No End in Sight for Soaring Art Market Tuesday December
25, 7:01 pm ET
By Ula Ilnytzky, Associated Press Writer
Despite Turmoil in Financial
Markets, No Signs That Booming Art Market Is Softening
NEW YORK (AP) -- Art is hot.
Despite turmoil in the financial markets, there are no signs
that the art market is softening. The fall auction season
in New York saw robust prices across most categories, with
postwar and contemporary works in particular going through
the roof. It seemed like a new record was being shattered
every time an art auction was held.
This record haul generated billions
of dollars for auction houses such as Sotheby's, contributing
to solid earnings but also exposing auctioneers to volatility
when sales didn't go as well as expected.
The reason for the art market's strong showing?
The weak dollar, expanding world wealth and new buyers from
countries not previously associated with the art collecting
community, experts say. Over the last five years, wealthy
buyers from Russia, China, India and the Middle East have
greatly helped fuel the art market.
The boom has occurred against the backdrop
of a dreadful year for the financial sector in the U.S. --
a slump that seems to have been offset by the influx of foreign
buyers and big American buyers who have not been affected
by the uncertain economy.
These buyers paid astronomical amounts for
art. An Andy Warhol painting sold for more than $71 million
in a May auction that brought in a total of nearly $385 million.
A Matisse fetched more than $33.6 million in a November sale
that also took in nearly $400 million. A limestone lion sculpture
that measures 3 1/4 inches hauled in $57 million earlier this
month.
Still, the art market hasn't been immune to
turbulence.
Sotheby's suffered a lackluster modern and
impressionist sale in November in which Van Gogh's "The
Fields," estimated at $28 million to $35 million, failed
to sell and many other works sold below their estimates. Sotheby's
stock plunged 28 percent that day because of investors' fears
that the company had overextended itself in guaranteeing sellers'
reserve -- the price the house promises to pay if a certain
item doesn't sell.
"What the market was saying was that
the property being offered was very heavily estimated and
the quality was not there to support this value," said
Ian Peck, CEO of the art-finance firm Art Capital Group.
"If you try to sell stuff for twice what
it's worth, the market's going to say no," said Peck,
adding that he heard that the Van Gogh later sold privately
for about $20 million.
Peck says his blanket advice to clients is
to take a wait-and-see attitude for the next year, and see
how the art market plays out. "Our view is that within
12 months we'll know if this thing is getting worse, meaning
if a recession occurs in the U.S. market or not."
Generally, the art market trails the Dow Jones
industrial average and other market indexes by about six to
eight months, Peck said. And stocks have been volatile, with
big swings up and down, since the summer.
But he was optimistic that the art market
would ride out the crisis, and noted that his firm, which
is essentially a private banker for art buyers, has seen a
spike in loan applications to buy art. And people at auction
houses aren't really seeing much of a downturn because of
problems on Wall Street.
"If you look around, particularly in
New York, it seems like everyone's a billionaire and they
don't seem to be affected terribly by this credit crunch,"
said David Nash, of Mitchell-Innes & Nash, a private New
York art consultancy and gallery specializing in impressionist,
modern and contemporary masters.
While art from all eras is selling well, works
by modern masters like Warhol and Mark Rothko and living artists
like Richard Prince and Damien Hirst are especially hot. In
oil producing countries like the United Arab Emirates, the
appetite is for modern American works by such artists as Keith
Haring, Jean Michel Basquiat and Warhol, Peck said.
"The most money is chasing these modern
and contemporary names, and that's just what's in fashion
really," Peck said, adding that buyers with new money
from Russia and China have a "limitless appetite for
Western art and objects. Prices in some cases have doubled
or tripled in the past year."
Michael Moses, co-founder of the Mei Moses
All Art Index, which looks at the historical performance of
art as an investment and asset class, said it is noteworthy
that the art buying public has become so global.
"This is the first time in a long time
where we've had truly universal world wealth expand. ... It's
a relatively new precedent that there is so much wealth being
created all over the world," he said.
Overall, Peck estimates that the art market
gained about 18 percent in 2006 -- not a bad return at a time
of turmoil in the stock market.
"My experience over the last month or
so is that there is a lot of money around, a lot of people
looking to buy things," said Nash. "There are not
very many people who've said I'm not going to buy this NOW
because I'm worried about the state of the economy."