Economic Crisis Extends Into the Art Market

Auction houses and art fairs put on a brave face, but cannot hide a steep decline in sales growth after the recent boom years Heading for a crash?

Yue Minjun’s Immortal Cranes, 1997, which failed to sell at auction at Sotheby’s Hong Kong October seemed to be the month when the wheels began to come off the global art market in the wake of turmoil in the wider economy.

This was particularly evident at auctions in the recently “hot” categories such as Chinese and Aboriginal art, high-end contemporary works, and in categories that have been supported by a relatively limited core of collectors, such as Islamic art which has been dependent on the purses of Qatar and Abu Dhabi in recent months.

“If the Damien Hirst sale [Sotheby’s, 15 September] had been two weeks later, it would have been a bloodbath,” said Michael Hue-Williams, director of Albion Gallery. As if to illustrate his point, the season’s design auctions are worth comparing: at Phillips de Pury on 25 September, total auction sales were above estimate, and 78% of lots sold; while at Sotheby’s on 18 October, total sales were below estimate and just 50% of lots sold.

In the intervening 23 days, the credit crisis hit the European financial services sector as groups including Dexia, Fortis and Hypo Real Estate were bailed out; Britain’s Bradford and Bingley was nationalised; Wachovia (the fourth largest US bank) was rescued by Citibank and the US House of Representatives unexpectedly rejected, and later passed, a $700bn rescue pla n for its financial system. The auction houses are putting on a brave face, using phrases in their press releases such as “given the economic backdrop” (Christie’s) and “the sale was assembled in a very different economic environment from that which prevailed today” (Sotheby’s). But they have been furiously changing their risk profiles, shoring up cash reserves, and minimising incentives such as guarantees.

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In spite of the credit crisis, most customers who go to a fine art auction, aren't affected by the middle class press or imploding housing market, as 6,000 to 7,000 eager bidders appeared at many of the fine art auctions this year.