Sunday, November 04, 2012

Global Art Market - Where are We - Summer to Fall?

Chinese art market in free fall – June 2012 ArtTactic report
Does the plummet in Chinese auction sales bode a return to a 2008 crash market?

On 22 June 2012, ArtTactic released a new report on the Chinese art market that contains signs of a significant slowdown in auction sales. China’s four highest-selling auction houses have experienced a 43 percent drop since the same time in 2011.

Auction results from 2011 confirmed the Chinese art market as the largest in the world, yet results from spring 2012 sales exhibit signs of a slowing market. The total auction sales (all categories) this spring from the Big Four (Sotheby’s Hong Kong, Christie’s Hong Kong, China Guardian, and Poly Auction) have dropped 32 percent from USD2.2 billion in autumn 2011 to USD1.5 billion this spring. The overall result is 43 percent lower than the peak of the Chinese art market in spring 2011.
 Among the Big Four, China Guardian suffered the largest abatement in overall sales, with a sales total 45 percent lower than that of autumn 2011. Despite a drop of 39 percent, Poly Auction still managed to claim the top position with a USD485 million sales total, 36 percent higher than Christie’s, who came in second.

Though the sell-through rates for Sotheby’s and Christie’s spring auctions were relatively high, Asian modern works clearly outnumbered and outsold contemporary. The flight to more established artists may be a result of collectors shifting their art investments to works with greater longevity and less risk exposure.

Related Topics: art investment, market watch – auctions, market watch – recession, resources

Related Posts:
 •Indian Modern and contemporary market treading water? ArtTactic reports decline – April 2012 – with two Asian markets sinking, could the crisis become global?
 •Sotheby’s Hong Kong spring 2012 auctions: Modern Asian art still outselling contemporary – April 2012 – rush to modern over contemporary may be indicative of risk-averse collectors
 •Rich swap stocks for art: Investment, passion or a bit of both? – February 2012 – motivation may be a key factor in whether or not the contemporary art boom is sustainable or just a passing fad
 •New records for Chinese auction houses despite market slowdown – ArtTactic report – January 2012 – the record year obscured a significant downturn between the spring and autumn sales
 •How confident is the art market? Depends on the price range – October 2011 – confidence in the art market soured as early as late 2011

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Art Market slide show
Charles Saatchi is making his usual contribution to the Frieze week auctions by selling a handful of works at Christie’s by relatively untested artists in the market place. Estimated to fetch upwards of half a million pounds, some of the works are being placed in the prestigious evening sale.
For Zambian-born Jonathan Wateridge, it is his first outing at auction. His massive hyper-realist diorama, Jungle Scene with Plane Wreck, was created in his studio. When Saatchi visited, he was so impressed he paid £35,000 for the painting – a high price for the young artist. That was in 2007. Wateridge can now command £150,000 to £200,000 each. He recently sold seven paintings to Christie’s owner François Pinault, which were shown in Venice during the Biennale.
Next year, he has his first show in LA with the dealers L&M Arts. Christie’s has estimated the Jungle Scene will sell for £100,000 to £150,000 – a nice return for Saatchi. But some pundits are betting it will fetch more.

