprises. There are more than 500 dealers in Ontario, taking up 34% of total numbers, followed by Québec (over 300 dealers), equal to 22% of total amount.
Art Dealer Distribution
City Where your Business is based
International Dealer Distribution
The geographic distribution of art dealers who participated in Art Toronto this year was rather evenly split between international and domestic, accounting for 43% and 57% of all dealers respectively. Canadian dealers most frequently base their businesses in Montreal and Toronto (making up of more than two-thirds of all domestic dealers), the remaining third constituted of Vancouver, Calgary and other major cities. In regards to international dealers, 58% were from the United States, followed by 21% from Germany and 10% from Great Britain.  

1.2 Dealers’ Overview of ArtTO in 2018

The total posted price range of dealers at the fair reveal a very widespread, with rather even proportions in every rank. This demonstrates the diversity of the artworks placed on sale at the fair, priced anywhere from below $10K to above $1 million. Participants at the fair do not seem to conform to a single price range of works, and rather bring in works from a variety of ends in the market.
Number of Artists per booth
Total posted value of booth
A majority of 57% dealers at Art Toronto in 2018 held more than 7 artists per booth. Approximately a third hold 3 or more artists, while a margin of 3% had only 2 artists in their booth. This supports the implications of the dealers’ posted prices that Art Toronto inclusively attracts and presents a broad range of artworks and artists rather than focusing on certain art market segments.
Dealer Cost of Attendance
The most frequent cost of attendance for 30% of dealers at Art Toronto fell within the range of $10-20K. 20% reported costs of $20-30K, followed by approximately 15% who handled costs of $30-50K. Less than 20% claimed costs below $10K, and a margin of approximately 3% dealers experienced high costs above $100K, due to international shipping and staff expenses. With consideration of the international geographic distribution of dealers at Art Toronto, the spread of the costs are reasonable as it varies depending on distance and other factors such as.
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1.3 Sales at ArtTO

This chart represents the sales each art dealers expect to have in each of their booths at Art Toronto. Art Dealers does not have high expectation on selling their works’ at this event. This chart is highly skewed towards the left, 85% of the art dealers are anticipating less than 50% of the artwork’s to be sold at Art Toronto. Only 15% of the dealers believe, more half of the works would be sold.
Expected Total Sales of Booth
Dealers' view on the Future of Art TOronto
Effect of Art TOROnto on Annual Sales
This chart shows the art dealers’ future outlook about Art Toronto. 70% of the art dealers are confident about the future sale of Art Toronto, 25% holds a neutral opinion on the future outlook and 5% holds a negative future outlook.

This chart represents the art dealer’s opinion about how Art Toronto can enhance their artworks’ total sale. As the chart is mostly skewed in the middle, 52% of the art dealers believe Art Toronto would “slightly” bring benefits to the sales, and 26% said Art Toronto would “moderately” help their sales.

The results from inquiries regarding’ expected sales at Art Toronto provides insight to the purpose the fair serves for dealers in terms of their business prospects. As mentioned earlier, 70% of dealers who express positive outlooks of the fair in the future, as well as the willingness to attend the event at particular financial costs, nearly 50% of dealers expect sales of less than 25% at the fair, followed by approximately 35% who expect sales between 25-50%. When asked the extent, their attendance of Art Toronto benefits their annual revenues, more than half of dealers responded “slightly” and approximately 25% answered “moderately”. A notable portion of nearly 20% reported that the fair did not benefit their yearly revenue at all. Despite dealers are favoured towards the positive outlook for future Art Toronto events, the charts regarding the expected sale and the benefits Art Toronto bring to art dealers are skewed to adverse expectations.  
"This reflects that sales are not the sole incentive for dealers to attend Art Toronto. Rather, the fair serves as a valuable platform that facilitates networking and marketing, while providing opportunities for sales. Dealers are optimistic in the fair’s promising potentials to boost sales but do not demonstrate reliance on the event itself to generate their revenues."  

1.4 Collector and Dealer Attendance

There is the overwhelmingly positive reception of Art Toronto by both art dealers and collectors, as illustrated by the high percentage of participants who would return to future fairs (96% of collectors and 95% of dealers responded that they would attend Art Toronto again). This is in accordance with the survey finding that 70.5% of dealers at the fair expressed positive outlook towards their 2018 sales at Art Toronto in relativity to other art fairs.
future Participaton
Art Collectors
Art Dealers
Years Returning to Art Toronto
Art Collectors
Art Dealers
With consideration to returning exhibitors, survey results revealed that in art collectors, 52% are attending Art Toronto for the second time, and 10% have attended more than 10 times, In art dealers, 31% have attended the fair more than 10 times and more than a third are returning for their second or third time. It is evident that Art Toronto is successful in maintaining loyal and regular attendees who consistently return to the fair. Moreover, it is able to capture first-timers and encourage them to return for the next year.
Number of International aRt Fairs Attended in the Last Year
Art Collectors
Art Dealers
Among art collectors at Art Toronto, 60% do not participate in any international fairs, and approximately one-third hold sparse attendance. Less than 10% have participated 3-5 times, and an even smaller proportion of 7% have attended more than 10 international fairs.

Looking at art dealers, there is a slightly higher attendance of international fairs with 26% who have been to 3, Once again, only a mere margin of 2% have been to more than 10 fairs, with the majority of 36% who have never attended international fairs.
"This lack of participation in international fairs reveals the tendency of Canadian art collectors and dealers to focus on market activity within the domestic scope."
This may be due to factors such as the cost of attendance and personal interests but moreover demonstrates the potential value in expanding the scope of the Canadian art world through more communication with international art market players through participating in other art fairs around the world.
Looking at art dealers, there is a slightly higher attendance of international fairs with 26% who have been to 3, Once again, only a mere margin of 2% have been to more than 10 fairs, with the majority of 36% who have never attended international fairs.
02
Chapter

The Canadian Art Auction Market

An overview of ArtTO 2018 at the Metro Toronto Convention Centre from October 26-29, 2018. Through our comprehensive research of collectors and dealers at the fair, we've compiled an overview of
Profile of Dealers
1.1
Dealers’ Overview of ArtTO in 2018
1.2
Sales at ArtTO
1.3
Collector and Dealer Attendance
1.4

2.0 Key Findings

Positive market outlook, public May 2018 auction sale surpassed the last-fall auction sale.
The 2018 spring live auction sale comprised  of  4 major auction houses (Heffel, Consignor, BYDealers, Consignor) and reached $20,325,225 in sales. Heffel made $14,624,761 in sales, Consignor  $2,203,334, Waddington's $2,043,230 and BYDealers $1,453,900. Total sales have increased 9% compared to the last live auction sale in November 2017.

Heffel Fine Art Auction House in Toronto dominated the spring Canadian auction sales.
Among the four auction houses, Heffel acquired the largest share by value in the 2018 spring auction sale, accounting for 69%, however their supply volume constituted 27% during the May auction sale .

Waddington surpassed its last Canadian live auction sale due to an increase in artwork supply.
Waddington's total sales rose by 68% above  its 2017 fall auction sale, bringing its sum to $2,161,880. Although, as Waddington maintained a similar sell-through rate of 74%, this outperformance can be attributed to the increase of 48 artworks supplied on the auction house.

