The sun shines on the art market this summer. Festivals and exhibitions have bloomed in many cities, or undressed in the case of Switzerland. It is a sign that the concept of art for the masses is well established as a key driver for a spreading market. It is also an excellent opportunity for the middle market to grow and, to believe the sales, this is what it actually does. Regarding the Big Names, the Masters or the Auction Houses, they are under surveillance.
Since that the art market sales are chaining the records, the probability that the market pauses … increases with each new record! And when the last August,5 Sotheby’s announced a decline of 0.1% of its turnover in the second quarter, investors panicked: the stock lost 10% in two days. The media meanwhile have hastened to make the buzz.
The Art market is down 8% for the first half of 2015
The evolution of the Art market has been fast over the last years and 2015 could stay in line with the trend despite a few missed sales this summer and probably to come, a less impressive growth pace.
The lack of interest from the Chinese and the Russian collectors, mainly due to economic reasons, has weighted on the global art market so far this year. After an increase of 214% between 2009 and 2014, the Chinese Public Group Artron has reported that sales in China fell 30% for the first half of 2015. A good news for the UK where the market sees a slowdown in the pace of growth, increasing only 5% (35% in 2014 on same period – 6 months): this is enough to barely be $100 million short from the second place held by China, and to confirm that London is The Place to be.
And Christie’s is in the place; the Auction House has reported an increase in sales to a record $4.5 billion the first 6 months of the year. Its rival Sotheby’s has reported on July, the highest total sales ever realized at auction in Europe, $204,7 millions.
Behind the Buzzy Headlines, the facts
Why did we get so much noise in the medias when Sotheby’s did report its 0.1 percent loss?
Despite the great headlines we have read these last 6 months, the global art market is having a break on the first semester of 2015 and the figures at the end of the year will probably confirm this. Therefore, it is important for the collector to understand where the trend up is and where he should not go.
When the headlines are only showing “record… records… records…” for over two years, the trend to make the buzz tends to go the opposite way in any occasion. It’s been the case when a piece by Francis Bacon missed the estimate last spring or more recently a Roy Lichtenstein sold $41.7 million, under pre-estimate. And it has been the case with Sotheby’s last results announced at the beginning of the month, which did brought the stock down to a support at $37 from the $42 (now back at 38$ in the uptrend).
Don’t get confused between the Auction Houses and the Artists
Sotheby’s has reported a net profit of $72,5 million compared to previously $71,7 million. Not to mention that a modification in the accountings, delaying the results achieved in the second quarter to the third one, has led the company to announce that their results were down. If Sotheby’s had kept the previous calculation model, its Contemporary art sales would have increased 18% for the first half of the year.
Overall, on the financial point of view, the results are good for Sotheby’s and if there is more opacity for Christie’s (not traded on stock markets), their results are good too! just not profitable enough: they make a lot of money, but have to face heavy costs, as we already pointed out in June: they are at a critical stage. They have grown over the last ten years at a very fast pace and they have faced important decisions over the last months and still have to do the right choices. Among the problems they are facing, the guaranties to the seller.
Like with any high-end and profitable market, there is a fierce competition between the Auction Houses, the major ones and the outsiders such as Auctionata. With an increase of 195% in sales… Auctionata is now the biggest Auction House in Germany. This is a good news for the outsiders, more flexible than the behemoths like Sotheby’s or Christie’s who are struggling to readjust their development model: the minimum price guarantees they offer to the seller to get the sale, significantly burden their results, amounting to $ 8 million for Sotheby’s over the last 6 months. That is actually one of the “few disturbance” that Sotheby’s new CEO Tad Smith did point out.
Without forgetting that these good financial results are also penalized on the Europe side by the strengthening of the dollar, which also had an effect on the geographical repartition of the sales. Christie’s reported a 24 percent increase of its sales in the US and reversely, a decrease of 11 percent for Europe (mainly France down 16% and Germany), also tormented by the Greek case this last spring.
After these series of records, the market is sensitive; those who need or expect a break on the market are increasing (we can have a parallel here with the stock markets!). With this in mind after the summer, the slightest incident could become a good excuse to make noise. It is important here to consider the information in the calm and remove ambiguities. If the Auction Houses make the headlines, one way or the other, what interests us is not what they earn, but what they sell. And on this point, it seems that although some master pieces (Gerhard Richter, Warhol, Francis Bacon… more about missed sales) found no buyer this summer, the trend remains positive in our market, the Contemporary Art.
Bad mood for the Chinese, the Russian and the Old Masters
Another good news came this summer from the US and its leadership. With a 20% increase in sales ($3.4 billion) for the first half of 2015, New York remains the core of the Art Market for the collectors, the dealers and the artists, accounting for 38% of the worldwide market (China 26%): the top 10 lots of the year were auctioned here last May.
