Art Market Risk in 2014

Forbes recently posted on art market risk for 2014.  The six main concerns appear to be:

1. A major disaster in an area with a large concentration of art, such as a freeport storage facility
2. A regional event which has global impact on art prices
3. A small group of collector/investors buying can greatly impact the upper end of the marketplace
4. Per item #3, the withdrawal of a major collector from the buying arena
5. Money laundering and fraud

and 6, the need for greater due diligence when buying, which I think would also include the use of appraisers.

Forbes reports

Given the risk of buying fakes or stolen works in the art market, buyers need to do a lot more due diligence on the background of the work and who is selling it. That’s particularly true now that many artist foundations have stopped authenticating art because of the massive amounts of money and huge liabilities involved.  “Otherwise, more people will just sit on the sidelines,” says Plummer. “If there’s a high concentration of buyers that are driving the market, what happens if they step back?”

Which is a very good question. And if it’s the case that stress testing the top end of the art market reveals that it is prone to fraud and money laundering, illiquid, opaque and easily spooked, and in some cases, propped up by just a few collectors, is this really an asset class at all?

Source: Forbes