I’ve been researching the art market for an article I’m writing and I have to be honest, I wasn’t too optimistic about 2008 when I started. Not that I’m jumping with excitement now, but at least I don’t think we’re in for the big correction (ie CRASH) that a lot of people have been talking about. Here are a few things I’ve come across that changed my mind and there are a few topics that scare me about the market’s potential in 2009 and 2010.
The global economy is strong. Yes, the US sucks right now. Our brokerage houses are falling apart, oil prices are crippling the airline industry, subprime lending has killed the housing market, our currency is in freefall. But take a look oversees. The European Union is managing to stay fairly strong and more importantly there are a lot of economies that are waking up like Russia, China and India. Wonder why art from these countries has been making a strong run lately? It’s partly because American and European collectors have been hungry for new art, but a large part of the dramatic run-up has come from local collectors buying art from their countries. The new wealthy Indian elite are collecting artists like Subodh Gupta who have made a huge impact on the interantional art scene and were prominent at the Venice Biennial. Nicholas Forrest points to the emergence of Indonesia in the art market as well.
And judging by the list of works available for the May sales, we’ll probably see a slight reduction in the number of lots offered this year as collectors get nervous about price corrections. You still can’t beat the law of supply and demand. Less supply with increased demand equals higher prices. We’ll see how things play out in three weeks.
What does make me nervous though is the trend for institutional investors to move money from other investments into the art market. According to Artprice, the average price per lot in 2007 increased 18% and the overall sales volume increased 43%. Those are amazing numbers for brokers who have been seeing the market rise and fall (mostly fall) over the past eight months. What happens when the stock market corrects itself? The brokers will dump a lot of their stakes in art and put the money back into stocks. The increased supply is going to have a huge effect on the art market. Fortunately that’s not likely to happen this year, but look out in 2009.
So overall think of this year’s art market like last year’s housing market. There’s a lot of talk about correction, but it will tread water until there is another change in the economy. The last big correction we saw happened about two years after the last US recession. If we use that as a benchmark, 2010 is looking grim.