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For many years, the market for the leading British modernist painter Ben Nicholson seemed to stand still. His auction record of £1.2 million in 1990 seemed set in stone when the so-called “Tate archives” fake scandal a decade ago rocked any remaining confidence in his market. Ever since, Nicholson has quietly been seen as underpriced, and a bargain buy compared with some of his contemporaries. But things may be changing. Last year, two paintings – an abstract inspired by Mondrian and a Fifties carved relief landscape – rose over estimates to challenge that old record price. Then, last week in Paris, an early Thirties painting of a fiddle and a Spanish guitar, influenced slightly by the paintings of Georges Braque, soared to a new £2.6 million record, 10 times the estimate. It was part of the sale of the estate of the Parisian fashion icon Hélène Rochas, and unexpectedly surpassed works by Andy Warhol, Kandinsky and Balthus in the same collection.
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London art market
Christie’s painted a rosy picture of the art market just before the summer break when it announced sales of £2.2 billion for the first six months of the year, up 13 per cent on last year. However, during the summer recess, Sotheby’s results were announced with far less fanfare. Its first six months sales had fallen by 12 percent to £1.88 billion. Several reasons were given for this: the global economic climate, the Asian market slow down, the lack of important single owner collection sales, and, most importantly, the exceptional performance in 2011 which left 2012 in an unfavourable position when making comparisons. The main common denominator between the two auction houses was the increase in private sales – that is, those conducted privately and not at auction. Sotheby’s had risen by 15 per cent to $513.6 million (£323 million), while Christie’s had jumped 53 per cent to a record $661.5 million (£413.4 million). Private sales and exhibition activities are now accounting for up to 18 per cent of all sales at the two auction houses as they encroach further into what was traditionally the art dealer’s territory. Two Royal Wilton rugs signed “Francis Bacon” have resurfaced for sale after they had been offered but withdrawn from an auction in 2009. The rugs had reportedly been brought into a carpet dealer’s shop in Pimlico, central London, by an elderly lady, and were then sent to the Netherhampton saleroom in Wiltshire where they were estimated to fetch between £60,000 and £70,000 each. They caused enormous interest, but knowledge about Bacon’s design activities before he became a full-time painter is thin, and the artist’s estate could not confirm they were actually by him. The rugs were instead bought privately by a German collection for an undisclosed sum. Next Tuesday, they are to be offered again by Newcastle auctioneers Anderson & Garland, catalogued as “Two Modernist Rugs, signed Francis Bacon”, and estimated to fetch “a six-figure sum” as a pair. The Authentication Committee of Francis Bacon has confirmed that the rugs are “consistent in style, manufacture and signature with the small output of rugs that Bacon designed and had made
up by Wiltons in c 1929”, but no more. The future of Cork Street in Mayfair as a gallery destination has been thrown into doubt after developers Native Land said that seven of the galleries’ leases will not be renewed next year as it undertakes redevelopment. Among the galleries is Cork Street’s oldest inhabitant, the Mayor Gallery, established in 1925, and the Impressionist art dealers Stoppenbach & Delestre. A petition to Westminster Council (Twitter:@savecorkstreet) suggests that if planning permission is granted, the Pollen Estate, on the other side of Cork Street “will doubtless follow suit, and this most British of institutions will be lost for ever”. Native Land has said that plans include art galleries, but not until 2016. Most galleries fear that they will not be able to afford the rent increase.
At Christie’s in H1 2012, $1m Works Fall by 10% but $10m+ Works Rise by 50%
Here are some highlights from Christie’s release of its H1 figures not covered in the press last night. Remember that new CEO Steven Murphy has staked his ambitions on shifting more volume to private sales and increasing internet sales. Hence you get the emphasis on visitors to the website and a jump in bidding on Christie’s LIVE.

Nonetheless, it is worth noting that the Christie’s own numbers confirm the shift away from the middle market as the number of $1m works sold dropped by 10% but the $10m+ category rose by 50%:

In the first six months of 2012, Christie’s sold 340 works at auction for over $1 million (376 in the same period 2011) and 26 for over $10 million (18 in the same period 2011). Average sold rates (by lot) stayed at 79%,  on a par with the previous 2 years. The market at more accessible price levels also performed strongly; Christie’s South Kensington saleroom, which offers works of art from under £1,000, built on two consecutive years of record sales, recording its highest ever total for a corresponding period.

Looking forward, Christie’s will launch the first in a series of online-only auctions for a global collecting category in August with a sale of fine and rare wines.

Christie’s Half Year Figures_2012
by Charlie Finch
This week's perfect storm of bad worldwide economic news, including depressed growth numbers from India, China and the U.S., capital flight from Spain and continued stalemate in the European Union over Greece and the future of the euro, make one wonder whether the high end art market can continue its contrarian record sales indefinitely.A major sign that it cannot was the 32 percent drop in revenue at the Hong Kong auctions from the previous year, as the auction houses dissembled by blaming high consigner price demands, rather than the obvious slump in the Chinese economy. Looking ahead, I wonder if a deflationary spiral, such as the one that hit the Japanese real estate industry and its art market in 1990, might destroy the auction market before the
coming November sales.

