Unpredictability of the Art Market
Armory Show Panel: Art Market Remains Unpredictable
On March 3, 2017, the Armory Show in New York held a panel called Conversation on Collecting: Hypotheses on the Future of the Art Market. The talk, presented by Athena Art Finance Corp and moderated by art market reporter Kelly Crow of the Wall Street Journal, encompassed expert panelists in the market: auctioneer Simon de Pury, gallerist Dominique Lévy, collector Alain Servais, Todd Levin, director of the Levin Art Group, and Athena Art Finance CEO, Andrea Danese.
The panelists’ predictions on the art market’s future recapped the longstanding debate about the motivations of collectors—whether the purchase of art is driven by personal and artistic tastes or the artwork’s investment potential. Some argue that collectors should not be focused on the monetary value of the work when purchasing artworks, finding the notion offensive. Rather, panelist Dominique Lévy encourages art collectors to focus on the intangible and emotional aspects of art—rather than letting the market drive their decision-making.
But still, with one Deloitte report finding that 72% of collectors purchase art as a hobby “with an investment view,” a perspective emphasized throughout the panel and in much public discourse about current collecting habits. Armory panelist Simon de Pury acknowledged the even those collectors who purchase out of love still want to know that they are not wasting their money when purchasing an artwork.
The panel also reinforced the oft-repeated warning that the art market is unpredictable: relying on past performances and numbers is very risky in a market where tastes habitually change daily and the slightest misstep of one artwork at auction can affect an entire artist’s oeuvre. And the modern and contemporary art market is particularly that way, due to many factors including the changing tastes of collectors and the speculative nature of investing in emerging, still-living artists. In fact, some experts have speculated Christie’s recent employment cutbacks and shutdown of its South Kensington location indicates a dangerously shortsighted emphasis on notoriously volatile modern and contemporary art.
The recent record-setting auction at Sotheby’s London also underscores the fickle nature of the art market: On March 1st at Sotheby’s Impressionist, Modern, and Surrealist Art sale, a Gustav Klimt painting for $59 million, the third most expensive artwork sold in Europe for a total combined results estimate of $241 million—the highest amount ever fetched at any London Auction. The results also came after the release of Sotheby’s Fourth Quarter earnings in late February, which indicated a significant increase in the company’s share price, which has doubled over the past year.
But for Sotheby’s and many others, the recent increased confidence in the art market was a welcome change to the art market, which experienced a significant slowdown in 2016. In spite of its recent successes, Sotheby’s itself had reported less than stellar earnings throughout 2016, including one auction in May where one-third of its lots went unsold. According to one gallerist, the overall art market saw a 30 to 40 percent decline in 2016, with many external economic factors that affect major buyers of artwork have been attributed to the art market slowdown.
Factors such as anxiety about the Chinese market and the falling oil prices, that have significantly impacted Russian and Saudi collectors have increased uncertainty in the future of the art market. Recently, it was reported that in a recent Christie’s auction, four of the top lots came from the collection of Russian billionaire Dmitry Rybolovlev. Rybolovlev’s own recent legal battles revealed that he had likely paid much higher prices for the paintings than their estimates at auction.
Of course, to counteract the market’s unpredictability, financial experts have attempted to quantify art market data to predict market trends. Still, the Armory panelists contend that the abundance of graphs, charts, and quantitative information now available on the Internet, will do little to replace the traditional connoisseurship, personal experience and knowledge to predict valuable art investments. And these experts reiterated one of the key challenges of the current art market: the lack of public information about art market transactions makes it difficult to truly quantify and monitor movements in the art market.
But experts agree that that the art market will likely continue to flourish so long as there is the United States retains its tremendous wealth gap, and current executive policies in the United States indicate that nothing will drastically change the wealth distribution time soon. And with more money pouring into the art market, especially from collectors who have a background in finance, panelist Danese noted that data might become more reliable and efficient, as investment savvy collectors demand a more quantitative analysis of their potential art market investments.
But then again, another change could counteract this trend—Todd Levin, a panelist at the Armory show talk, noted in 2016 that collectors are likely turning to more private forums, like galleries to sell high valued artworks, rather than selling at auction. This would deprive the market of data about what tastemakers are buying and selling and whether this will actually be true in light of the recent success at auction is, of course, unpredictable.