The art world is hurting as the New Year begins. December’s five-day auction at Christie’s Hong Kong resulted in sales of $146 million, 35 percent less than projected. More than 30 percent of the 2,400 items went unsold. To measure what this means, compare December with Christie’s Hong Kong auction in May, which ended in sales of $310 million, the highest ever for the house’s Asian branch.
In other year-end news, New York’s National Academy, holding one of the largest collections of American Art, was forced to sell a pair of Hudson River School paintings to meet operating expenses.
The silver lining is that the National Gallery earned $15 million from the sale. Good art with a solid pedigree will continue to sell. As one New York auctioneer recently put it, the global financial downturn has driven the “silly money” from the market. Many of the nouveau riche aren’t as rich as they were a year ago. Their paper fortunes have evaporated, and with it their ability to acquire contemporary work of dubious long-term interest and trophy art for its prestige, not its beauty. The art market is undergoing what Wall Street dryly calls a “correction.” Blue chip work will always be valuable, regardless of fluctuations. The careful investor will win in the end.
Meanwhile, the art world’s biggest auction houses have lost a lot of money. After several seasons of record-breaking sales and above-average growth, minimum reserves were set high and the auction houses favored the big sellers. Guaranteeing a predetermined return for some of the top sellers with the best goods, the auction houses were banking on big bids.
But as buyers entered the season with market jitters and the U.S. Congress debated the $700 billion banking bailout, fourth-quarter sales were uneven and mostly down. Caution kept the bidding soft. At Sotheby’s Oct. 17 Contemporary Art Evening auction in London, the sales room was far from filled and a quarter of the lots went unsold. Andy Warhol’s 1976 silkscreen series Skulls sold for only one bid at $7.5 million (buyer’s premium), under its reserve of $8-$12 million.
The following evening at Phillips London Contemporary Art Day sale, results were weak, bringing in $8 million, far below the $32 million-plus number anticipated. Christie’s followed the downturn the next evening in London with its Post-War and Contemporary Art Evening sale resulting in 21 out of 47 works unsold.
Auction house guarantees to the seller have been at the heart of the biggest losses in recent months. Fiercely competitive for high-ticket inventory, auction houses frequently lure potential sellers to consign with them through guarantees of an agreed price to the consignor prior to the auction. If the artwork goes unsold or falls below reserve, the seller is guaranteed the sum agreed on by the consignee.
Sotheby’s New York secretly began the practice of guarantees in the early 1970s when consignors were often opting to sell their works through dealers rather than through an auction house where the return could be low if the sale was soft. By offering the seller a guarantee at an agreed upon price, the auction house was really purchasing the artwork from the collector, with the risk in the hands of the house, not the seller. It worked well for Sotheby’s, now able to more frequently acquire major artworks from prestigious collectors and museums, thus offering the best in the market and reducing dealer competition.
In 1975, the New York City Department of Consumer Affairs required all public auction houses to disclose their financial affairs and the secret practice of guarantee became public knowledge. Opponents have argued that this practice inflates market prices because the auction houses have a bigger stake in the outcome of the sale.
Christie’s, Sotheby’s most powerful rival, enforced a policy against this practice until 1990, when it could no longer compete with executors of estates and trustees of museums without it. In its high profile November 2007 sale in New York, Christie’s auction of Post War and Contemporary Art, actor Hugh Grant put his Andy Warhol portrait of Elizabeth Taylor on the block with a guarantee of around $20 million. The actor had purchased the turquoise portrait Liz six years earlier for $4 million and made a substantial gain despite the pre-sale estimate of $35 million. It sold for $23.7 million. The amount the house received depended on the individual deal struck with Grant. Christie’s probably didn’t make a lot of money on the sale but in a highly competitive market they got the client and ruled the day.
The global economic crisis has affected areas of the art market but the long view remains optimistic. Unlike stocks and bonds, art trades irregularly and for a variety of reasons. The chief factors for movement in the auction world has been described as the three “d’s”: death, debt and divorce; none of them in rhythm with the stock market. Works sold at auction come and go and come back again. The Mei Moses Art Indexes is a database compiled to track repeat auction sales of the same works and the performance of long-term art sales. Among its findings, stocks out-performed art for the past quarter-century but lagged behind art sales for the past half-century.
Not all news has been bad news. Aside from steady numbers of the Old Masters, a term that now encompasses the early exponents of modern art, photography has done well at auction, especially images of high status celebrities of the 20th century such as Marilyn Monroe. The Dec. 16 sale at Christie’s New York, Icons of Glamour & Style: The Constantiner Collection of Photographs, achieved the highest total for a single owner. The 280 lots focused on photographs by sought-after artists such as Andy Warhol, Richard Avedon and Irving Penn and broke a record for Helmut Newton’s Sie Kommen (1981), hitting the hammer at $662,500.
But the drum beat of pessimism continues in many quarters of the art world as the New Year begins. In Los Angeles the Museum of Contemporary Art is looking for a bailout as its endowments head toward empty. And in a sign of declining confidence in the market, the International Asian Art Fair, held each spring in New York City and scheduled for March 2009, has been cancelled.
Mary Manion is the acting director of Landmarks Gallery and Restoration Studio, Milwaukee. She can be reached at email@example.com.
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