With a constant sell-through rate and volume supply , Consignor’s spring sale in 2018 surpassed that of fall 2017
Maintaining a similar sell-through rate and volume supply as the previous fall auction sale, Consignor’s spring sale grew by 75%, totaling  $2,203,334. This increase  was due to the sale of “Hot day in Kensington Market” by William Kurelek at $472K.

90% of artwork on Canadian secondary art market is priced below $100,000. The most popular price range is between $10,000 and $50,000.
With the constant sell-through rate of 75% at every price segment, artworks priced below $100K accounts for 90% of the sales volume. Moreover, 48.2% of artworks  were sold in a price range of $10K-50K.

Artists from Les Automatistes movement shows outstanding performance at the last live spring auction sale.
Paul-Émile Borduas and Jean Paul Lemieux are ranked in top 2 of the 2018 auction sales with a combined 28.86% of sales (Paul-Émile Borduas with 19.71% of sales and Jean Paul Lemieux 9.15%). Moreover, Borduas‘ “Figures Schématiques” was the most highly priced artwork sold, at $3,601,250 through Heffel.   

Group of Seven artists’ established artwork on the secondary market ranked these landscape painters as the 20 best selling artists since 1984.
Lawren Harris, Alexander Jackson, and James Hervey Mcdonald, Arthur Lismer, Frederick H. Varley associated with the Group of Seven are ranked in the top 20 best selling artists on the secondary market, representing 47% of the market share. Emily Carr and Tom Thompson were closely influential to these Canadian landscape painters.

2.1 Canadian Auction Landscape

BYDealers
‍Bydealers is the first auction house collaborating directly with primary market dealer, a new business model. This allows ByDealers to inherit expertise of the associate dealers, and their extensive knowledge of the art scene and its players. The aggregate of these experts is able to set up auctions comprised of the most sought-after artwork and present it to collectors.Buyer’s premium policy: BYDealers charges a 20% buyer’s premium on the hammer price of each lot sold. The buyer’s premium is payable by the winning bidder, in addition to any applicable sales taxes.

Heffel Fine Art Auction House
Heffel Fine Art Auction House, a division of Heffel Gallery Limited, was established in 1995, and through its inaugural auction, became the first western Canadian fine art auction to achieve over $1 million in sales. Heffel has revolutionized the way art is sold in Canada and now conducts live auction events semi-annually, in May and November of each year. It is one of the most prestigious auction houses in Canada.Buyer’s premium policy: The Buyer’s Premium is the amount paid by the Buyer to the Auction House on the purchase of a Lot, and is calculated based on the Hammer Price as follows: a rate of 25% of the Hammer Price of the Lot up to and including $25,000; plus 20% on the part of the Hammer Price over $25,000 and up to and including $5,000,000; plus 15% on the part of the Hammer Price over $5,000,000, plus applicable Sales Tax.

Waddington's
Established in 1863 the formerly  ‘C. M. Henderson & Co. Auctioneers’  was transferred to Frank Waddington in 1939 and renamed  ‘Waddington’s’. With over 160 years of experience in the Canadian art market, Waddington’s expertise ranges from Asian, Canadian, contemporary, international and Inuit art, decorative arts, fine jewellery, as well as fine wine & spirits. Waddington’s is also renowned for its ability to find or create markets for unique collections such as the contents of Maple Leaf Gardens, Toller Cranston’s Toronto Collection, The William Jamieson Estate Collection, the FXSmith Studio Collection, and many others.Buyer’s premium policy: Waddington’s charges a buyer’s premium of 20% on the hammer price. Buyer’s premium and applicable Canadian taxes are added to the hammer price. Taxes are exempt for any items directly shipped from our premises out of Canada.

Consignor Canadian Fine Art
Created by Ryan Mayberry in early 2012, Consignor Canadian Fine Art bridges the gap between traditional art auction services and the online fine art marketplace. With dedicated preview and gallery space, regular art auctions, and partnerships with national art experts, Consignor provides both buyers and sellers of Canadian Art a unique and effective set of services which marry the traditional methods of promoting artwork and  the means of building a collection.Buyer’s premium policy: A buyer’s premium of 18% of the successful bid price is to be paid by the Successful Bidder to CAL as part of the purchase price. In addition, 13% HST (Harmonized Sales Tax) is applied to the successful bid (hammer) price and buyer’s premium.

Walker’s
Walker’s  provides a comprehensive range of services including expertise in the appraisal and sale of 19th and 20th century Canadian and European paintings,  and Asian Arts.

Hodgins
Hodgins is  the leading and most trusted art auction house in Alberta which has been selling Canadian & International art since 1985.
Hammer price from 2009-2017
The total annual hammer price in the last 10 years on the secondary market in Canada have never surpassed  $25M. In 2009, the yearly total sales started  at $25M which was below the high estimate price. However, due to a lower supply of artworks on the art market, the total sale from 2009-2014 decreased by an average of 8% year-over year. From 2015-2017, the total annual hammer price surpassed the auction houses’ top-line estimation, reaching the $25M mark once again on the secondary market.
Auction Houses Hammer Price
The annual volume sale and sell-through rate from 2009-2017Annually, on average, the Canadian secondary art market offers 489 artworks. Whereas  only 69% of them would typically be sold, (337 lots ) in the last ten years. In 2010, the auction house reached its peak in sell-through rate at around 81%. The same year, auction houses had a career low of 69 unsold artworks. From 2011-2017, even though the artwork's volume supply on the secondary market increased, the average sell-through dropped by 2% annually over 7 years compared to 2010.
Sell-through Rate
Share of the Total Sales by price bracket from 2009-2017
This chart shows the total number of individual artworks and the value of each artwork by auction houses in the past 10 years. The sales volume is strongly skewed towards the lower-end of the chart, where around 90% of the artworks were sold under $100k, they represent a small proportion of the value of the sales (32%).  At the higher end, 10% share of each work were sold beyond $100k, this market segment accounts for 68% of the total secondary market. It is important to note that the volume sale of each of these artworks were limited, investors highly value these works above $100K.
Sales and Value per Price Range

