Off the wall? A globalised art market defies the doomsayers

Deborah Brewster
When Roman Abramovich, the Russian metals and minerals tycoon, and Sheikh Saud al-Thani, from the Qatari royal family, both showed up this month at the Basel art fair, their presence caused a stir but no surprise. The commodities market and the art market have grown unlikely links.
The huge wealth from oil and mining in the Middle East and Russia is flowing into fine art, with a rush of new buyers entering a market that was already booming. Mr Abramovich was the buyer of two of the three most expensive paintings sold at Sotheby’s big May sale in New York, according to The Art Newspaper – paying $86m (£43m, €55m) for Francis Bacon’s “Triptych, 1976” and $34m for Lucian Freud’s “Benefits Supervisor Sleeping”.
The Qataris are building an art museum and the sheikh has emerged as one of the biggest collectors in the world. Sotheby’s estimates that Russian buyers accounted for 15 per cent of sales at its Impressionist and Modern auction in February, compared with 9 per cent last year, and a negligible amount the previous year. Russian art is itself booming – along with virtually every other sector of art – thanks to demand from Russia.
The arrival of Russian, Middle Eastern and emerging market collectors has given fresh evidence to those who believe that the powerful rise in the price of artworks is structural rather than cyclical – reflecting a long-term shift to a truly global market supported by growing numbers of millionaires and billionaires.
Last year, the art market – as measured by proceeds for the top 100 artists sold at auction – in nominal terms surpassed the previous high set in 1990, according to data from Art Market Report. After a decade in the doldrums the market recovered sharply in 2003-04 and has been on the upswing ever since. The rise in the contemporary market has been especially strong, with prices up by 300 per cent in the past three years, according to Art Market Report’s Contemporary Art 100 index.
On Tuesday, Christie’s sold £144m of art at its Impressionist and Modern sale in London, the highest ever amount for any European art auction. Claude Monet’s 1919 “Le Bassin aux Nympheas’’ water lilies painting went for £41m, twice its estimate.
The next night at Sotheby’s a 1915 painting, “Danseuse” by Gino Severini, likewise raced away from its £7m estimate, going for £15m. That was more than seven times the previous record for a work by the Italian artist, of £2m, which was set at the peak of the last boom in May 1990. (Final prices include a buyer’s premium of more than 12 per cent, which is not included in estimates.)
This week’s sales were buoyant, with the two houses together selling £283m of artworks, 19 per cent more than last year, according to MutualArt.com, an art database. That defied the doom­sayers, who have been predicting a fall in art prices for the past two years. The high level of nervousness about the market was revealed last November, when shares in Sotheby’s plummeted 28 per cent in a day. The reason? The auction house had failed to sell a work by Van Gogh at its sale the night before. The share price has not recovered.
Many respected dealers and collectors believe the market has reached its peak. Eli Broad, the Los Angeles-based billionaire collector, has said several times that he does not believe prices will continue to rise.
One bearish New York-based dealer says: “Mark my words, the Russians will turn out to be the Japanese of the early 21st century.” During the last art market peak, Japanese property developers were famously among the biggest buyers, snapping up Impressionist works – they were especially fond of Van Gogh – only to offload them at much lower prices just a few years later when the Tokyo asset bubble burst.
The underlying support for today’s art market does appear to be much more broadly based. Certainly, claims that the middle market in art is softening – by implication, a precursor to a wider decline – are not supported by evidence. At this week’s day sales, the proportion of lots that failed to sell was no higher than in previous years.
Sotheby’s points out that five years ago, its buyers who spent more than $500,000 on an artwork came from 26 countries. Today, buyers spending that level or more come from 58 countries. Last year, 21 per cent of buyers at its sales were new, the auction house says. Since few buy at auction only once, that means an influx of customers. Helena Newman, vice-chair of Impressionist and Modern art at Sotheby’s, says: “The whole make-up of buyers has changed beyond recognition from 10 years ago. Now we have a far bigger global reach. We are also seeing far greater demand for the very best works. Our big challenge remains the sourcing of works, finding those top-quality Impressionist and Modern works to sell.”
Simon de Pury, who heads the Phillips de Pury auction house, echoes that trend, saying: “Five years ago, the market was concentrated in western European and American collectors, a small group of art cognoscenti. The Contemporary market was dominated by three countries – the US, the UK and Germany. Now we can see the change just in our website: the hits are coming from Brazil, Turkey, China, India, Indonesia, Korea.”
Phillips de Pury specialises in Contemporary art and will be holding its sale next week, along with Christie’s and Sotheby’s Contemporary sales.
Mr de Pury says the change accelerated two years ago. He predicts that Contemporary art will continue to grow in buyer popularity, in part because the sheer number of buyers means that demand for works from previous eras cannot be met. “It is a question of availability. If you have unlimited money, you can no longer buy the best Old Masters collection in the world. But you can buy the best collection of living artists. For that reason Contemporary art will be the most significant market for the next 20 years.”
He adds: “In China, every new [top-end] real estate complex being built has an art museum. All these spaces need to be filled and that will keep demand high.”
Most Middle Eastern nations are likewise building art museums, with both a Guggenheim and a Louvre destined for Abu Dhabi, for example. These museums will start accumulating works to fill their vast spaces later this year. In the US, the home of most of the world’s billionaires, there is a growing trend for rich art-lovers to build their own museums rather than donate works to existing museums as used to be the practice.
There are far more rich people in the world and they are simply far more likely to buy artworks. The number of millionaires in Brazil, Russia, India and China grew by 19 per cent last year, according to the World Wealth Report, released this week by Merrill Lynch and Capgemini. The top 10 collectors in the world now include Victor Pinchuk, a Ukrainian steel billionaire, Carlos Slim, the Mexican telecommunications tycoon, and Qatar’s Sheik al-Thani, according to ARTnews magazine, which this week released its annual list of big spenders.
Art is also seen as a socially desirable channel for the wealth resulting from the 20-year growth in financial services. US hedge fund managers such as Steve Cohen have emerged as big Contemporary collectors. Ben Crawford, the chief marketing officer of MutualArt.com, says: “It starts with the wealthy and then there is a trickle-down effect. Look at the beginning of the century – who bought designer clothes? Tiny numbers of high-society people – but once they became available to more and more people, the buyers didn’t go back. The art buyers won’t go back to putting Star Wars posters on their walls.”
A new test for the market will come next week, when the Contemporary sales take place. The sales include works by Chinese and Indian artists, which even three years ago would have been relegated to the Chinese and Indian sales – if they were sold at all.