The redeveloped Royal Hibernian Academy opened with much fanfare and to great acclaim last month. Its first show is the 178th annual academy exhibition, featuring 536 paintings, sculptures, photographs and prints. It is always a hugely popular exhibition and an important fundraiser for the academy. But wandering through the gallery's impressive new spaces, one thing in particular is notable by its absence: the usual proliferation of little red dots, indicating the works that have been sold.

"Sales have been slow but steady," says RHA marketing officer Elaine Fallon. "We've found that the works between €1,000 and €3,000 are selling well… and we are still selling the bigger names, but maybe not in the same quantities as before."

But things, of course, are different now. These are uncertain days for the Irish art world, and the RHA annual exhibition could be taken as a bellwether for the change in mood. With the Celtic Tiger era well and truly behind us and the country in recession, many consider art a luxury we can no longer afford. And, with a buying frenzy sending the price of certain Irish artists soaring at the auction houses in recent years, people may now be nervous about investing in art – worried that it, like property, may have become overvalued.

Ian Whyte of Whyte's auctioneers admits things had got out of control. "The demand for some of the contemporary artists was a little bit overheated. I mean you had instances of people rushing into a gallery and buying the pictures almost before they were even hung."

Whyte believes buyers are now becoming more discerning. "Anything that's really good is selling well but if it's not so good it's not selling at all, whereas two years ago anything nearly sold."

At a recent Irish art sale at Whyte's, only 60% of the lots were sold, netting €1.5m – far less than the hoped-for figure of almost €3m; several works sold below their estimates. Prices have fallen between 10% and 20% for contemporary artists such as John Shinnors, Donald Teskey and Mark O'Neill, whose work was in huge demand at the auction houses only a short time ago.

Such sluggish sales are echoed on the international art market, with the global financial crisis that erupted in September effectively putting a halt to the frenzied art boom of the past half-decade. The assumption during the past year that the art market could somehow remain immune to the financial turmoil has now proved to be misguided. At a recent Christie's contemporary art auction in New York, almost one-third of the works went unsold, with sales totalling $113.6m, half the pre-sale low estimate of $227m. At the Sotheby's contemporary art sale, the story was the same: it netted $125.1m – far below the estimate of $202 million – and sold only 68% of the lots.

As the economic reality starts to bite, all eyes will now be on the sales results at this week's Art Basel and Nada fairs in Miami. Dublin's Green on Red Gallery takes part in Nada.

"Our presence this time last year was probably the most successful art fair we've ever done. We did a huge amount of business," says co-director Jerome Ó Drisceoil.

Much has changed in the intervening period, however. "There just isn't as much hype or excitement or spending going on, so we'll see how we get on," he says. "I'm fairly confident because I think we're showing really good work… but the whole climate has changed dramatically."

According to dealer Sebastian Guinness, who opened his eponymous gallery in Temple Bar, Dublin, earlier this year, art is low down on the list of priorities at a time like this.

"It's very difficult to even talk to clients now because they're talking to their brokers five times a day; it's almost rude to ring them."

With so much uncertainty pervading both the art world and wider economy, it remains to be seen whether the art market is simply levelling out after a frenzied boom, or whether this is the beginning of steep falls in demand and prices as disposable incomes decline and cash-strapped collectors try to offload artworks.

So is this a bad time to invest in art? Not necessarily. Guinness believes it is now a buyer's market.

"You just have to look at auction houses – people are picking up things well under the estimates," he says. He advises caution, though: "Historically, art is an incredibly safe investment but you have to have an eye to editing at moments like this because certain artists will go out of fashion… If you stick with the triple-A artists, they're safe as houses for the moment."

John Daly, director of Hillsboro Fine Art, agrees. He believes that, in these recessionary times, art can be an excellent investment – more reliable and tangible than shares and likely to increase in value over time, provided you choose carefully.

"One man told me that a number of years ago he had €100,000 and he bought Bank of Ireland shares with it, thinking they were rock solid. He actually wanted to buy a Picasso drawing at the time and his wife wouldn't let him! He'd have been a lot better off if he'd bought the picture."

Daly thinks investors looking for somewhere safe to put their money will be more likely to opt for internationally known, established artists whose work is included in museum collections, as opposed to mid-range or emerging artists, or those whose market is limited to Ireland.

"People are going to be a lot more selective so they're only going to buy established artists. I represent a few big international people like Alex Katz, John Hoyland and Anthony Caro, and I'm finding it's easier, in a bizarre way, to sell a painting for €20,000 or €30,000 than for €500."

There are concerns that emerging Irish artists will be hit by the downturn, as galleries and investors become less inclined to take risks. Things may become difficult for young and experimental artists in particular, many of whom rely on the occasional – and set to become increasingly rare after budget cutbacks – Arts Council grant. Artist Mark Cullen, co-director of non-profit Pallas Contemporary Projects gallery and studios, has noticed an aura of uncertainty.

"Speaking to painters, they're concerned as to how next year and the year after are going to go, particularly if their sole income is from selling work. A lot of the artists we deal with here are working to cover the costs of their art making or they're on grants, so the recession is going to affect everyone across the board. And there is a palpable air of anxiety in [Arts Council-funded] organisations."

Time will tell whether the art world will weather this economic storm. For the moment, though, the only certainty is uncertainty.