2.2 Review of Recent Live Auction

BYDealers
Due to a high price of Printemps à Québec-Ouest which was sold  significantly  above the average hammer price of the other artworks, this outlier was removed to make the chart more readable. The color blue corresponds to the area where the hammer price is below the low estimate value. The color orange corresponds to the area where the hammer price is between the low and high estimate price, and the color yellow is where the hammer price is above the high estimate price.
Hammer Price, BYDealers
Hammer Price Under 100k, Bydealers
About 45% of the artworks were sold below the low estimate price, about 45% of the artworks were sold between the low and high estimate price and remaining 10% of the artworks were sold above than the high estimate price. Thus, by comparing the hammer price with the low estimate price, the average hammer-low estimate proportion of the artwork’s hammer prices below the low estimate value was at 85%, and the average hammer-low estimate proportion of the artwork’s hammer prices between the low and high estimate price was at 118%. Thereby, most buyers have been biding ±15% from the low estimate price.
Hammer Price vs. Low Estimate, BYDealers
The bar chart below illustrates the percentage of artwork sold in  different price ranges in November 2017 and May 2018. According to Price Segmentation, in May 2018, 93% of the artworks were sold below $100K. By comparing this  with the performance in November 2017, 15% more artwork were sold under $10K while 14% fewer artworks were sold between $10K and $50K.
Price Segmentation, BYDealers
Value vs. Volume, Bydealers
In the summary table above, the low average earnings rate (total sales / total average estimate) indicates ByDealers averaged  57% in sales for every project earned in final sales. In comparison with the other auction houses, the average earnings/sell-through rate indicated average earnings of an auction, based on the proportion of artwork sold.  BYDealers has an earnings/sell-through rate of 0.867 which means in comparison  to the other auction houses’ average earnings, ByDealers  earned 0.87 cents in sales for every projected earned dollar. The auction sell-through rate is at 0.66. Among the sold artwork, the total sales in ByDealers ($2,148,400) are below the total low estimate price ($3,180,000).
Heffel
To further analyze Heffel’s performance, a chart representing the hammer price of each artwork and a diagram representing price segmentation is conducted in the  following charts.

According to the following diagrams, 75% of the work was sold at a price below $100K. Among them, around 13% of them were sold at a price under the low estimate price. 47% of the artwork was sold between the low and high estimate price range, and 40% of the artwork was sold above the high estimate price. A large portion of artwork was sold above the high estimate price.
Hammer Price, Heffel
Hammer Price Under 100k, Heffel
From the work that was sold under the low estimate price, the average hammer-low estimate proportion is at 92%, and from the 47% of the work that was sold between the low-high estimate price, the average hammer-low estimate proportion is at 110%. 60% of the buyers have been biding ±10% from the low estimate price.
Hammer Price vs. Low Estimate, Heffel
The bar chart below illustrates the percentage of artwork sold in the different price range in November 2017 and May 2018. According to Figure Price Segmentation, in May 2018 73.12% of the artworks were sold below $100K, while 26.88% of  artworks were sold above $100K. In comparison with the performance in November 2017, 3.53% more artworks were sold between $50K-100K. From the performance of price range, Heffel focuses more on a middle-to-high end of the art market which amounted between $10K and 1 million.
Price Segmentation, Heffel
Value vs. Volume, Heffel
Among the artwork which were sold above the high estimate price, there is a significant gap between the low estimate price. Among the 84% of sold artwork,  total sales by Heffel ($14,624,761) is between the total low estimate price ($11,501,500) and the total high estimate price ($17,038,500).

Thus, in proportion to the artwork’s pricing range, Heffel possess a significant amount  of medium-to-high-end works with better quality where people feel comfortable biding above the high estimate price. Heffel typically auctions high-quality work that is actively in demand. For this reason, the bidding sentiment is enthusiastic and competitive. As a result, artworks are often sold above the high estimate price, which might indicate that intrinsic value of artworks is lower than what clients paid.
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Waddington's
To further analyze its performance, a chart representing hammer price of each artwork and a diagram representing price segmentation are conducted as following figures. According to the bar chart, Waddington sold a large proportion of artwork at a price between $0 to $50K. Three artworks sold above the $100K mark, significantly  above the high estimate. Excluding  these outliers, 97% of total artworks were sold under $100K. Among those artworks, around 27% of the works were sold below the low estimate price, 27% of artworks were sold between the low and high estimate price range, and  45% of the artwork were above the high estimate price. From this chart, it illustrated that Waddington’s performance has surpassed their expected results.
Hammer Price, Waddingtons
Hammer Price Under 100k, Waddingtons
From the 27% of works sold under the low estimate price, the average hammer-low estimate proportion is 94%. Moreover, from the 27% of works  sold between the low and high estimate price, the average hammer-low estimate proportion is 121%. Even though 1/4 of the artworks were sold under the low estimate price, the standard error of their corresponding low estimate price is at around ±2%. Thus, the artworks were mostly sold around the low estimate price. Among the 74% of sold artwork, the total sales by Waddington ($2,161,880) is above the total low estimate price ($1,466,100) and is below the total high estimate price ($1,927,800). Waddington has an average earnings rate at 1.274, and their average earnings/sell-through rate is at 1.727.
Hammer Price vs. Low Estimate, Waddingtons
According to the value and volume diagram, Waddingtons generally sold  94.68% of all artwork at a price ranging $0 to $50K. The most revenue was generated by artworks in a range of 10K -50K, followed by artworks which were bid above 100K, though these high-value artwork only make up 3.19% of the whole volume of works sold. Waddington had the best overall results in  their auctions. The total sales were above the high estimate price, which means Waddington’s auction generated more sales than the maximum predicted sales. Moreover, the auction house made an extra 0.27cents/ dollar. Compared to other auction houses, they generated an extra 0.73 cents/dollar. Regarding their sales, the artwork’s hammer price is sold at a profitable range and  most works  are sold above the high estimate price.
Price Segmentation, Waddingtons
Value vs. Volume, Waddingtons
Compared to the other auction houses, Waddington’s average estimate price is below the average art market price for similar work. Most of the sold artwork is under $100k. Even though they have some high-quality work, they lack works which merit a hammer price above $1M.
Consignor
According to this graph, only three works have been sold above $100K. In contrast to the other two artworks, lot 38  was sold below the high estimate price. Moreover, lot 21’s hammer price seems to have a large gap compared to the low estimate price.
Hammer Price, Consignor
Hammer Price Under 100k, Consignor
Even though 1/5 of the artworks were sold under the low estimate price, 98% of the orange dots are touching the blue line, where the standard error of their corresponding low estimate price is at around ±5%.
Hammer Price vs. Low Estimate, Consignor
According to the value and volume diagram, Consignor generally sold 92.22% of all artwork at a price point between $0 and $50K. While  artwork priced above 100K generated the most revenue , these high-value artworks only account for 3.33% of the total volume of artworks. The second highest sales bracket was artworks priced between $10K and $50K . Based on this diagram, Consignor has a similar pricing strategy as Waddingtons.
Price Segmentation, Waddingtons
Value vs. Volume, Waddingtons

