The annual New York May art sales, the biggest event in the art world calendar, start today in a drastically shrunken form, with Sotheby's expecting its contemporary art auction to generate less than a quarter of the sales it did a year ago.

The two weeks of sales – Impressionist and Modern auctions are this week and postwar and contemporary auctions take place next week – come after a 35 per cent fall in the price of art in the first quarter of 2009, according to the Mei Moses art index. That index excludes works that failed to sell. Some insiders put the price drop closer to 50 per cent, sharper than stock markets.

Ian Peck, principal of Art Capital Group, which lends money against artworks, said: “We have cut our valuations 40-50 per cent since the start of the year. We have seen some absolute forced borrowing but everyone, rich and poor, is facing liquidity problems.”