The art market is booming, but you should still be wary
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Last week, Picasso’s Dora Maar With Cat fetched $95.2m at auction in New York, making it the second most expensive painting in history after his Garçon à la Pipe, sold for $104.1m in 2004. Sotheby’s attributed the hefty price tag to the painting’s “sculptural presence” and “gorgeous palette of colours”– but “if the filthy rich had ever possessed taste”, says Ian Bell in The Sunday Herald, “Vincent [Van Gogh] might never have died an abject death”.
Bell’s remark echoes the observations of many art dealers that the market is getting ahead of itself. There are warning signs that many people who’ve recently bought in the contemporary market have been swayed “by fashion rather than quality”, says Will Bennet in The Daily Telegraph. Theo Westreich, a New York art dealer, agrees. He tells Barron’s that collectors are being guided by market buzz, rather than knowledge or insight. So, even if the Picasso sale suggests a healthy market boom, investors should take note. First, when pieces of art go for astronomical prices, “the disparity between price and quality rises to the nose”, says Stewart Waltzer, a New York-based art dealer on ArtNet.com. He adds that: “$100m pictures don’t make a market; $2m to $10m pictures do. Very high prices are scarier than lots that don’t make their reserve because that’s where buyers and markets get stranded”.
Second, the health of the market is linked to that of the economy. According to Bloomberg, data gathered from price tracker Art Market Research’s Art 100 index reveals that “an index of expensive art rose fivefold from 1985 to 1990, then fell 59% in two years”. This reflects the experience of Sotheby’s and Christie’s, who both recorded profits of $155m and $76m respectively in 1990. The markets’ cyclical character came to the fore in 1992, though, when profits fell to $6.5m at Sotheby’s and $11.2m at Christie’s. As Bennet says, art is an illiquid asset that is best kept for ten years. While the market remains strong as the “super-rich continue to spend enormous sums”, its volatility is underlined by its vulnerability to “anything from a major terrorist attack to a bird-flu epidemic”. And even, very occasionally, good taste.
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