Classic deflation is marked by falling prices for goods as various economic players hoard cash in anticipation of lower prices to come, reducing demand and then spiraling down as output and supplies tumble reducing economic activity to inertia. Certainly even the very richest among us must feel that $100 million price points for Picasso, Warhol, Bacon and Richter are the ceiling after which true valuation and resale are impossible, and, as a reward for their participation in an unprecedented boom, even the rich are entitled to some price relief, especially when the world economy, as a whole, is quickly contracting.

This means that the rich will sit on their hands and stop buying, Deflationary pressures in general will cut down the underpinnings of the art market, with art galleries closing and secondary market action drying up. Midrange collectors, with hundreds of pieces valued in the low millions collectively, will panic, trying to raise cash in the face of deflation and finding no takers. This will increase the demand for bargains, even for Warhols and Picassos, with arguments such as "rarity" and "quality" bursting in the bubble of what was an artificially stimulated price boom.

Eyes will open, as collectors argue that the $100 million Munch might just as well be worth $10 million in an environment of falling prices: relatively the true value is the same under different economic realities. So, stipulating that the world economy is just beginning a marked deflationary downturn, I predict that, in six months, art prices will be down, across the board by 50 percent, falling faster with no takers.

The beneficial side of a severe art market crash will be to liberate markets by making them more transparent through the operation of real supply and demand for fine art as opposed to focusing on a few big ticket sales. In my view, and I am biased, Artnet's indices, information and auction services and its magazine will be in a privileged position to profit from such a downturn.

CHARLIE FINCH is co-author of Most Art Sucks: Five Years of Coagula (Smart Art Press).
Art market confidence decreases by 9% as economic gloom takes its toll.

The latest results from the ArtTactic US & European Art Market Confidence survey this month show that respondents continue to feel confident about the post-war and contemporary art market, although the economic crisis in Europe and slowing Asian economies have started to weigh in negatively on the general art market sentiment.
The overall Contemporary Art Market Confidence Indicator came in at 48 down from 56, a decrease of 8.6% since January 2012. A reading below 50, signals a market where there is more negative than positive sentiment. A 37% drop in the Economic Confidence Indicator contributed to the fall in overall art market confidence. The confidence in the Primary market in the US and Europe saw a 2.1 % increase from 56 to 57, whilst the Confidence Indicator in the auction market fell from 68 to 67, a 1.2% decrease. The recent findings suggest that the confidence in the art market is holding up well despite the negative economic outlook.

Recent findings show that experts’ confidence in the $1 million plus price segment have increased from 81% feeling positive in January 2012 to 97% in June 2012. The Confidence Indicator for the top price-segment stands at 99, significantly above all the other price segments, and signals a strong market consensus and continued polarisation towards the high-end of the market.
SOTHEBY’S DEMONSTRATED A RECOVERY after a steep 3rd quarter loss reported in October, its shares falling by 23% percent in less than three weeks. The jarring fluctuation marked significant volatility in the art market. According to the Wall Street Journal, “Collectors have shown signs of hesitation, making investors nervous." This coupled with the fact that revenues are shrinking in light of increased expenses (such as guarantees) make for a turbulent situation. Unfortunately, its main rival Christie’s is a privately held company, its figures confidential, which negates an accurate comparison. But luckily for Sotheby’s the season ended with a bang, up by 20%!


FORBES MAGAZINE NEW YORK: During The Big Art Auctions This Fall, Take A Second Look At The Results
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The beginning of the fall auction season always produces dramatic headlines about the art works that achieved record-breaking prices and those that bombed, yet beyond the hype, all auction results can be misleading. During last week’s contemporary art auctions in London, for example, the top lot sold was Eric Clapton‘s painting by Gerhard Richter, Abstracktes Bild (809-4). The painting went for £21.3 million ($34.2 million) at Sotheby’s, way above the estimate of £9 million to £12 million, and set a new auction record for a living artist.

