Getting your Monet’s worth: how the international art market is changing

Up Close: We’ve seen the rise of some very serious new entrants into the international art market of late: who would they be?

MEAGHAN WILSON-ANASTASIOS: Art is a commodity and the people we’re talking about are treating it that way. In that sense, it’s just like a Ferrari: it’s a luxury good. Buyers are people with a heap of money, and they’re buying art as a luxury good but also as another form of asset.

People rarely buy art beyond a certain price. If you go to Ikea and buy a $200 painting to hang above your TV, you don’t at any point think you’re going to get money back from that. You’re buying something as a decorative piece of wall art.

But people who spend millions on works of art obviously expect they are going to be able to recoup some, if not all of their investment at some point in the future.

Up Close: Is it true the emphasis on traditional markets in Europe and the US has weakened, and there are new buyers from the Middle East, Eastern Europe and Asia?

MWA: Most certainly and it’s probably what has allowed the art market to survive in recent years, post the Global Financial Crisis. Recent figures show most art is still being sold in America, but not necessarily to American collectors. A lot of international buyers acquire their art in New York. But the second highest percentage revenue generated was in China.

Christie’s recently estimated 10 per cent of their contemporary art sales went to buyers from the Middle East, which is enormous. These are people who have entered the market only in the past 10 years.

Up Close: There’s some great characters in this ‘story’ and one I’ve read about is Sheikha Mayassa al Thani from Qatar, known as the Queen of the art world because she has spent billions over the last few years, amassing a huge collection for a planned major complex of galleries in Doha. Has that had a distorting effect on the market?

MWA: It’s certainly had an effect in terms of the art that is being sought out, because there’s a strong taste for contemporary British, American and European art from Middle Eastern collectors. She’s a very interesting character. She’s a member of the Qatari royal family, but was educated at Duke University (in the USA). She’s been the driving force in the establishment of the Museum for Islamic Arts in Doha, which is considered one of the top 10 museums in the world. Her father was a very serious collector of traditional Islamic works of art but she’s now buying Damien Hirst, Murakami, Jeff Koons. You couldn’t choose two more different forms of artistic expression!

Up Close: This phenomenon seems to have happened quite quickly?

MWA: On the scale it’s manifesting now, yes it is. It’s the old global village/social media/internet revolution that’s creating a market place where people can negotiate, buy and sell minute by minute around the world, which is something that didn’t exist 10 or 15 years ago. But there have been spikes. In the late 1980s there were Japanese collectors who concentrated on Impressionism and Post-Impressionism. In the late ‘80s into the ‘90s Russian oligarchs emerged who started buying 20th century artists’ work. So it’s happened before, just not on this scale. The art market really has globalised. It wouldn’t have entered Christie’s and Sotheby’s minds to have an office in Shanghai 20 years ago.

Up Close: The world has changed so the art market has come in behind that?

MWA: The market this year is back up to pre-GFC levels, which is fairly impressive given the significant dent the GFC made. Clearance rates went from between 80-100 per cent down to between 40-50 per cent. Prices overall are estimated to have dropped about 7.5 per cent. So a significant hit, but largely due to the intervention of these new buyers, the market has been buoyed.

Up Close: So is art a good investment? How risky is it? 

MWA: At the very top of the market, art is a good investment. If you invest $100 million in a painting, there’s a good chance you’ll get that and more back in the future. The unfortunate fact is the vast majority of work is bought and sold in commercial galleries rather than in big auction houses, and is worth only a fraction of the purchase price once out the door.

Up Close: What sort of margin are Christie’s and Sotheby’s making? 

MWA: Their turnover is in the billions: Sotheby’s was around $5 billion last year and Christie’s was $3.5 billion. They’re running very expensive businesses. The amount of money they have to invest to actually stage these auctions is significant. They get what is called a buyer’s premium, which can be between 15 and 25 per cent of the hammer price and sellers would usually give the auction house around 15 to 20 per cent commission, so auction houses are generally getting between 30 and 40 per cent of the selling price.

Up Close: How well regulated is this market?

MWA: It’s predominately unregulated. There are things you can’t do, but there’s no peak body moderating behaviour. As is the case in the real estate industry, auctioneers can’t use phony bidding to artificially inflate prices. But the way the auctioneers operate, you can’t tell whether they’re calling for a bid or they have a bid. Good auctioneers are masterful and it’s a dangerous world. A prominent auctioneer once described it to me as the Wild West: it’s certainly a fraught environment for people to be buying and selling art.

Listen to the full episode of UpClose at: 

http://upclose.unimelb.edu.au/episode/325-getting-your-monet-s-worth-rapidly-changing-global-market-art

http://culture-communication.unimelb.edu.au/