2.3 Market Overview

The sell-through rate based on low-estimate price segments
The fine art auction market is a growing market where volatility is high. Separating  artworks into different low estimated price ranges shows how the sell-through rate remains  consistent throughout different price ranges. In the last spring auction sale in 2018,  auction houses’ price estimation did not necessarily prevent art collectors from buying prestigious artworks on the secondary market. In a highly volatile market, it’s rare to see a low fluctuating sell-through line seated at around 75% where unsold lots go hand in hand with the  volume of artwork offered on the market. The consistent sell-through rate of  the four major auction houses’ spring  sale shows that for every four auctioned artwork, there is at least  one unsold work. The market demand had been reasonably constant.
Sell-Through Rate Based on Low Estimate Price Segments
Hammer Price in proportion to Low-Estimate Price values.
This chart shows the hammer price to low estimate price ratio, where we compare the difference between the hammer price and the low estimate in different price segments in the last auction sale. On average, in the last spring live auction sale, the artworks were mostly sold beyond the auction houses’ estimation price, and the hammer price trendline is more skewed towards higher-end of the price segments. As price grew, investors are more confident about higher valued works.
Hammer Price in Proportion to Low Estimate, Different price Ranges
Price Segmentation
This table represents the market share of total sales and of the volume supply, as well as the change in the volume of shares from 2013-2018. Among the 211 individual artists which appeared on the last live auction sale, the artworks sold beyond $100k represents 70% of the total market share in 2018.  Over the last five years, artworks priced above $100k have increased by 57% in the sales volume, resulting in an increased compounded annual growth rate of 11.95%. Moreover, artworks sold between $10k-$100K have a notable market share of the secondary market.
Price Segmentation
Canadian May Auction’s Sales and Value per price range
The secondary market sold a significant number  of high-end artworks after the 2008 financial crisis since the demand for  highly expensive artwork increased. This chart represents the value and the volume of artworks in different price ranges in the spring auction sale. In the volume sales, the most abundant sales  according to hammer price segment is between $10k-$25k where it represents around 43% of the artwork sold in  in Spring 2018. Although 90% of the artwork was  sold below $100k, the high-end artwork selling above $1M represents 68% of the total value share in the four auction houses’ total sale. The volume sales/price is not proportioned to the value share/sale. Thus, the artwork’s quality is more profitable than the quantity.
May Auction Sales and Value Per Price Range
In the last Canadian spring auction sale, there were only two artworks that were sold beyond $1M. Both “Figures Schématiques” and “Morning Lake Superior” are  top-priced artwork that were  sold by Heffel at $3.6M and $1.1. As previously mentioned, these two prestigious artwork add up to around $4.7M which accounts for around 20% of the total spring auction sale. Heffel has also made more net sales than the other three auction houses by a margin of  2 paintings. Heffel is  dominating the art market for the top-selling artworks where, they were responsible for 80% of the top 20 artworks’ selling price in the spring auction. The auction house’s reputation has surely gained the trust of many  wealthy collectors.
Top Selling Artworks at the 2018 spring live auction sale
Artists
This chart shows the total sale and the market value of each artist at the 2018 live auction sale happening in- (Heffel, Waddington’s, Consignor and BYDealers). The highest selling artist in the spring auction sale was Paul Émile Borduas, whose sales totalled $4,167,750 representing one-fifth of total spring auction sale. Moreover, Jean-Paul Lemieux and Lawren Stewart Harris have each respectively made $1,934,500 and $1,856,068 during the last sale where their share of value was above 7% of the secondary market. Despite the diversity of the Canadian art market, the top three artists’ artwork hammer price represents around 38% of the spring auction sale. They surely serve as the leading artists share value on market.
Top 20 selling artists canada,  2018 spring live auction sale
Top 20 selling artists Canada, all time
"The highest selling artist in the spring auction sale was Paul Émile Borduas, whose sales totalled $4,167,750 representing one-fifth of total spring auction sale."
However, according to the all-time best selling artists ranking, Paul Émile Borduas’ artworks total sales are not ranked among the top selling artists of all time on the secondary market since 1984. Lawren Harris’ sales totalled $89,659,460 representing one-fourth of the that total secondary market. Moreover, eleven canadian artists’ works reached beyond $10M, accounting over 3% of the secondary market.
"5 artists; Lawren Harris, Alexander Jackson, and James Hervey Mcdonald, Arthur Lismer, and Frederick H. Varley, associated with the Group of Seven are ranked in the top 20 best selling artists on the secondary market."
Emily Carr and Tom Thompson were closely influential to these Canadian landscape painters.

The appearance of top Canadian Artists on the international auction market
This chart represents the proportion of Canadian individual artists who sold artworks at  international auction houses. On the international auction market, more than half (58%) of the work was sold in the USA, 21% of the sales happened in the UK, and 7% of the sales reached France. Moreover, less than 2% of these Canadian artists work were sold in an Asian country such as China or Japan.
Auction House Value SHare, During Sale
Auction House Value Share
Even though Waddington’s is leading the share of sales volume with 39% in the last auction sale, Heffel is surely dominating the total sales’ value on the secondary market with 69%. This latter did not have the most supplied artwork on the market, but Heffel had a skewed pricing segmentation where the most expensive artwork was sold around $4M, surpassing Waddington’s total sales. In contrast to Heffel, BYDealers, Consignor and Waddington’s price segmentation were more skewed towards the lower-end, they had a more accessible price range for collectors to purchase arts. Therefore, Heffel’s high auctioned artwork has dominated the value share of the spring auction sales in 2018.
03
Chapter

Canadian Art Dealers

Examining the Canadian art dealer landscape and dealer's market traction, sales, financing, supply, geography and future trends and challenges. We also examine the solutions provided by dealer's at ArtTO 2018.
General Info
3.1
Dealer Sales
3.2
Dealer Margins and Financing
3.3
Supply and Inventory
3.4
Challenges, Future Trends and Solutions
3.5

3.0 Key Findings

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Low dealer participation on the secondary market and polarized expectations for revenue in 2018.
86% of dealers mainly participate on the primary market, 25% of which reported an expected estimated revenue of over 1 million dollars by the end of the year. For dealers who also acts in the secondary market, 50% dealers expect revenues less than $10,000 but 20 percent of them expect to earn over 1 million dollars in 2018.

Positive market outlook: 10-30% growth in dealer sales performance in 2018 compared to the previous 3 years
Nearly 40% of art dealers see slight improvements of 10-30% growth in sales in 2018, and 13% report significant improvement of market performance with over 30 percent of sales growth.

Personal investors and sales were reported as dealers’s most prominent sources of financing
Dominant sources of financing reported were personal investors (family and friends) followed by sales, reflecting a young and limited market and the potential in seeking alternative financing sources.

Most dealers rely on working on consignment and maintains a relatively high turnover rate and sustainable cash conversion cycle
72% of art dealer sales come from working on consignment due to limited demanding and restricted inventory financing. The market also has an efficient inventory turnover rate and short duration before paid, easing their cash-flow shortage and financial risks.
Finding new clients, art market size, overheads for business premises, and participation at fairs ranked as four biggest challenges. Financing business and debt concerns are the biggest challenges foreseen for the next 5 years.
Finding new clients has been the challenge rank 1st  for dealers in the past 5 years, and seem to continue as the biggest concern for the next five years. When inquired of challenges they foresee in the near future, financing business and debt concerns were ranked at the top.  

Growing requirements of establishing online presence and utilizing technology to alleviate expenses and differentiate on the secondary market
Through online channels, Canadian dealers can expand their reach beyond domestic market horizons to access a larger market as well as network with relevant market players. Dealers are looking into the establishment of online market platforms, which may help improve outlooks and alleviate expense pressures from overheads for business premises such as rent.

Dealers share in the art collectors’ concern over awareness of art collecting in the younger generation, who demonstrate great potential to vitalize the market.
Dealers reflect that there is a lack of younger generation participation in the art market, expressing the need to cultivate interest and educate awareness in emerging young collectors. Young millennial collectors have driven online sales and tend to be more dynamic market players, which can bring more activity and innovative possibilities to the art market.

