Auction houses say the art market is booming. But what is hidden behind these brilliant figures?

The art market is booming again, bigger than ever.

That was the message given to the world’s media after last month’s marquee auction fortnight at Christie’s, Sotheby’s and Phillips in New York.

A final installment of 20th and 21st century works from the “peerless collection” formed by New York divorcees Harry and Linda Macklowe brought the total to $922 million, making this sole proprietorship the “most gem never sold at auction. according to Sotheby’s. Phillips’ mixed night sale of modern and contemporary art brought in $225 million, a record for the company. The previous week, Christie’s had sold Andy Warhol’s 1964 Blow Sage Blue Marilyn to Larry Gagosian for $195 million, the highest auction price ever achieved for a 20th century work.

“The art market no longer includes the market, it only includes auctions. It’s really the only thing people talk about,” says Lisa Schiff, the founder of US-based SFA Art Advisory, commenting on the edge that livestreaming technology and global marketing have given venues. international sales since the advent of Covid.

Sotheby’s says its various live sales attracted 3.6 million views in its flagship May week. But the ability of auction houses to shape broader perceptions of the art market has led to hyperbolic messages.

Special guest (2019), by Los Angeles-based artist Lucy Bull, sold ten times its estimated price, for $907,200 © Lucy Bull

According to Sotheby’s data, this latest round of New York sales at the three major houses was “the biggest auction season the market has ever seen.” But figures analyzed by London-based art market analysts Pi-eX disagree. Their independently collected numbers show that May was actually the third-highest-grossing auction round on record: the grand total of $2.84 billion was lower than the $2.93 billion achieved in May 2018 and the 2 .89 billion taken over in May 2015.

Warhol’s serigraphy Marilynone of a series of five large-scale versions, has been described by Alex Rotter, Christie’s President for 20th and 21st Century Art, as “one of the greatest paintings of all time”, in the sides of Botticelli. Birth of Venus and da Vinci mona-lisa.

Wow. But if that was really the case, why would that not ultra Pop Art sold to Gagosian below its hard-hitting $200 million estimate? Is a Hollywood superstar who died 60 years ago no longer the icon she once was? Or did the world’s population of over 2,000 billionaires simply think there were better ways to spend that kind of money than on art?

The reality of auctions

The world is told that the high end of the art market is booming again, but new realities lurk beneath the shining numbers.

Certainly, the $922 million obtained by Sotheby’s last month and in November for the 65 works in the Macklowe collection testifies to the enduring appeal of the divorced couple’s classic Upper Manhattan taste for marquee artists such as Warhol, Rothko, Twombly and Richter, practiced for over 50 years. Earnings well above the supposed $650 million global guarantee seemed to underscore the status of these canonical names as sustainable “blue-chip” investments, at least when offered from a named collection. long established.

But there was significantly less demand for big-ticket works of established white male names when offered individually by anonymous sellers.

One of Cy Twomby’s great “blackboard” abstracts of the late 1960s, hitherto highly prized, was guaranteed to fetch at least $40 million in Sotheby’s contemporary mixed-ownership sale. In 2015, a similar “blackboard” by Twombly sold at auction for $70 million. This latest example sold at a single bid from the third-party guarantor for less than the estimated $38 million, a price reflecting discounts available to backers at auction.

Four Lots Earlier, Francis Bacon’s Study of the Red Pope (1971), which failed at auction five years earlier, was also guaranteed to sell for $40 million. An additional bid eliminated the guarantor, resulting in an all-in price of $46.3 million. A one-time offer that would normally be a raise of, say, $100,000, costs $8.3 million here.

“If you’re a collector, why sign up to bid with a paddle if you can guarantee a work and get a discount?” said William O’Reilly, president of the New York branch of Dickinson Advisors and Dealers.

But if wealthier collectors realize the benefits guarantors enjoy as buyers, this in turn could deter registered bidders from paying extra, which in turn could suppress demand for top-notch classic works. . Auction house warranties are hard enough to understand, but the recent ruling by a federal court in New York that auction houses no longer have to declare such arrangements has the potential to make this situation even worse. more obscure, further deterring inexperienced buyers.

According Forbes, the global population of billionaires – individuals who can comfortably spend $200 million on a work of art – has grown from 1,209 in 2011 to 2,755 in 2021, their total wealth has nearly tripled from $4.5 trillion dollars to $13.1 trillion. Over the same period, global fine art and decorative art auction sales rose from $32.4 billion to $26.3 billion, according to data from the Art Basel and UBS annual report. Art Market Report.

“The art market has been stable for ten to fifteen years,” says Roman Kräussl, professor of finance at the University of Luxembourg and co-author of the 2016 study, “Does it pay to invest in art? ‘art ? A perspective of selection-adjusted returns”.

Buy now, worry about value later

“Maybe the ultra-rich are realizing with all this data that the returns aren’t in the double digits,” says Kräussl. “When I calculate the return on art, it’s about 5% plus costs.” By comparison, S&P 500 stocks have generated average annual returns of about 14.7% over the past ten years, according to Business Insider.

“People who buy top-notch art like a classic $25 million Richter aren’t buying it primarily as an investment, but primarily as a hedge against downside risk,” says Kräussl.

But what about the folks clamoring for six- and seven-figure auctions for paintings by Instagram’s favorite ‘red-chip’ young artists like Anna Weyant, Flora Yukhnovich and Lucy Bull that recently sold in galleries? five digits? Are they buying to invest?

For Kräussl, and for many other market watchers, this is simply a sign of a younger cohort of clients with too much liquidity (what we call “the money”) pursuing too little work. available by too few fashionable names. And the buyers are wealthy enough not to care too much about the investment.

“You sold a startup for $50 million. You have white walls. What do you put there? Not a Richter. It’s old school. But people are afraid to buy the wrong art,” says Kräussl. “It has to be politically correct. It must be kind of OK. Must be racing OK. And then you can say at the dinner table, “I bought this at Phillips.” It’s a stamp.

The record total of $225 million reached in New York by Phillips, which has specialized in emerging art for years, and the bidding frenzy the following night at The Now’s $72.9 million sale of Sotheby’s collection of 23 works, by “today’s most exciting artists,” characterized this shift from blue to red, chip-wise. The $907,200 donated for a 2019 summary by Los Angeles-based Lucy Bull , represented by David Kordansky, were one of nine new auction records at Sotheby’s Bull’s artwork sold for more than ten times its pre-sale estimate.

” What is happening ? Everyone wants to get into it. There’s nothing here that makes sense in a traditional value creation scenario,” Schiff says. She remains convinced that while there’s a lot of money to be made in freaking out, art is a better investment in the long run. “You can make money by buying and selling,” she adds. “[But] you can make a fortune by holding.

The Macklowes certainly did, although it took them half a century to get there. Can buyers and sellers of digitized art today wait that long?

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