The Market for Fine Art Investing

An article published in Russia Today on November 3rd states, “The turmoil on world markets, from shares to foreign exchange, raises the question of hedging risks and finding new investment opportunities. Paintings, coins and other kinds of art are an increasingly attractive option.”

In an article by the Associated Press published on November 5, Ian Peck, the CEO of the Art Capital Group is quoted as saying, “Last night firmly demonstrated the concept of a recession in the art market is not abstract but real.”

What is the state of the art market? How can we expect it to behave in the coming months? The media is putting forth a lot of conflicting information. Looking at the numbers and at statements from the big auction houses, however, it’s possible to get a better idea of what is to come.

At Sotheby’s recent auction of Impressionist and Modern Art on November 3, Degas’ “Dancer in Repose” fell short of its $40 million estimate. At first glance, this seems to fit into the idea of an art market recession. “Dancer in Repose,” however, sold for over $37 million, an all-time high for Degas, and at the same auction a record was set for Munch. Overall the sale fell short of its estimate, and yet, it made a total of $223.8 million. This sale, which, “demonstrated the concept of a recession in the art market,” was the fifth-highest grossing Impressionist and Modern sale in Sotheby’s history.

If the market is in a recession, it’s not exactly frightening. The market has seen similar slow periods in the past and recovered. Russia Today’s article on art investment quoted the Chairman of Christie’s, Brett Gorvy, giving his take on the “recession” :

“People do see art as a tangible asset – something which they can put their money in, in bad times. After September 2001 the art market also was hit by a lack of confidence, but also a little concern as to where it was going. It came back almost immediately and became even stronger.”

The art market has remained remarkably stable during the economic crises of the past. Why shouldn’t it now? There is simply less chance involved in the art market. Though on some level it’s debatable whether or not art loses its inherent value, in a literal sense art does not suddenly go bankrupt. The value of art is more lasting than the value of other commodities, and in a time when our faith in the economy is shaken, it makes perfect sense that we invest in art, which cannot outlive its essential importance to the world.

P.S. (Editor’s Note): As Brett Gorvy said, (above) the art market slows not just due to a lack of confidence in the stability of the market, but because of concerns about the “direction” of the market. What concerns me about the direction of the art market, what I believe is its great weakness, is the inflated prices of a number of contemporary painters’ work. Just yesterday, a triptych of Francis Bacon self portraits failed to sell at a Sotheby’s auction.

“Bacon’s 1964 “Study for Self Portrait” — billed as a highlight of Christie’s contemporary art auction — was estimated to take in some 40 million dollars.

But when the bidding stopped at 27.4 million the esteemed auction house halted the proceedings, to a chorus of gasps.” – AFP

This past February, a different Francis Bacon triptych sold for 51.7 million dollars, the record for any post-war painting ever sold in Europe. Perhaps this recession will spark a re-evaluation of work whose monetary value no longer corresponds to buyers’ perceptions of its artistic and historical value.

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Summer Auction Results

“View From the Terrace, Gurzuf” – Konstantin Korovin

Christie’s and Sotheby’s Russian auctions earlier this June had mixed results. Sotheby’s sold just over $41 million, acceptably between the pre-sale estimate of $36-$52 million. Compared with their successes in recent months – Sotheby’s April auction exceeded its high estimate – the June sale was a change of pace. Fewer bidders attended the sale and fewer lots were bid on competitively. The same was true for Christie’s Russian sale on June 11th which missed its low estimate of $26 million pounds with a total of $22 million. Only 66% of the 298 lots sold.

It’s unclear what’s behind the disappointing results of these auctions. Katya Dolgova, an art dealer in Moscow speculated that Russians are moving on to bigger and better things in the European art market. “Rich Russians aren’t stupid. You can get a Matisse or Monet for two to four million dollars, so why spend that money on a Goncharova?” Cultural pride, however, seems to be an important part of the growing interest in Russian art. An interest in repatriating artwork has been one of the key motivating forces behind this boom. Last year, for example, billionaire Alisher Usmanov purchased the entire collection of Cellist Mstislav Rostpovich and donated it to the Russian government. Could Russian and Ukranian buyers have simply lost interest in their artistic heritage? Why, if European art holds such an appeal to this group of buyers would they have waited until now to focus on collecting it? Other dealers suspect that Christie’s estimates were overly ambitious.

In spite of the mixed overall results of the auctions, some individual pieces sold very well. At Sotheby’s Konstantin Korovin’s View from the Terrace, Gurzuf, sold for  $2,985,217  (well above its high estimate of $1,600,000) and set record for the artist at auction. At Christie’s, Ivan Shishkin’s Mast Pine Forest in Viatka Province sold for $2,761,900, more than double its high estimate of  $1,200,000.

Future auctions will make clear whether the results of these auctions are an anomaly, or the beginning of a trend.

Update:

On June 24th at Christie’s Impressionist and Modern sale, alongside work by Monet and countless other notable European artists, Natalia Goncharova’s Les Fleurs (1912) sold for $10,965,900 to a Russian buyer, setting a record for the artist at auction. The great disappointment of Christie’s auction earlier this June was that Goncharova’s Crucifixion (est. $4,984,500)  failed to sell. Any doubts about the future of this artist, however, have been cleared. The sale of Les Fleurs seems to debunk the speculation by some that Russian buyers are losing interest in Russian work, and turning their attention to European art.  Vladimir Baranoff-Rossine’s The Rhythm also sold very well, fetching $5,383,260 with fees.