Promising value in working with wealth management to improve sales and growth the art market
43.5% of dealers responded that they have been contacted by wealth management advisors or firms. It is a promising alternative channel for dealer sales that may help educate and introduce a new client base into the art market, supported by the emerging trend of Canadian art collectors incorporating art as an asset into their long-term wealth management strategy.

3.1 General Info

Geographic Composition
The geographic composition of Canadian art dealers appears to be unevenly split, with Ontario, Québec, and British Columbia taking up the top three proportions in the number of art enterprises. There are more than 500 dealers in Ontario, taking up 34% of total numbers, followed by Québec (over 300 dealers), equal to 22% of total amount.
Geographic Composition of Art Enterprises in Canada
Age Composition of Canadian Art Dealers
Age Composition
The Canadian art dealers are distributed to middle to senior age groups. 96% of art dealers are older than 30 years old. 44% of dealers are between 30 to 40 years old, followed by 19% of dealers aging 50-60 and 60-70 years old respectively. This situation is due to the fact that this is a resource-based industry which requires strong capital back-up and abundant supply resources in order to compete in the market.

3.2 Dealer Sales

EXPECTED 2018 ANNUAL ART DEALER REVENUE
Considering both primary and secondary markets, respondents vary in terms of their expected total revenue in 2018. 35% of the dealers are optimistic that their expected revenue in 2018 will reach a total amount of above $1 million, while 26% of dealers estimate their revenue would fall under $50,000. The respondents surveyed are targeted towards dealers who had participated in the Art Toronto event and have had a significant business scale, therefore not considering smaller scaled art dealers with lower sales revenue.
Primary market expected revenue
86% of dealers mostly participate on the primary market, while 12% focus only on the secondary market and a margin of 2% sell on both markets. On the primary market, more than 25% of Canadian dealers reported an expected estimated revenue of above $1 million by the end of the year.
EXPECTED REVENUE FOR PRIMARY MARKET 2018
Expected revenue comparing the primary and secondary market in 2018
For the respondents who participate in both primary and secondary market, expectations on 2018 revenue are differentiated between the two markets. The results from the primary market reveal polarized expected revenues, concentrated either at the high or low end. According to the survey, 50% of dealers who are active in both markets estimated their revenue from secondary market to be less than $10,000, followed by 20% who estimated their revenue from secondary market to be above $1 million. Dealers are more spread out within the middle to high ranges in their expectations on sales on the primary market. 30% estimates that their sale will fall between $100-500k, 26% for over $1 million, and 17% for between $500k and $1 million. This implies that the majority found marketing opportunity less optimistic on the secondary market, resulting the low participation level on the 2ndary market. This further suggests higher entry barriers locating opportunities for second-hand sales compared to primary market consignment.

EXPECTED REVENUE FOR PRIMARY AND SECONDARY MARKET 2018
MARKET PERFORMANCE RELATIVE TO LAST 3 YEARS
In regards to market performance compared to the previous 3 years, nearly 40% of art dealers reported improvements of 10-30% growth in sales in 2018, followed by approximately 35% who reported no significant changes. A margin of 13% dealers reported significantly better market performance of more than 30% sales growth in 2018 compared to the last three years. According to the results, Canadian art dealers hold a moderately positive outlook for the market this year.
26% of art dealers claimed profits of approximately $50-100K per year, followed by 22% who make between $10-50K and between 100-500K respectively. However, only 4% of the respondents surveyed expected their 2018 profits to be higher than $1 million.
EXPECTED 2018 PROFITS

3.3 Dealer Margins and Financing

In the art dealer market, accessing credits and sources of financing have remained one of the most difficult challenges, given the highly volatile nature of cash flows and annual revenue generated. The financial issues are especially essential to beginners and for dealers who wish to expand their business, building up significant entry barriers and to compete with existing dealers with dramatic scales.
SOURCES OF FINANCING
In both the Canadian and global market, art dealers are usually self-financed and have low levels of leverage. Subsequently, a growing number of dealers in the primary market started working on consignment to operate without large capital, which gradually spread into the secondary market in order to transfer financial risks to artists or vendors. From the survey, only 16% of the dealers use debt as a way for financing, among those 40% expected their debt to be less than 15% of total revenue. Personal investors and operating sales are major financing options, making up 36% and 32% of all financing sources respectively. For the dealers who are financed by personal investors, most of them fundraise among family and friends, secondarily from artists, galleries and financial institutions. Canadian art dealers have relied heavily on their individual resources and personal sales, and are obscured by lack the established social circles and initial capital to finance their business. This reflects that the Canadian art market is still in need of a diversified funding support, and there is potential in seeking alternative sources for finance.

3.4 Supply and Inventory

The art market is mostly a supply-driven market, with sales per year dependent on the quality of works and artist talent. It is worth noting that “accessing supplies and inventories” has been one of the most undeniable challenges to art dealers in recent years due to the excessive amount of non-differentiable supplies, especially in the primary market. Due to a lack of inventory financing, a vast majority of art dealers hold an inventory basis of consignment, selling as agents for artists or vendors rather than building their own inventories.
INVENTORY BASIS
SOURCES OF SUPPLY
In terms of sources of supply, the largest portion of 40% comes directly from the artist from the primary market, usually through working on consignment or direct sales. Besides, private sectors, estate, auctions and networks of dealers are important sources for dealers to acquire their supplies from both primary and secondary market.
Time Holding
In 2018, 47% of dealers responded with an average holding time of 12-18 months for its inventory, followed by 27% reporting 1-3 months. No respondents surveyed hold inventory for more than 18 months on average. The holding period is highly variable as it depends on the type of work and is volatile to changes in demand. Individual tastes and preferences also impact market structure. However, compared to the global market, where 34% of inventory is held more than 1.5 years, Canada has a relatively more active and liquid art dealer market.
AVG. HOLDING TIME 2016-2018
# OF PIECES HELD ON HAND
Payment Cycle
Another important factor that affects the cash-flows and financial liquidity of art dealers is the average time taken to get paid after the item is purchased. The survey results show that more than 80% dealers claim they are paid within a month, reflecting high level of liquidity in the market. The tightened payment cycle prevents dealers from lowered risk of bad debt and provide them with a more flexible cash flow.
AVG. TIME TAKEN TO GET PAID
Pieces on Hand
More than half of the respondents on average hold more than 100 pieces of works as inventory or on consignment, while other respondents who hold less than 10, 10-50, or 50-100 pieces share equal proportion. The dealers’ abundant inventory basis and relatively short duration holding inventory indicate an efficient inventory turnover cycle, with sufficient artist supply, pieces of works, and stable demands.