Nevertheless, these good news are not good enough and overall, the global art market is down 8 percent for the first 6 months of the year. The good results in the US or the UK were not enough to fill the gap left by the Russians and the Chineses, but most importantly, the disinterest for the Old Master, which benefits to the Post War and the Contemporary artists. Christie’s has reported a decline of 37% for Old Master paintings, 19th century and Russian art. This trend is strengthening and have an important impact on the market if we consider that it is still accounting for 50% of the total sales. The Old Masters and 19th century declined 13.3% and 23.3% respectively in 2014 and the trend will probably be confirmed at the end of the year.
Go for the Post War and Contemporary Artists
The Artists making over €10 million
(source Artnet) The $10 million threshold for the Post War and the Contemporaries works was exceeded thirteen times in 2014, compared to four in 2013. At the end of 2014, 26 contemporary works had reached this level in auction history. For the first half of 2015, 42 auctions have crossed the line in New York.
Ten years ago, Jeff Koons was establishing records at $2 million and is now hovering around the $40 million. Still below the levels reached this year by artists such as Pablo Picasso $179.4 million, Alberto Giacometti $141.3 million, Vincent van Gogh $66.3 million, Monet $54 million, $46.3 million (new record for a living artist; double its optimistic estimate) for “Abstraktes Bild 599 – 1986″ by Gerhard Richter, the most sought-after and only living artist in the Top 10 this year. Andy Warhol totalized $289 million in sales for the first half of the year, behind Picasso and Monet. The other artists in the Top 10 are Mark Rothko, Francis Bacon, Cy Twombly, Joan Miro and Jean-Michel Basquiat. At lower levels, a piece by Christopher Wool was sold $5,5 million at Art Basel this year and at the same level, a piece by Keith Haring, one of the three street Art icons with Jean Michel Basquiat and Richard Hambleton.
Last year, Basquiat, Koons and Wool alone were accounting for 22% of the total contemporary sales, with 10 of the 13 auctions above the $10 million. The ranking was similar to the previous year. Basquiat remained stable; Koons and Wool have posted impressive rises of 186% and 142% respectively. Ten years ago, the total turnover of the three top artists at auction came to €35.8 million. A total now established at €339 million. These 3 artists are american, they are leading the top news headlines and they are supported by major art dealers such as Larry Gagosian. And talking about Koons and Wall, they are both 60 years old and they are not at the end of their carrier but probably close to a less prolific activity, which has an evident effect on the prices’ trend up. This may not be right this year, or the following one… let’s make an appointment in 5 or 10 years!
Best art market auctions 2015: FEEL IT!
What is the right pattern when considering to buy Art
Should you buy some Koons or Wall? On the collector point of view, buy what you like! If we consider the strong financial concern now spreading over the market, the answer is no that simple. When prices are skyrocketing on a growing market, the “first in” use to take some profit in order to anticipate the evolution of the market. The “last in” pays the highest price and experiences difficulties to find counterparts at the time to sell. On the other side, the growing number of new actors, along with the “first in”, start to look for other “producers” and to diversify the purchases.
Following this pattern, after two years of records for the Contemporary Art Masters, probabilities that the market will make a break are not high, they are just… evident: though it is its natural trend, a market never goes up in a straight line. This period generally offers good opportunities for those who have missed the train. But the actual trend, still following this pattern we already have explained in our article “Wine and Art, same model for same Lovers ?”, is to look after more interesting opportunities left by a new market: in our case, The Middle Art Market.
The Middle Art Market -$25,000 to $1 million- is growing fast in the wake of the new concept of Art for the Masses, now developing all over the world. More buyers, more counterparties, that is basically what it is suggested by the 49% increase in online bidders, reported by Christie’s. The Auction House also reported a 14% bump so far this year in the number of bidders interested in artworks priced between $100,000 and $1 million, mostly contemporary art works.
The trend: the Living artists
As mentioned above, another living artist has joined this year the most sought-after artists rankings, Gerhard Richter. As a good example of the trajectory of these living artists coming under the spotlights, “Abstraktes Bild 1988″ by Richter was sold $169,911 at Sotheby’s in 2005, and sold again by Sotheby’s $USD 522,904, roughly 300% more 7 years later in 2012. His last record this year, $46.3 million, is 41 times more than the price it achieved in 1993.
This is another strong signal of the move by collectors, from Old Masters and the 19th century, to contemporary artists. Despite a slow down on the global art market this last spring, The contemporary market is still doing well. Christie’s has reported an increase on its Postwar & Contemporary art and Impressionist & Modern art segments, up 8%and 8,5% respectively from the 2014 first half.
If the masters such as Warhol, Giacometti, Mark Rothko or Gerhard Richter are the core of the Art market, the middle market is now its breath. We may not see as many records as we did over the last two years, but it is a matter of fact, the art market is healthy, especially in the UK and the US where the interest for the living artists with an established background and a long history, is growing. Of course, it is not politically or socially correct to say it, but this is probably the most common bet done since the world exists: the anticipation of the death! of an artist or… a mother in law!
- The global art market is having a break
- The Old Masters are clearly loosing ground in benefit of the Contemporaries
- The Post War and Contemporary art segments are growing in sales and buyers
- The top buyers tend to be more educated and selective
- The Top contemporaries should have a break
- The Middle market is the next place to be