A Look at the Contemporary Art Market

The NY Times takes a quick look at the current state of the contemporary art market and the surging prices.  The article notes the high number of wealthy individuals who have the ability to buy and invest in fine art, and are doing so for numerous reasons. This includes tax advantage which come with private museums as well as an alternative investment to act as a store of value.

The NY Times reports
LONDON — This has been, by any reckoning, a momentous first half of the year for the art market.

In February we learned that Qatar had bought a Gauguin painting for an undisclosed price of as much as $300 million; in May, an experimental week of Impressionist, modern and contemporary art sales in New York raised more than $2 billion, including $179.4 million for Picasso’s 1955 “Les Femmes d’Alger (Version ‘O’),” a high for artwork sold at auction; and in June, several prominent contemporary dealers reported their best-ever Art Basel fair, which attracted a record 98,000 visitors.

As collectors, advisers and dealers head off for the Hamptons, or Provence, or other favored vacation spots, this might be the moment to take stock — or as two medieval peasants asked in a classic New Yorker cartoon, after a minstrel sauntered past singing “Sumer is icumen in”: What was that all about?

When art prices surge, there is always talk of a “bubble.” But for the moment, despite the uncertainty over Greece and despite Chinese stocks losing $3 trillion of their value in less than a month, those involved in the art market remain insouciant about prospects for the second half of 2015.

On June 30, the London analysts ArtTactic published a study based on the responses of 128 art collectors, advisers, auction experts, dealers and media commentators. More than half of the participants think the market for postwar and contemporary art will continue to grow over the next six months and less than half think it will remain flat. None expected it to contract.

“It’s not a bubble in the classical sense of the word,” said Tom Flynn, director of art appraisal at Kingston University in Surrey, England. “The cyclical process appears to have gone from the top end of the contemporary market. It’s being driven by almost unprecedented levels of wealth in the world, and by an influx of people from finance who are treating art as a pure asset class.”

In 2009, during the depths of the financial crisis, worldwide auction sales of postwar and contemporary art contracted to 1.4 billion euros, about $1.5 billion today, less than half the €3.5 billion achieved in 2007, according to a report published by the European Fine Art Foundation in March. The report said auction sales of contemporary art hit an all-time high of €5.9 billion in 2014. Or, to put it another way, no “bubble” burst in 2009; the market for contemporary art simply paused.

“There’s so much wealth around, and it keeps on being created and put into tangible assets like art,” said Suzanne Gyorgy, global head of art advisory and finance at Citi Private Bank in New York.

“The recession created opportunities for huge wealth creation,” she added, referring to the quantitative easing policies that over the past five years have raised asset prices in the United States and Europe. “Money goes to people who are able to make more money out of it.”

The Victoria Miro gallery in London, for example, represents the veteran Japanese avant-garde artist Yayoi Kusama. A 2006 version of one of the white “Infinity-Net” paintings Ms. Kusama has been producing for more than 50 years sold at auction in Hong Kong in November for $2.3 million, according to the auction results database Artnet.

Little wonder, then, that Victoria Miro had a waiting list of more than 200 clients for the four fresh Infinity-Nets, priced at $450,000 each, it took to Art Basel. These were among 15 works the gallery either sold or had firmly reserved within an hour of the fair opening to V.I.P. guests on June 16.

“That’s never happened before,” said the gallery’s co-director, Glenn Scott Wright. “People have been saying the contemporary market is a bubble for 20 years. But it’s a different beast now. So many people see art as an alternative investment.”

That said, the market for contemporary art remains a fickle beast. The speculative trade in hot, young “process-based” abstract painters such as Lucien Smith, Alex Israel, Parker Ito and Israel Lund, whose works were routinely being flipped by multiple-estimate auction prices in 2014, has cooled.

Blue-chip names like Francis Bacon, Andy Warhol and Gerhard Richter can also prove problematic. Ambitiously valued, so-so examples of these highly regarded artists’ work failed to achieve estimates as high as 35 million pounds, about $55 million, at Christie’s and Sotheby’s in London on June 30 and July 1.

But over all, contemporary art retains its allure as a wealth preservative. Back in January, the Hong Kong-based website Larry’s List calculated that there were about 8,000 to 10,000 collectors worldwide who regularly buy substantially priced works from galleries and from the major art fairs such as Art Basel.

That is a tiny segment of what Tefaf said was a world population of 35 million millionaires, and more than 200,000 ultrahigh-net-worth individuals with $30 million or more to spend, in 2014.

But with their multiple homes, tax-efficient private museums and sophisticated offshore investment plans, wealthy contemporary art collectors are people who, by and large, have managed to detach themselves from the everyday concerns of national economies. Unlike Greek shopkeepers and Chinese small investors, art magnates like Dakis Joannou and Budi Tek are in little danger of going bust.

In fact, the very rich do not seem to have much interest in collecting any other kind of art, other than postwar and contemporary. There were clear signs of the ever-widening inequality with other art markets at recent auctions in London.

Christie’s evening sale of contemporary works raised £95.7 million on June 30, and the company’s equivalent auction of Old Masters paintings raised just £19 million. Christie’s said in an email that Richard Knight, co-chairman of the Old Masters department, would be leaving the company at the end of the month.

Despite some high-value failures, Sotheby’s contemporary sale on July 1 managed to raise £130.4 million, the company’s highest total for the category in Europe.

On Wednesday, Sotheby’s auction of Victorian, Pre-Raphaelite and British Impressionist art took in £4.7 million. The auction house’s publicity department made the most of the £167,000 paid by an American collector for an 1895 pencil and white chalk study for Frederic Leighton’s much-reproduced painting, “Flaming June.”

But those results were a far cry from 2000, when wealthy individuals were buying a broader range of status-enhancing art, and the British collector Andrew Lloyd Webber had to pay £6.6 million for John William Waterhouse’s “St. Cecilia” at auction.

Still, there have been other exceptions. Though just half of the 61 lots at Christie’s £18 million “Exceptional” sale of miscellaneous historical items on July 9 found buyers, a circa 1880 wooden figural bow-stand from Congo’s Luba culture was pushed by two telephone bidders to £6.1 million with fees. It is one of just eight works attributed to the Warua Master, who worked for Luba royalty, and fetched more than double the high estimate and the second-highest auction price paid for an African work of art at auction.

A number of wealthy collectors of modern and contemporary works also have a taste for Oceanic and African art.

“This piece did have an aesthetic that appealed to a broader spectrum of buyers,” said William Robinson, Christie’s international head of world art, who would not divulge the collecting tastes of either of the telephone bidders. “It was just a spectacular piece of sculpture.”
Source: The NY Times

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