3.5 Challenges, Future Trends and Solutions

Navigating the constantly evolving art market is a challenge shared by all participants in the field. A survey was conducted to identify the past, present, and estimated future challenges faced by art dealers in their business. Finding new clients was the most highly ranked challenge for dealers in the past 5 years, and remains the top concern for the next five years. Other frequently expressed challenges include art market size, overheads for business premises such as gallery, rent, and storage, and participation at fairs. A rising challenge for the upcoming future years is financing business and debt concerns.
ART DEALER CHALLENGES IN THE LAST 5 YEARS
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While dealers express that unpredictability and the stated challenges are part of the inherent nature of the market, we will demonstrate our suggestions to deal with those problems. We advise to take imperatives to establish a solid online presence. Through online channels, Canadian art dealers will be able to have a greater access to international clients and expand their reach beyond domestic market horizons to access a larger market as well as network with relevant market players.

The incorporation of technology may give way to more innovative and efficient management processes that can help dealers differentiate their business and explore new opportunities. To address the difficulties in generating revenue on the secondary market, as reflected by the low expectations for 2018 sales in comparison to the primary market, it is worthwhile to consider novel sales methods. Dealers says that they establish and utilize online secondary market platforms to attempt to improve outlooks on the secondary market. This would also alleviate parts of the expense pressures originating from overheads for business premises such as rent and use of gallery space. The findings of the 2018 U.S. Trust Insights on Wealth and Worth survey confirm the necessity of online models for those in the art business. Over the course of the year, online art acquisitions have grown rapidly, as 43% more collectors bought art online compared to the year prior. In terms of generation, 78% of Millenial collectors have bought art online in the past year (U.S Trust, 2018).

This accords with another possible solution noted by dealers--advocating for cultivating the awareness of and interest in the art market among emerging collectors. Art dealers pay attentions to emerging collectors because art market’s expansion will rely on introducing young and creative minds. Young millenaire collectors play significant roles in driving online sales. The 2018 U.S. Trust Insights on Wealth and Worth survey inquired collectors from a wide age range of their plans to purchase or sell art. Among millennial art collectors, 97% anticipate art acquisition in 2018, 85% plan to sell art in the next year. Both figures are significantly higher than art collectors from the older generations -- Gen X and the Boomers. “Younger collectors tend to be more dynamic, selling works as they build their collections” (U.S Trust, 2018). Thus there is evidently great potential to be discovered in young art collectors that can bring novel ideas and dynamic activity to the art market.
ART DEALER CHALLENGES This Year
This year, 43.5% of Canadian art dealers responded that they have been contacted by wealth management advisors to inquire their intentions of acquiring artworks. Incorporating art collecting into individual’s overall wealth management plan stands as a promising alternative for dealer sales to help introduce a new client base to the art market. This is a mutually beneficial partnership that both promotes sales for dealers as well as integrates potential new features to the wealth advisor portfolio that allows them to deliver a more holistic service. This is supported by the emerging trend of incorporating art as an asset into their long-term wealth management strategy found in Canadian art collectors. In 2017, 29% of Millenial art collectors incorporate art into their wealth management strategy, this grew to 42% in 2018 (U.S Trust, 2018).

Many dealers reports that participation at local or international art fairs is an advantageous method to deal with business challenges, as it helps locate new market opportunities and expand networks. Furthermore, given the heavy reliance of financing on sales or personal investors such as family and friends, there is value in looking into opportunities to receive more support from the public sector, such as public or government funding. Dealers have also acknowledged the necessity to develop a stronger relationship with supplying artists to support their artistic production.
04
Chapter

Canadian Art Market Wealth

This section provides an overview of the wealth distribution of art collectors as well as their perspectives on art in the Canadian art market. It illustrates how, when, and why  Canadians have an interest in the art market currently.
Profile of Art Buyers
4.1
Art Collector’s Journey
4.2
Financial Institutions Involvement
4.3
Expert Opinion: Art Secured Lending
4.4

4.0 Key Findings

Growth of the Canadian Art Market relative to the Growth of the Canadian Economy
In the 2013-2017 period, auction sales had similar moving momentum with Canadian GDP per Capita at around 58% and 38% respectively.

Substantial Interest in Canadian Artists by both Domestic and International Collectors
Local Canadian artists are preferred over international artist by 82% Canadian collectors and 50% international collectors, while considering the paintings have identical characteristics.

Considerable Demand in Art by Age Range Extremes
Canadian collectors under 25 and over 50 years old would allocate more than 50% of a simulated wealth of $1 million CAD to art and collectibles whereas the majority of people would only allocate 10%. However, only collectors over 55 years old purchase art frequently.

Rising Popularity of Online art market platform
The Canadian art market has faced major changes due to social media (e.g. Instagram) and technology. Indeed, the majority of collectors (21%) collect their information on artworks through online art research platforms and 6% purchase their artworks through online art marketplaces.

Art fair remains collector’s major acquisition channels
Art fairs (42%) and galleries (36%) rank highest in terms of acquisition channel for Canadian collectors who purchase art pieces domestically. On the other hand, for Canadian collectors who purchase abroad, they prefer purchasing through galleries (42%) and art fairs (37%).

4.1 Profile of Art Buyers

Auction sales, GDP Per Capita, and Number of Canadian HNWI
Relationship between Canadian economy and Canadian Art market
In the graph above, the number of HNWI are divided by one tenth to allow the values to adjust itself for the graph.

From 2013 to 2017, the relationship between  auction sales and the number of Canadian HNWI, as well as auction sales and Canadian GDP per Capita, can be described as having similar moving momentum. This is suggestive of a link between the three elements.

The Canadian GDP per Capita, was lowest in these 5 years in 2013, at approximately $49,000. At the same time, so was the lowest number of Canadian HNWI, at roughly 320,000. The latter grew to approximately 380,000 and the former grew to $51,000 by 2017. This is indicative of positive growth in the Canadian economy. Auction sales, in 2013, were at $37 million and peaked in 2016 at $77 million. However, it reduced to $55 million in 2017. This negative change might have taken place as a market slump which is often seen over a period of time. However, with recent sales such as Leonardo da Vinci’s Salvator Mundi at a record price of US$ 450 million, the global art market and, subsequently, the Canadian art market will rebound to grow further.

Canadian Art Buyers
According to a study  of more than 3000 collectors, Canada ranks 11th with 2% of art collectors globally. Per continent, North America ranks 2nd with 28%,  lower than Europe (38%), and higher than Asia (18%) and Latin America (8%). It was found that Canada has more contemporary art collectors than Netherlands and Japan. There is also an increasing number of domestic privately owned museums as  they typically have financial power to buy high-quality artworks and have more flexible acquisition program than public museums.

Canadian Millionaires
In 2017, there were 984,000 Canadians qualify as millionaires and 1.5 million  rank among the top 1% in terms of wealth. However, these numbers are highly sensitive to exchange rates.

Collector Profiles
Through an ArtVenture exclusive survey of Canadian collectors, a more complete profile of Canadian collectors was drawn.
Age Distribution of Canadian Art Collectors
As observed from the graph, the majority of Canadian art collectors with diverse occupations are between 61 and 65 years old, followed by collectors under 20 years old. The twin peaks represent the fact that most art collectors are either above 50 years old or under 40 years old.
Simulated Situation: Allocation of $1M CAD to art and Collectibles
Regarding the extent to which collectors would allocate money to art and collectibles, the majority responded  10% of $1 million dollars (in CAD).  It was observed that people aged from 26 years old to 50 years old are reluctant to allocate more than 50% of 1 million dollars to art. On the other hand, collectors under 25 and over 50 were more willing to allocate the majority of the sum of money to art and collectibles.

