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
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
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
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
"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
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."