Art Market Bubble

The Financial Times takes a look at the current art market, and recent sales, while relating current trends to past trends, touches on the growth and changes within the international auction houses, the growing importance of guarantees and if we are in bubble, when does it burst.  Yes, a lot of information, but many of the points are already known, it does a very good job of relating and reviewing what is happening, and what may happen to the art market.  Well worth reading.

The Financial Times reports

A key factor in the art market boom is the growth of global wealth. In 2013 there were a record 2,170 billionaires in the world, according to research group Wealth-X, and many have founded private museums or art spaces. Many of the new super-rich are far younger than the collectors of yesterday, and their tastes influence the high-impact immediacy of much contemporary art. The new collectors need living artists to keep the fairs, auctions, galleries and biennales afloat with new creations. In contrast, there is a shrinking inventory in other sections of the market, be it impressionist painting or Renaissance sculpture. The top works are in museums or in major collections. New buyers, however deep their pockets, would find it near-impossible to create a museum of anything except contemporary art.

The boom at the top isn’t, however, trickling down to all artists: according to Clare McAndrew, who runs research and consulting group Arts Economics, high-end dealers report that top collectors are only interested in the work of 50 to 100 artists, overwhelmingly modern and contemporary. One dealer told me that the “conformity in the global market today [is] due to the internet – everyone wants the same few things”.

While art and money have always been linked, there is now greater convergence between the worlds of art and finance. In the sale described at the beginning of this article, 40 of the 72 lots carried some sort of guarantee, with 29 financed by Christie’s and 11 by unidentified third parties. This meant that more than half of the lots were presold at a secret price – the only question was whether another buyer would put in a higher bid.

The auction houses say that by taking any risk out of the auction, they attract consignors who otherwise might hesitate to send something to auction in case it is “burnt” by not finding a buyer. The guarantors are happy to acquire the art at the price they set – or they get a cut if it sells for a higher price to someone else.

Though guarantees have been around since at least the 1950s, they have been a key element in inflating recent prices. Also driving them up has been the phenomenon of speculators “flipping” works by young artists, buying massively into a first show and then put the art into auction for sometimes high returns. The film producer Stefan Simchowitz is reported to have bought 34 paintings by the Colombian Oscar Murillo for a total of about $50,000 early in the artist’s career: the works now make up to $400,000 at auction.

Everyone wants to know whether this market is a bubble and, if so, when it will burst? This seems unlikely to happen any time soon: the sheer amount of global wealth; the massive museum-building programmes; the positioning of art as an element of the celebrity and fashion worlds, and the seductive lifestyle the art world offers are all very attractive to the super-rich.

But I like to keep in mind what the Chinese say: “Trees can’t grow as high as the sky.” All markets are cyclical; the art market has had booms and busts before, for example, during the armed conflicts of the 20th century, in the 1970s and in 1990: each time mirroring the global economy.

There are parallels between this situation and the art market in England between 1860 and 1914, “the golden age of the living painter”, according to art historian Gerald Reitlinger. It was a time of rapid economic growth thanks to the technological revolution, and new patrons of art came from these manufacturing and trading fortunes.

The sometimes scandalous lives of Pre-Raphaelite artists and their circle were well publicised; advances in printing meant that 600,000 impressions were sold of Millais’ winsome child, “Cherry Ripe”. Contemporary artists were stars: Edwin Long’s florid “The Babylonian Marriage Market” (1875) sold in 1882 for £6,615 (almost £700,000 today) – then a record for a living English painter. It was bought by Thomas Holloway, a multimillionaire from sales of ointment and medicines. The art establishment was outraged, and in Holloway’s obituary the Art Journal sniffed: “Those whose productions he acquired may possibly have to regret the inflated prices which . . . their works assumed.”

Long’s prices did collapse, along with those of many Victorian artists. The first world war and the Great Depression would end that boom.

How will today’s art stars fare in the future? Major political upheavals or financial problems inevitably have an impact on investment and the art market cannot be immune. Almost all the huge prices are, however, being made as a growing pool of ultra-rich buyers battles for a small number of brand-name works. There is a vast hinterland of good art by creators whose names will never be widely known and whose works will never achieve such heights. The overall trend of the market is upwards, historically, but not for everyone, and not always.

Marc Quinn’s “Myth Venus”, the Kate Moss statue outside the extraordinary Christie’s sale, made $1.3m at auction last month but it is impossible to predict whether the empty-eyed beauty will turn out to be a good, bad or unremarkable investment.

Source: The Financial Times