Sign of things to come? New York art market shows evidence of weakness

Global stocks crash; buying drops at auctions in US and fairs in Korea and France

LONDON. The Asia Week auctions in New York were the first to show a dramatic fall in revenue and buy-in rates since last year, suggesting that the art market can no longer withstand the pressure of the surrounding economic turmoil. In the same week, although nearly all lots sold at Damien Hirst’s solo auction at Sotheby’s in London (some of it to his art dealers), the Korea International Art Fair was hit by the financial backdrop and buying also dropped at the art and antiquities biennial in Paris.

In the space of a few days in September, the investment bank Lehman Brothers filed for bankruptcy protection; the US’s biggest insurance group, AIG, was rescued from collapse by the Federal Reserve; and financial corporations including Merrill Lynch and Halifax Bank of Scotland (the UK’s largest lender) were pushed into acquisitions by their competitors. Market commentators were comparing the situation to the economic gloom of the Great Depression, which began in the US in 1929, and warning that it could be at least five years before stability returns.

There are still those who profess to believe that there are markets that can continue to operate in isolation; auctioneers and dealers have been saying for months that buyers from growing economies such as China and Russia can make up for the likely retirement of western buyers. But news of Lehman Brothers’ collapse didn’t only see the Dow Jones fall 500-points: Asian stocks nosedived (the benchmark Shanghai Composite Index closed down 4.5% on 16 September), and on 17 September trading on Russia’s main stock exchange—one of the best performing indexes in recent years—was suspended following sharp falls in share prices prompted by the news from Wall Street.

“There will be a tightening of belts,” says Philip Hoffman, founder of the UK’s Fine Art Fund. Andreas Gegner, director at Sprüth Magers in London, says: “September’s news was more dramatic than we’ve seen before and sent more alarming signals. The Damien Hirst sale went fine, but you could argue this sale was the exception and therefore can’t be relied upon. I would imagine that people who have started buying art recently, many of whom work in financial companies, may pull out now.”

Historically there has been a loose correlation between the wider economy and the art market, which has taken around 18 months to react to financial downturns. It is now over a year since the sub-prime mortgage fiasco began to unwind.

October’s Frieze Art Fair and the following contemporary sales in London and New York will once again hope to defy economic gravity.

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Comments

19 Oct 10
1:21 CET

JAMES V. FREEMAN, LANCASTER, PA

As a devoted, real artist who has sold numerous original in the five figures, yet remains an outsider to the New York art scene, I am overjoyed to see decades of pumped up schlock come tumbling down in value. For too long art has been run by charlatans - dealers and scholars -as a front for money laundering and sheltering wealth from taxation. It is predicted that collectors, after licking their wounds from this catastrophic loss of value, will return wiser, buying thoughtful, original artwork done with excellent craftsmanship. Let's deliver the fatal cut to the art racket by eliminating public funding for visual art, and it's tax deductability for donation. Then we'll see how many real collectors, dealers, museums and artists remain in the ring. www.jvfreeman.com

20 Sep 09
14:14 CET

ANNE FAGGIONATO, LONDON

you rightly point out in your article that some of the lots in the Hirst sale were auctionned to his dealers. Either the dealers were buying for clients who wished to remain anonymous or they were buying for their own stock. In the later case would that not attest to the strengh of Hirst's market and the confidence of his dealers or do you assume the dealers intend to sell at a loss?

20 Sep 09
14:14 CET

BOBBY MOOKINI, LEEDS (UK)

There has been a similar suggestion over at the Guardian, JJ, towards the start of the week about the burst of the ‘Art Brand’ Bubble due to parallel yet poisonous correction to the financial sector. I guess the big question is how many of the same investors have also made bad investments on Art as Assets...Only time will tell us all the real value of recent art purchases. BobbyM

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