Sales of modern art are returning to levels seen before the global financial crisis, as collectors snap up works that have dropped in price in recent years as an investment or to decorate their homes.

Gallery owners taking part in Arco, one of Europe’s biggest contemporary art fairs being held in Madrid, said many collectors had seen art values soar in the last decade and had bet they would profit from any new rise.

But they said buyers were being more selective this time around and it is mostly the very wealthy who have returned to the market as growth in the United States and other major economies, such as Germany, picks up.

“There was such a level of restraint in spending that people are now starting to buy stuff that before they would not buy,” Arco director Carlos Urroz said at the opening of the fair which features 197 galleries from 26 nations.

“For this reason I believe Arco can be a parenthesis in this austere time which we have all had and people who have money will allow themselves a treat.”

Arco organisers are also hoping to find new buyers from China where there is a growing interest in modern art among wealthy collectors looking to expand beyond their own country’s artworks.

Several works by Pablo Picasso and Andy Warhol are among the art up for sale at the fair, which wraps up on Sunday along with more avant-garde works such as a photographic series of dead monkeys and a replica of a skeleton in a transparent plexiglass coffin.

During boom times, contemporary art was sought after by the new rich as a badge of affluence as much as luxury cars and branded jewellery.

At its peak in 2007 the world art market was worth around €48 billion, double the figure from five years earlier, according to research firm Arts economics.