Is the boom ending?
Yue Minjun 1995/Sotheby’s
“BY THE end of the year we will be in the correction phase of the hot contemporary art market,” predicts Charles Dupplin of Hiscox, the largest insurer of fine art in Europe. Closely watched sales of contemporary art in mid-October at Christie’s and Sotheby’s, the duopoly that dominates fine-art auctions, showed signs of a bubble deflating. Some important works failed to sell or make pre-sale estimates. But bigger tests are to come: contemporary-art auctions in New York in November and Miami Beach in December. FIAC, an art fair that opened in Paris on Thursday October 18th will provide an indication of the market’s health.
The boom that might precede a bust is evident. This year is likely to prove one of the most successful ever for the art business. Christie’s and Sotheby’s reported their highest sales ever in the first half of 2007 with sales of around $3.25 billion each, nearly 50% more than a year ago. Works by well-known artist all set record prices. “White Centre”, an early abstract painting by Rothko, sold for $72.8m at Sotheby’s in May. Warhol’s “Green Car Crash”, part of his “Death and Disaster” series, went for $71.7m. At another auction one of Damien Hirst’s trademark medicine-cabinet sculptures fetched £9.7m ($19.3m), breaking the European record for a work by a living artist.
Since then paintings have lost some of their gloss. The October auctions that ran alongside London’s Frieze Art Fair, saw Sotheby’s rake in $70.7m and Christie’s $80.6m. Superficially all seems well. But a close inspection reveals flaws. “Man Turning on the Light”, a painting by Francis Bacon, sold for $16.3m in the middle of Christie’s pre-sale estimate of $14.2m to $18.3m. Other high-profile lots underperformed too. Works by Warhol and Jean-Michel Basquiat failed to sell; several Hirsts went for below estimates. Almost one in six of lots failed to find buyers. It was a similar story at Sotheby’s. A polka-dot painting by Mr Hirst valued at up to $5.1m went unsold.
The big money paid for Warhols and Hirsts earlier in the year may have inflated expectations and convinced some collectors to cash in. Sotheby’s sold ten Warhols in October, but the priciest, a portrait of Jackie Kennedy, went for just $3.5m. A further test comes later this year. Christie’s is auctioning “Liz”, a version of Warhol’s famous picture of Elizabeth Taylor owned by another British actor, Hugh Grant. The auction house estimates that the picture might fetch £34.8m. If prices for Warhols are softening Mr Grant may have to do make do with a little less.
The picture, however, is not just of storm clouds gathering. The market for Chinese contemporary art is roaring ahead unabashedly. Yue Minjun’s “Execution”, a painting (see above) inspired by the Chinese government’s crackdown in Tiananmen Square in 1989, became the most expensive work by a Chinese contemporary artist ever by going for $6m at Sotheby’s, well over its upper estimate. Prices for Indian art have also been buoyant.
Andras Szanto, a fellow at the Centre for Arts and Culture in Washington, DC, is not sure where the market is heading. He thinks that a correction or a crash is possible. Or perhaps investors might consider art a safe-haven if the economy turns sour. The scarcity of top works and the desire of rich punters drive a market where predictions are hard to make. If, for instance, Ronald Lauder, a fabulously wealthy philanthropist, thinks a painting by Gustav Klimt is a must-have for Neue Galerie New York who knows how much he might be prepared to part with.
So far the credit crunch, and fears of recession in America with its depressed housing market and weak dollar have had little impact on contemporary-art sales. “But the art market tends to follow financial markets with a delay of a few months,” says Edmondo di Robilant, an art dealer in London. In January the golden boys running private-equity firms and hedge funds in the City of London and on Wall Street might find bonuses have dwindled. For many of these buyers the passion for contemporary art is a recent one. Faced with the decision between buying the latest Ferrari or a work of art, says Mr di Robilant, they might revert to type and plump for a fast car.