Art Market Bubble? Not So Fast

Earlier this week I posted on some reports and commentary about the art market overheating with the potential of a bubble. When there is talk of a bubble, the discussion typically leads toward when the bubble will burst.

As many AW readers are aware, Michael Moses of the Mei Moses Art Indexes and Beautiful Asset Advisors reviews and comments on the art market on a regular basis. He is one of the more quoted experts in financial publications on financial returns and trends in the art market and I hold him and his expertise in high regard.

In talking with Mike, his collected data of repeat art sales shows there is no bubble for the art market in general. Mike stated to me that "our data clearly shows there is no bubble in the global art market. In fact our latest results show that the global art market has been basically flat for the last five years."

Mike continues "For example, even the post war sector only showed a 4% gain for 2015, which is hardly a bubble, and the only overheated part of the market were trophy purchases".

For those who follow the art market, many do realize the art market is made of many sectors and sub-groups. In discussing the overall art market with Mike, we find some sectors performing well and others not nearly as well. It is unfortunate that the general health of the market is reported about and defined only be a small group of works at the very top end of the market and not for the market as a whole.

Mike substantiates his view with the idea that "during the last major bubble, 1985-1990, the Mei Moses Broad World Post War and Contemporary Index went up about 400%, while in the 5 year period of 2010 to 2015, it has only increased 30%. The Mei Moses World All Art Index increased only by 10%.

Mike relayed to me the Mei Moses Index added 15 works in 2015 that were purchased previously for more than $10 million to the World All Art database , and their average compound annual return (CAR) was 8.7%. Of these 15 works, 3 had a prior purchase price in excess of $30 million and had an average CAR of 6.8%. According to Mike, these returns are very respectable but they are not the making of bubble values.

What this means is, when we see art market bubble talk being promoted we should take a step back, look at the whole art market, and its various sub-sectors to determine trend clarity and what is actually happening.

For more information visit the Mei Moses/Beautiful Asset Advisors website at www.artasanasset.com.