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
By Melanie Gerlis. News, Issue 195, October 2008
Published online: 02 October 2008
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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