NEW YORK (Reuters) - The global art market, which for decades has enjoyed record-breaking prices and often frenzied buying, is facing a foggy future in 2009.
In the final months of 2008 big autumn sales in London and New York saw totals dip from half to two-thirds of expectations. Sales also dropped at art fairs such as Art Basel Miami Beach and business at galleries also fell.
Sotheby’s and Christie’s, the big guns of the rarefied auction world, are feeling the effects as well. The auction houses have acknowledged prices are off some 30 percent and that they are in a period of reassessment and re-evaluation.
“We’ve seen it in all the asset classes,” that investors rushed to as recently as a year ago — including oil, precious metals, real estate and fine art, said Baird Ryan, managing director of Art Capital Group, an art-related financial services firm.
In November a self portrait by Francis Bacon, whose paintings have seen some of the most stunning prices in recent years including $86 million last May, failed to draw any bids at $25 million despite a $40 million pre-sale estimate.
The auction houses averted disaster by encouraging sellers to lower their reserves, the undisclosed minimum price at which a work will sell, but paintings by famous artists like Andy Warhol and Roy Lichtenstein did not sell and both Sotheby’s and Christie’s are reviewing their strategic plans.
Layoffs look inevitable, and guarantees — promised minimums paid to consignors whether or not their work sells at auction — are history.
But auction officials point out that much of their business is not tied to $50 million paintings, but rather lower-profile markets that have performed well in recent weeks.
Strong prices, some even exceeding expectations, were seen at sales ranging from American paintings, works on paper and 20th-century decorative arts to porcelain, wine, jewelry and photography, according to Christie’s President Marc Porter.
“These non-headline categories are going extremely well,” Porter said, adding that expectations are high for Christies’ sale of Yves St. Laurent’s art collection, furniture and decorative objects in Paris in February.
“We will all see the remarkable strength of the art markets, plural, with that sale,” Porter predicted.
Sotheby’s chief Bill Ruprecht admitted that in the future sales will generally be smaller but he expects buyer and seller sentiments to be easier to align.
A more sober market could also be an opportunity for buyers and may attract new collectors or lure back those who were priced out in recent years.
“I find that a little premature,” Ryan said. “I don’t think we’ve found the bottom yet. We haven’t seen panic selling, which is encouraging, but the quantity of transactions is immensely reduced.”
Buyers are either struggling financially or waiting to see how things tease out, while sellers either got out of the market quickly because they were overextended, or have much less incentive to sell given a waning market, he explained.
Analysts and officials agree that a leaner market will help redirect the focus to where it belongs — on the art itself.
“As with any market with excessive speculation, sooner or later the party stops,” Ryan said. “The auction houses say people are focused on the objects now, and I find that reassuring.”
Porter said the challenge is to make sure there is a supply of works for auction.
“Buyers will exist if they can get the right property for sale.”
Ruprecht said he is confident that “works of art will be as relevant to collectors in the future as they have always been.”
Although Ryan admits his firm is now more conservative, he believes there is a future in buying and selling fine art.
“Owning great objects is still a place for quality of life and to shelter some wealth. At the end of the day, there is this immense visual dividend — and that shouldn’t be a footnote,” he explained.