Current Trends in the Art Market

Michelle DuBois, Ph.D.Winston Art Group

Art Economy

• In 2013 (the last complete year for which we have figures) the total value of the top 5,000 most expensive artworks sold at auction reached USD $36.5 Billion (Source: Skate Art Market Research, Annual Art Investment Report)

Most Valuable Artists on a Global Scale 2013(Source: Skate’s Art Market Research, based on cumulative value of works in existence selling at

threshold price of $2.5 millionArtist Market Cap in USD

1. Pablo Picasso 3,454,255,270

2. Andy Warhol 1,968,881,839

3. Claude Monet 1, 695,980,160

4. Francis Bacon 877, 108,689

5. Gerhard Richter 854, 406, 389

6. Mark Rothko 854, 406, 389

7. Henri Matisse 815, 185, 033

8. Alberto Giacometti 799, 732, 593

9. Paul Cezanne 719, 485, 789

10. Amadeo Modigliani 704, 829, 826

Postwar and Contemporary Leading the Art Market

• Global Annual sales of postwar and contemporary art increased by 11% in 2013 with an annual auction tally of $6.7 billion (Source: Bloomberg Press, May 14, 2014)

Some remarkable sales figures in 2013 include the following

Francis Bacon, Three Studies of Lucien Freud,Sold at Christie’s, November 12, 2013, $142.4 M

Andy Warhol, Silver Car Crash (Double Disaster) Sold at Sotheby’s, November 13, 2013 for $104.5M

Jeff Koons, Balloon Dog (Orange) Sold at Christie’s November 12, 2013 for $58 M (highest price for living artist)

Norman Rockwell, Saying Grace, Sold at Sotheby’s, December 4, 2013, for $46 M

2014 May Post-War and Contemporary Sale

• Christie’s May 2014 Contemporary Sale:• $745 M – Most expensive single auction in

history, 10 auction records set, 5 of these purchased by Chinese phone bidders.

Barnett Newman, Black Fire 1, Sold at Christie’s May 13, 2014 for $84.1 M. Previous high record for this artist

was in 2013, at $43.8 M

Francis Bacon, Three Studies for a Portrait of John Edwards, Sold at Christie’s, May 13, for $80.8 M

Gerhard Richter, Abstrakte Bild (712) fetched $29.8 at Christie’s, May 13. Last time it sold was in 2012 for $17.4 MThis represents a 50% gain in value in 1.5 years.

May 2014 Sales

• Sotheby’s May 2014 Contemporary Sale• $364.3 M – Much lower returns, many

thought it due to the fact they were in a hostile takeover situation and Christie’s used that fact to get better works of art. Still, they set records for 8 artists

May 2014 Sales

• The sale of contemporary art rose to 72% of all sales in NYC at auction in 2014. This is causing some concern that we might be reaching a peak in the art market and that a correction is immanent. Others are more optimistic and think the model of the art market is changing.

Other strong markets

• Old Masters, Impressionist and Modern markets all remain very strong due to limited inventory. The great pieces rarely go to market and when they do, fetch top prices.

Unique features of the art market to be aware of

• 1. Most of the data we have on sales comes from public auctions. Gallery sales and private auction sales are unreported and information for these transactions is very difficult to obtain.

• 2. Auctions are engaging in more private treaty sales, therefore information becoming less readily available.

Unique features of the art market to be aware of

• 3. It is not uncommon for the identity of the seller of a work of art to be unknown, and to be identified as “Private Collection.” This fact was just upheld by a New York state court that just ruled in William J. Jenack Estate Appraisers and Auctioneers vs. Albert Rabizadeh, in which the court ruled that consignors can keep their anonymity while having legal recourse against reneging bidders.

Unique features of the art market to be aware of

• 4. The history of ownership (Provenance) is often unknown.

• 5. Related to this is that clear title to the object is also not certain.

• Title risks in art include:• ---theft (contemporary or historical)• ---creditor lien• ---authority to sell

• Aris Title Insurance for Art – addresses chain of title and lien risks

Projections for the art market

• The European Art Foundation “TEFAF Art Market Report” found that the art business rests on a slender stem of buyers. 8% of the art auctioned worldwide accounted for 82% of the money spent. Ultra-High Net Worth Individuals (UHNWI) seek works of between 50-100 artists and skew the data towards those artists.

Unique features of the art market to be aware of

• According to this report, UHNWI - about a third of whom are American – command $28 trillion in wealth.

• UHNWIs devote about 10% of their money to “investments of passion” such as art, jewelry and other collectibles, and sports. Globally, art accounts for 17 cents out of every dollar spent on “investments of passion.”

Unique features of the art market to be aware of

• The report states that many HNWIs are increasingly approaching luxury goods as investments, and looking for sectors that have long-term value, notably art and antiques.”

• Presumably, they will also be seeking more sophisticated financial and legal strategies for managing these assets.

Unique features of the art market to be aware of

• 1031 Exchanges is one such sophisticated strategy in the art market and appears to be on the increase

• Works well with collectors of art who wish to trade up

• Also works in estate planning situations when heirs do not wish to keep art objects they would be inheriting; they can exchange undesirable paintings for ones they prefer.