The sale of Gerhard Richter's painting Abstracktes Bild (809-4) for $34.2 million at Sotheby's last week set a new auction record for a living artist. (Image credit: AFP/Getty Images via @daylife)
In total, Sotheby’s made £69.9 million ($112.1 million) of sales from its contemporary and 20th century Italian art auctions in London last week, close to its top estimate of £74 million. That looked pretty fantastic on the face of it, yet without the sale of that one Clapton painting, the auction house would not have even reached its low estimate of £54 million.
Auction house sales figures are misleading for another crucial reason. After any auction, the final sale result published by the auction house for each lot is not the hammer price for that work, or in other words, the agreed sale price reached when the auctioneer’s gavel finally comes down. Instead, the auction house also adds on the buyer’s premium that was paid to that hammer price amount.
That buyer’s premium, the amount of commission that all successful bidders must pay the auction house, is pretty hefty. In New York, the big global auction houses currently charge 25% of the hammer price up to $50,000, 20% of the amount above $50,000 to $1 million, and 12% of the rest, although those percentages and thresholds vary from country to country, depending where the sale is held and the currency it is held in.

Why does this matter? Well, it obviously inflates the overall price achieved for each lot that it successfully sold. But because auction houses only include the buyer’s commission in their final sales results, and not their pre-sale estimates, it also makes the difference between, say, the estimated price for a Picasso painting and the actual price it sells for, look a lot better than it actually is.
Auction houses say this practice is a well-known convention, but it’s actually a big deal for anyone trying to extract price comparisons from auction market information, which as I mentioned recently, is the only real source of art price data out there. Without the buyer’s premium, last week’s results start to look a little different. Take out the buyer’s premium and Eric Clapton’s Richter was sold for £19 million, not over $21 million. Christie’s combined sales of post-war, contemporary and Italian art in London last week, which raised £41.2 million ($62 million), compared to its estimate of between £36.6 million and £51.9 million,  was pretty weak already. Take out the buyer’s premium and the auction house barely reached its low estimate. The buyer’s premium issue makes the record-breaking prices trumpeted by auction houses and reported in the press pretty misleading. With November’s impressionist and modern art and post-war and contemporary sales in New York fast approaching, that’s definitely something to keep in mind. Here are a few of the star lots up for auction in New York next month: Sotheby’s is going to try to follow its success selling Eric Clapton’s Richter in London with the sale of Abstraktes Bild (712), Richter’s first painting from 1990, in its evening sale of contemporary art on November 13. The estimate? Over $16 million. Also in its November 13 contemporary evening sale, Sotheby’s will offer No.1 (Royal, Red and Blue), painted by Mark Rothko in 1954, one of the paintings the artist himself selected to appear in his solo show at the Art Institute of Chicago the same year. The estimate: $35 million to $50 million. In its November 14 sale, Christie’s will offer Andy Warhol’s 3D silkscreen painting Statue of Liberty, produced in 1962. The estimate is also in excess of $35 million. Of nine Picasso paintings offered in Sotheby’s impressionist and modern art evening sale on November 5, Nature morte aux tulipes, painted in March 1932, is expected to fetch $35 million to $50 million. The star lot of the New York impressionist and modern art evening sale at Christie’s on November 7 will be one of Claude Monet‘s famous water lilies series Nymphéas, painted in 1905. The estimate is between $30 million and $50 million.
Other than collectively indicating that when an auction house isn’t really sure what a super famous painting will sell for, it sticks a price tag of $30 million to $50 million on it, the thing that all these estimates have in common in that they do not include buyer’s premiums. Whatever Christies’s or Sotheby’s say these paintings fetch come November, the hammer price will be lower.
Old Masters
