As art market booms, some see the risk of bust

Thu Feb 3, 2011 9:30am EST
 
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By Mike Collett-White LONDON (Reuters) - At the top end of the art market, the financial crisis seems a distant memory -- surging prices saw Christie's and Sotheby's post impressive 2010 results that were back to, or above pre-crisis levels.

Yet while the market leaders are confident the recovery from 2009's deep slump can be sustained, the prospect of speculative money pouring into art, driven partly by rich Chinese investors, increases the risk of boom and bust, some analysts believe.

"This bull market trend could go on for some time, supported by China's rising class of super-wealthy, but eventually the bubble will burst, as it did in Japan in the early 90s and the global art market crash in 2008," ArtTactic said in its latest analysis of the contemporary art market.

"Too much speculative money will push art prices beyond their long-term, intrinsic art historic value, and it will become a game of who's the Greatest Fool."

The research company said it believed more "hot" money, lured by recent spectacular gains, would enter not only emerging markets but also established Western markets too, with Andy Warhol paintings a prime candidate for further speculation.

"We will experience mini-booms and busts more frequently than in the past as speculators move in and out of different markets trying to cash in on the latest trend," ArtTactic said.

"We see 2011 being the start of this new era, where art is increasingly moving from a collectable asset toward a financial asset."

PICASSO AND GAUGUIN LEAD

Over the next two weeks in London, the two big auctioneers are offering works worth around $650 million at impressionist and modern, surreal, and post-war and contemporary art sales.   Continued...

 
<p>A Christie's employee poses with Eileen Gray's black-lacquered wood "Transat" lounge chair (circa 1926-30) from the Gourdon Collection which is to be auctioned by Christie's, in central London, February 1, 2011. REUTERS/Andrew Winning</p>