As we begin the second quarter amidst global economic uncertainty, the media continues to report that the art market bubble is bursting. The problem with this reporting, and the reason it can be confusing or unnecessarily alarming, is that there are so many different art markets – defined by type of art and price point – and they are not all behaving the same way. I’d like to walk you through some of them and give you my perspective on where things stand today.
Most of these bubble-is-bursting news stories refer to the auction market for Impressionist & Modern and Contemporary art in the tens or hundreds of millions of dollars range, which has statistically slowed down due in no small part to the diminishing quality of works for sale. Interestingly, the press also recently reported that billionaire hedge fund manager Ken Griffin spent $500 million on just two paintings (no, that’s not a typo) in one of the world’s largest private transactions. I am guessing it wasn’t a distressed sale.
Many are also wondering if a bubble is bursting, or if we are experiencing a correction. But If you are interested in contemporary art in the $10,000 – $5 million range, the conversation is very different.
In the primary market (the first time art is sold – from galleries or directly from artists), the pace has slowed somewhat, but this can be advantageous. Buyers have become more discriminating and are being more thoughtful about their collecting. Art fair openings are less frenzied, giving collectors more time to make better decisions. Yet demand is absolutely still there. Many gallery booths still sell out in the opening hours, and there are still waiting lists for the most popular artists.
In the emerging artist space, the past few years have brought an influx of speculators that were snapping up artworks at a record pace. But flipping art made by artists with no track records turned out to be a bad investment strategy for the vast majority of those buyers, so most have left this market, slowing sales to a reasonable pace. It’s great to buy emerging artists, and with educated choices, there are certainly opportunities to make money, but it requires portfolio management – just like any other investment. There is less risk buying fewer names of more established artists, and I typically advise clients to buy a mix. I am seeing a big trend toward trading out of younger names and into mid-career and blue chip artists.
In the secondary market (resales), global uncertainty would logically result in good deals, but there are presently very few to be had. In fact, good works are even priced on the high side. I get the sense that sellers are happy to wait for their asking prices; they have little incentive to cash out right now due to a lack of better investment opportunities.
Early May will be an important indicator for many art markets. The main auction houses have their big New York Impressionist & Modern and Contemporary sales. And the Frieze New York art fair will return to Randall’s Island, along with several smaller fairs dotting the city.
In short, there are many art markets, a range of opportunities, and numerous great artists to be collected. If you have questions about what I’m seeing in the markets, or if I can be helpful during the auctions or fairs, please don’t hesitate to contact me.
04/02/16