Spending and Purchasing Behaviours in the Art Market

Among the 85% of participants who had previously purchased artworks, the majority of people under 40 owned less than 15 artworks, whereas people over 40 began acquiring more. Also, the amount spent on average per work varied significantly. It can be observed that 10% of collectors most frequently purchased works at $2,000, followed by $2,500 and $5,000.

As for the frequency of their purchases, 39% of people responded that they sometimes purchased  and 39% responded they did so rarely. However, 19% of people said that they purchase works of art often. The majority of collectors who responded this way are over 55 years old. Therefore, even though these results show that art is not a commodity good or even a good that is frequently purchased, there is still a significant demographic who purchases it regularly.
Amount spent on Average on Artwork
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International Profile
The questionnaire also surveyed  international collectors, including individuals from  Argentina, France and Japan. They were mainly aged  26 to 55 years old. When asked about how much money they  allocate to art and collectibles out of $1 million CAD, the majority responded 10%, which was similar to Canadian collectors’ responses.
When asked about their behaviors towards art as  investment, the majority (52%) of participants replied they view art as decoration.  This group cited their main motivation behind buying art was for aesthetic value. For that reason, they are not willing to replace their existing investment vehicles such as stocks and bonds with art and do not see it as part of their investment plan. This will be further discussed in the next section of the report.

As for  purchase behaviors, 76% of participants  purchased art occasionally. When they did, they mainly acquired from channels such as galleries (26%), art fairs (42%), online art marketplaces (11%) and other channels (21%), such as artist contacts, charities and by trading with friends.

When it comes to how participants  obtained information regarding artworks, the majority did so via online art research platforms (30%). As well as other methods such as learning from friends, artists, galleries and social media are very popular (33%) as well.
Artist Preference
Artist Preference (International vs Local)
ArtVenture’s exclusive survey found that 82% people prefer purchasing artwork made by Canadian artists,  compared to international artists, if both paintings were visually identical.

Out of the international art collectors, 50% prefer local Canadian artists. This preference stems from the importance and significance people would like to give to Canadian culture. They believe promoting Canadian art culture is of importance and their preference for the same would help in accomplishing that. Out of the art collectors who were over the age of 66, approximately 91% preferred local Canadian artists. However, the only age groups that had a 100% preference of local Canadian artists were in the category of 46-50 years.
26% of art dealers claimed profits of approximately $50-100K per year, followed by 22% who make between $10-50K and between 100-500K respectively. However, only 4% of the respondents surveyed expected their 2018 profits to be higher than $1 million.

4.2 Art Collector's Journey

Based on a Hiscox online art trade report, some of the biggest influencers of Canadian art are social media, technology and identity. Social media, especially Instagram, has caused massive change within the art market. It has led to more transparency and openness about who collects and who owns. Instagram especially has been very influential in spreading knowledge and awareness about artworks and the market, it’s the perfect blend between being a popular, entertaining and visual platform. This report also says that Instagram will be up to almost 1 billion users making it the most preferred social media platform twice in 2 years.  

Technology has also had a big impact on the art market. The ease of access to auctions through online portals has made it easier to buy and sell paintings. Many people have also shifted to online art purchase. The 2018 Hiscox report estimates that as web mobile traffic could double from 2014 to 2018, resulting in  an increase in the usage of mobile commerce to buy artworks.  

Another important influencer on this market is demographic factors such as gender and racial identity. This  is a relevant and nascent topic, with the growing acceptance of LGBTQIAPK people, in mainstream culture. For this reason representation within art in terms of race, gender, and sexual orientation has become increasingly important. This trend is seen at pitches and speaks to  contemporary social changes. Canada can adapt to this trend to correct or rebalance the political incorrectness relating to people’s freedom of expression and identity.

These rising trends observed can also be seen through the primary research conducted by ArtVenture.

Motivation behind Art Purchase
Collectors’ major motivation of buying art by far remains aesthetic value (68%). Other motivations are heritage (like family heirlooms),  as well as safeguard value, investment vehicle, status and participation in the art world, and other motivations such as the passion and love for art.
Art Buying Motivations
The art market is mostly a supply-driven market, with sales per year dependent on the quality of works and artist talent. It is worth noting that “accessing supplies and inventories” has been one of the most undeniable challenges to art dealers in recent years due to the excessive amount of non-differentiable supplies, especially in the primary market. Due to a lack of inventory financing, a vast majority of art dealers hold an inventory basis of consignment, selling as agents for artists or vendors rather than building their own inventories.
Often, the question  is whether art, in recent years  has become a normal good, as opposed to a luxury good. However, art still remains  a passion consumption. Galleries, auction houses and other estates that sell or facilitate the trade of art are responsible for providing lavish experiences to their guest and potential customers. This includes, but isn’t limited to, parties, exceptional services and creating an environment of grandeur. This in totality, creates the sense and perception that art is a luxury good.

Now, most people consider artwork based on aesthetic value. Companies and individuals have collections of artwork and the art-investment market has been growing over the years, especially in US and Europe. Canada is yet to do some catching up. This has led to the consumption of art in three distinct modes, namely as:

1. Collectible
2. Décor and aesthetic
3. Investment

Using primary research, the graph below shows the segregation of people's view of art in the categories mentioned above.
People's Outlook on Art
From the graph above, the majority of the people, 61%, view art in the décor and aesthetic category, which is aligns with the data  that indicated people’s main motivation of purchasing art is due to the same reason. The next category, art as investment, accounts for 25% of participants and collectibles  14%. 13% of participants  wanted to include art in all three of these categories. This is suggestive of the acceptance of art as  investment as compared to its usual category of décor and aesthetics.

To look further into the status  of art as investment, research was conducted that asked participants if they  would consider art as investment which can be part of the portfolio among their stock/bond investments. The resulting data indicated  that approximately 87% of participants  were not in favour of replacing their traditional investments of stocks and bonds with art. Some reasons stated were, but not limited to, the risk of earning similar returns, and an unwillingness to trade art. Through these reasons we see that aesthetic passion, and investment related uncertainty, are major factors in preventing artwork from being seen as a legitimate replacement to stocks and bonds.

Another way of investigating this relationship between art and investment is s to understand whether art is considered  part of wealth management services. As art is still seen as a luxury good, the acceptance of art as an investment will lead to an inclusion of art in wealth management strategies. The following graph shows art collector’s responses to including art in their wealth management services.
Include Art in Wealth Management plan
Over 89% of participants were opposed to including art in their wealth management plan. The reasons for this might include, but not be limited to, the lack in an investment environment in the art sector, unaffordable investment market, lack of trade and liquidity, etc. Another research method asked whether Canadian banks offered art management as part of their wealth management services to their clients. This is discussed in the next part of the report, under financial institutions involvement.

