Sotheby's Bullish on Art Prices

I am back from my trip and presentation on the current state of the antique furniture market. My presentation to a group of about 45 collectors was well received, although much of the content was not pleasing for many to hear. I also believe most were aware of the current state of the furniture market, and what I told them reinforced what they knew, but may not have wished to hear from a professional appraiser with a good presentation and content to back up the discussion. The question and answer session was active and lively.

Several appraisers contacted me stating they would be interested in my presentation and content.  I will look into a way to perhaps hold a webinar or some form of getting some of the content and findings out to fellow appraisers. Ideas are welcome.

Sotheby's recently hosted its first quarter conference call, which is typically offers little as the first quarter, outside of American week has no large fine art sales. CNBC recently reported on the conference call where Sotheby's CEO Tad Smith stated his believe the art market has not peaked and the prices can go even higher. He also believes it will be a long term or "structural" increase rather than a cyclical change.

CNBC reports

Conventional wisdom holds that the art market is highly cyclical and moves with stock markets.

But recent comments from Sotheby's CEO Tad Smith suggest that fine art prices have room to grow — and may be in for a structural (rather than cyclical) surge.

Sotheby's looked at the wealth of today's billionaires and compared it to the most expensive works of art sold. To do this, Sotheby's used the 201st richest American on the Forbes 400 to get a median wealth level. In 2006, the 201st on the list would have had to spend 10 percent of their wealth to buy the most expensive piece of art sold that year. In 2016, that same number was only around 5 percent.

In 2006, the 201st wealthiest person would have had to spend 70 percent of their fortune to buy all of the top 10 pieces of art sold at auction that year. In 2016, that same number was 40 percent.

"In other words, the median member of the Forbes 400 would have seen his personal spending power to purchase art at auction grow 75 percent in the past decade alone," Smith said.

Granted, not every billionaire collects art, and even the most avid collectors aren't likely to spend 10 percent of their wealth on a painting. And billionaire fortunes aren't that liquid — most are in the form of operating businesses rather than cash that can be handed over to Sotheby's.

Yet, the numbers counter the perception that art prices have soared beyond the reach or rationale of even the wealthiest buyers.

There are not only more billionaires in the world than ever — more than 2,000 — but their fortunes have grown far more rapidly than art prices. And that could make today's most expensive art look relatively cheap in the future.

Souce: CNBC