Art and the Super Rich

The Art Newspaper recently ran an interesting article on the continued strength of the top end of the art market.  The article states that the number of high net worth individuals has grown to its highest point ever at 11 million with an estimated $42 million in new wealth.  With that growth comes interest in collecting.

The article also states that 11 of the top 20 sales records at auction have hammered since 2008, and with the top three being over $100 million  since 2010.  The figures are not adjusted for inflation.  The article notes the economic and art bubble caused in the late 1980's by the Japanese and when the bubble economy ruptured art prices and demand fell.  There are similarities with the current trend from Chinese buyers and the predicted softness of the Chinese financial and real estate markets.

The Art Newspaper reports 

According to Benjamin Mandel, an economist at the Federal Reserve Bank of New York who has been studying the art trade, comparing the overall economy and the art market is misguided: it is the fortunes of the super-rich that should be used as the measure at the highest end. “The historical relationship between the global economy and art purchases is pretty normal at present,” he says. “The fraction of income that the super-rich are spending [on art] remains consistent—they just happen to have more money.”

Changes in wealth distribution since 2008 mean that the number of high-net-worth individuals (commonly defined as having at least $1m in divestible assets) reached its highest ever level of 11 million last year, holding an estimated $42 trillion in net wealth, according to a report by Capgemini/RBC Wealth Management. Following in the footsteps of wider economic changes, the very top of the art market is enjoying rude health while the middle is struggling. At the recent London sales of impressionist and modern art, Joan Miró’s Peinture (Etoile Bleue), 1927, made a record £23.6m, but works of lesser quality were shunned.

The geographic concentration of wealth has expanded, too, and this is having an impact on traditional investments. In newer econ­omies with more volatile, or less mature, financial markets, the rich spend more on luxury assets, including art, jewellery, wine and cars. According to a recent survey of 2,000 of the world’s super-rich individuals by Barclays Wealth, respondents in the United Arab Emirates hold 18% of their wealth in such assets, closely followed by the Chinese and Saudi Arabians (both 17%) and the Brazilians (15%)—compared with 9% of Americans, who tend to focus on more traditional investments.

Buyers from China and Qatar are entering the trade at this luxury level: they account for at least a quarter of the top 20 works sold at auction. There has been a parallel boom in private sales, including the reported $250m acquisition of Cézanne’s The Card Players, around 1893, by Qatar last year. The expansion is not without problems, however. One of the most expensive works to sell at auction, an 18th-century Qianlong-dynasty porcelain vase that went for £51.6m ($83m) in 2010 at Bainbridges Auctions in England, is a record only on paper—the buyers have yet to pay for it.

Source: The Art Newspaper