Boom (ctd.)?

December 31 2012

Image of Boom (ctd.)?

Picture: Getty/FT, Sotheby's sells Munch's 'The Scream' for $120m

In the FT, Georgina Adam looks back over the art market's stellar prices this year:

Well. What a year that was

Economically speaking, 2012 was dismal in many parts of the world, but the art market again demonstrated astonishing resilience, racking up records at the top end and maintaining some momentum at the bottom end, even if the middle market found the going tough.

Overall, according to the art site, sales of fine art at auction until just before Christmas were more than $9bn, and are expected to top $10bn once complete figures for the year are in. This shows a contraction compared with 2011’s record-breaking $11.8bn, but nonetheless should beat 2010, the second-highest grossing year with $9.5bn.

I'm also struck by the disconnect between the economic gloom and the much more positive feeling here in our part of the art business. We've had another encouraging year, selling 151 pictures and miniatures (and the odd portrait bust). I'm not entirely sure why this is, but I'm vain enough to put at least part of it down to the hard work of my colleagues and I (and the other reasons are trade secrets). Even the much maligned 'middle market' is doing well for us - the majority of our sales have been priced at under £50,000, to private buyers.  

Meanwhile, over on Forbes, Kathryn Tully has been looking into the year's auction sale numbers in a little more detail, and what they mean from an investment point of view:

The headline-grabbing prices fetched at auction for a number of post-war and contemporary artists in 2012 certainly does not indicate that the broader art market is on the up. On December 24, Mei Moses reported a 3.28% decline in its World All Art Index this year to date, whereas the S&P 500 Total Return index returned 7%. Mei Moses only tracks the sales of art works that have previously appeared at auction, so the 3.28% drop represents the average loss for the sellers of those items.

Its December report also noted that these collectors lost money, despite keeping their art works for an average of 29.7 years. It also pointed out that although it is impossible to tell whether the collectors that spent millions on the most pricey individual art works this year have made a good financial decision, history suggests that they have not, because throughout its database of 33,000 repeat sale pairs, art works bought for over $1 million tend to produce the lowest returns.

Of course, there have been years when the S&P has gone down, and we mustn't forget that for many people the attraction of investing in art is its long-term stability (not to mention the dividend of pleasure). But then, as a dealer, I would say that, wouldn't I...

Still, from an investment point of view, buying and selling art only through auction has to be a long-term consideration, for two reasons:

  1. the hefty buyer and seller premiums mean you have to be sure that your art has increased in value by up to 37% (not including Vat) before considering a sale and getting your original investment back. 
  2. a 'fresh' work at auction invariably attracts more bids than one seen again. So if you re-consign a picture to auction too soon, you can be sure that the level of interest in it will be considerably less than it was before. Partly this is due to dealers not wanting to buy works that have recently appeared at auction, but I think it's mainly psychological for collectors; people don't like buying things that have been on the market repeatedly within a short space of time. They begin to look like ugly dogs at the pound, the ones nobody wants to take home. That's why you have to be so careful to make sure your picture doesn't get fail to sell.

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