Although the above charts shows a lack of acceptance of art as investment, if we compare Canadian art market condition with that of the US and Europe, it shows that there is a lack of awareness of the financial opportunities within the art market in Canada. A report from Deloitte states that art-secured loans are estimated to be around $17 - 20 billion in the US. This is indicative of how US lenders have gained more trust in ar as investment , therefore allowing people to borrow against this asset. Around 67% of private banks offered this service, suggesting that US banks are increasing their capacity, ability and willingness to provide this art-secured lending service. This provides an incentive for people to own artworks as they can borrow capital against this asset and invest that capital in artworks itself or other investment vehicles. A survey conducted by Deloitte Luxembourg & ArtTactic, within the same report mentioned above, shows that around 57% of wealth managers had a strong understanding of including art and collectibles in wealth management services. The survey was answered by banks and family offices across the US and Europe. Collectively, all this information shows how the art market has been growing and is appreciated by professionals organisations. To add to this, 3 major institutions namely, US Trust, Citi Private Bank and J.P. Morgan Private Bank, provide art advisory to its clients in the US. This shows the opportunity for Canada’s art market and points to the current lack of awareness within Canada which has prevented it from achieving growth simultaneously with these other art markets.
How collectors do research
When it comes to methods employed by collectors  to research and gain information on artworks, the most popular is  online art research platforms (21%), followed by art advisors (19%) and dealers (18%). Other methods include Wikipedia (6%), magazines (8%), news (4%) and other methods such as through art fairs, friends, galleries and social media. Note that there is also a large number of collectors who do not conduct research at all (18%). The graph below showcases the data.
Research Methodology
Acquisition Channels
Most collectors purchase art works through different acquisition channels. The most popular ones are galleries and art fairs. Auction houses and online art marketplaces also frequently serve as a distribution channel for art works. Collectors are also likely to purchase directly from artists and friends.
For people who have not purchased artworks yet, but intend to, said they were inclined to  purchase from art fairs and online art marketplaces.
Acquisition Channels
Domestic
Abroad
Time Holding
In 2018, 47% of dealers responded with an average holding time of 12-18 months for its inventory, followed by 27% reporting 1-3 months. No respondents surveyed hold inventory for more than 18 months on average. The holding period is highly variable as it depends on the type of work and is volatile to changes in demand. Individual tastes and preferences also impact market structure. However, compared to the global market, where 34% of inventory is held more than 1.5 years, Canada has a relatively more active and liquid art dealer market.
"When looking at the frequency of collectors going abroad to purchase art, 61% have never done so whereas 37% have done so occasionally. Finally, 2% often go abroad for such purposes."
As for the channel of purchase, similar to what Canadian collectors would do locally, galleries and art fairs are still the most popular channels for acquiring art. Other channels, such as auction houses, artists, friends and even families, street vendors and local shops have also been mentioned.

The following pie-chart shows the shift to a different acquisition channel, online art purchases.
Purchase of Art
2017
2018
The proportion of people buying art online increase from 28% in 2017 to 40% in 2018. This shows how technology has enabled and made online purchases easier. It symbolizes how people have an increase in trust for online websites and portals to make valuable purchases like artwork.

4.3 Financial Institutions Involvement

Let’s look at some of the biggest banks in Canada to see the involvement of financial institutions in fine art. The biggest banks in Canada are as follows, in terms of market capitalization (CAD):

1. Royal Bank of Canada (RBC)
2. Toronto-Dominion Bank (TD)
3. Bank of Nova Scotia (Scotiabank)
4. Bank of Montreal (BMO)
5. Canadian Imperial Bank of Commerce (CIBC)

Other financial institutions include the National Bank of Canada (NBC) and Blue Bridge.

Blue Bridge is a wealth manager and multi family-office founded in Montreal, in 2002. They offer art consulting services. This service includes valuing artworks, appraising and negotiating deals, analysing the participants and the economy of the art market etc.

ArtVenture conducted phone interviews to obtain information about financial institution wealth management involvement with art. Through contacts with the six banks (RBC, TD, Scotiabank, BMO, CIBC and NBC) these institutions seem unaware of services relating to art advisory or investment. To conclude, banks have not yet started offering art wealth management services due to the illiquidity of the art asset, making it a risky investment as it is often  difficult to achieve the desired amount of return. There are a few who offer commercial art-related services, like Blue Bridge’s art consulting. However, the lack of art wealth management services  is indicative of why the Canadian art market has lacked growth as compared to the art markets in US and Europe. Nonetheless, the fact that banks have not yet  started offering this service, shows massive opportunities in the art investment market for the companies who will be entering this market.

Ability of Obtaining Loan for Art Purchases
As per the current market, gaining access to loans for art purchases is available. There are a few organisations that provide such loans in Canada, UK, USA, Australia & New Zealand. The following table shows details and information about those loans.
Loan Providers
There are several benefits of taking such loans. First, many credit-options have low interest rates or are interest free. Also, these loans are backed with the artwork as collateral, meaning other personal assets are not jeopardized.

One concern with these options could be that the customer has to bear transportation cost to the storage facility. Also, it is recommended to deposit the security, just in case anything happens to the artwork in the facilities. Even the location of these lenders is quite specialized, which could make them less accessible.

4.4 Expert Opinion: Art Secured Lending

Carly Gouweloos, MBA
Executive Manager
LONO
Fine Asset Lending
The following section was written by Carly Gouweloos, the executive manager at LONO Fine Asset Lending. Carly is an expert in art secured lending.
Art-secured lending is an effective way to leverage art assets to raise capital for whatever your life needs are.
We are seeing collectors becoming more strategic in the way they are investing in and holding on to key pieces within their collections. We have spent time with many collectors, galleries, artists, dealers, appraisers, auction houses, lawyers and accountants and they all confirm that their clients could use these services if they were aware of them.  

Why lend against your art?
If you have a financial need or have a more effective away to use your art equity, art-secured lending is an easy way to unlock that stored value. Ask yourself what you would do with $85,000 dollars in hand today? It is this easy to arrange.  

We are finding that our clients are using this unlocked capital for a wide range of purposes.
We have sophisticated collectors who leveraging their existing art to buy their targeted artworks when they become available. We have clients who are using it to fund their children’s education, tax bills, funding business inventory, and one couple used it to pay for their daughter’s wedding expenses. Some of our clients already have their art in storage, which makes it even easier to turn into immediate cash.

How does art-secured lending in Canada compare to Europe and the US?
Many art-as-collateral lending companies in Europe and the U.S. only accept values upwards of $1M per artwork. However, the average art collection value in a city like Toronto is smaller than in NY or London, so our lending products have been tailored accordingly offering solutions starting at $10,000 CAD. Across all markets, we see that provenance is a key component to appropriately appraise works and confirm title. Loan-to-value ratios are 50% across the board and interest rates decrease with higher value loans.

And how big is this market?
The art-secured lending market in the U.S. reached an estimated $17-20 billion in 2017 (Deloitte Art & Finance Report, 2017). The 10% rule suggests that the potential Canadian market value for art-secured lending is approximately $2 billion dollars, but we still have a way to go. We look forward to facilitating the growth of Canada’s art lending market as more and more collectors leverage these new lending opportunities available to them, especially as art values go up.