OVERVIEW: Sales were largely flat last year for European art spanning the 14th to the 19th centuries, but the Renaissance men appear to be enjoying a comeback this season: Christie's $133.4 million Old Master and British paintings sale in July was the house's highest-ever total for the category, thanks to collectors from 22 countries like Brazil and Russia, plus an influx of first-time bidders. Demand remains soft at both auction houses for middling pieces in the $50,000 to $200,000 range, though. Outlook: Expect collectors to keep ratcheting up prices for masterpieces while sniffing at anything that feels lackluster. The same divergence shows up in the market for Old Master drawings and medieval manuscripts. In December, Sotheby's will try to get at least $6.4 million for a two-volume play, "The Mystery of Revenge," illustrated in a 1468 manuscript originally commissioned by a French duke called Philip the Good. (No word if the play was as well-received.)
New Name Here: With Old Master paintings continually trickling out of the marketplace and into museums, top pieces remain in short supply. That's one reason why auction houses invest heavily into seeking attributions for works that may have been deemed anonymous or wrongly labeled over the centuries. In July, Christie's got $7.9 million for a scene called "Christ Between Saints Paul and Peter" after scholars agreed to attribute the piece to 14th century painter Pietro Lorenzetti.
Artist to Watch: Joachim Anthonisz Wtewael. This little-known Dutch painter scored a coup when Christie's sold his long lost Roman love triangle scene from 1610, "Mars and Venus Surprised by Vulcan," for a record-setting $7.2 million in July. On Dec. 4, Christie's will try to capitalize on Wtewael's breakthrough by selling a later panel from 1623, "Charity," for at least $644,000.
Market Mover: New York financier Leon Black reset price levels for Old Master drawings three years ago when he paid $47.6 million for a Raphael chalk drawing, "Head of a Muse," a record auction price at the time for a work on paper. Now, the Duke of Devonshire is asking Sotheby's to sell one of his 15 Raphael drawings, "Head of a Young Apostle," for at least $16 million in December. The work amounts to a preparatory sketch for Raphael's 1520 painting of the Transfiguration, which hangs in the Vatican. Contemporary Art Overview: Art history is still mulling the lasting merits of today's living artists, but that hasn't stopped collectors from placing bets now. The market's most speculative sector, which spans art made between 1945 and today, saw prices plummet by as much as 66% during the recession, only to surge back up quickly—especially for well-known artists like Gerhard Richter. Outlook: Brace for sticker shock. Contemporary-art auctions rarely totaled more than $30 million a couple of decades ago, said Christie's specialist Brett Gorvy. "Now, collectors will spend $30 million to win a single painting." At least three contemporary paintings carry price tags north of $25 million this season alone: Mark Rothko's 1954 "No. 1 (Royal Red and Blue)" and Jackson Pollock's "Number 4, 1951," both at Sotheby's, and Warhol's 1962 "Statue of Liberty" at Christie's. Market Movers:Hedge-fund manager Steven Cohen is wagering heavily on the contemporary market's strength by asking Christie's to help him sell Richter's 1983 abstract "Prag 1883" for at least $15 million on Nov. 14. New York collector Donald Bryant is also offering up "Marlon," Warhol's 1966 portrait of "The Wild One" actor Marlon Brando at Christie's for at least $20 million. (Warhol's much-larger version of the same image sold for $32.5 million at Christie's four years ago.) Artist to watch: The auction record for Warhol's protégé Jean-Michel Basquiat has been reset twice this year—one of his paintings sold for $16.3 million at Phillips de Pury in May, followed by another for $20.1 million at Christie's in June. Now, society photographer Patrick Demarchelier has asked Christie's to get $20 million-plus for his untitled Basquiat from 1981, which depicts the artist holding a dangling catfish. Richter's Reach? Prices have topped $21 million lately for Richter's squeegee-smeared abstracts, but Sotheby's plans to test demand for the artist's family portraits on Nov. 13 by selling two paintings, both titled "IG," depicting Richter's second wife, artist Isa Gentzken. Asking price: $3 million apiece. Affordable Alternative: With prices for top postwar paintings routinely surpassing $10 million now, collectors with smaller wallets are increasingly turning to these artists' drawings, where prices rarely reach half as high. This fall, Mr. Cramer, the Miami collector, is selling off around 50 works on paper at Christie's, including an early Roy Lichtenstein drawing of basketball shoes. Estimate: at least $2 million. Write to Kelly Crow at
A version of this article appeared October 5, 2012, on page D1 in the U.S. edition of The Wall Street Journal, with the headline: How Strong Is the Art Market?.

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