Sarah Thornton in The Economist magazine recently described the art market as a bubble bath – an apt metaphor for a market made up of a myriad distinct markets for individual artists, each one expanding or contracting at any given time. It appears that, as of late, the foam is getting frothier, or the bath is getting bigger, or both.
At an Art Basel dinner earlier this month, a dealer told me about a collector who missed a chance to buy a work on opening day because he came back to the booth “twenty minutes after the reserve deadline” – a prime froth indicator. There were signs of invigorated confidence everywhere.
The auction market is likewise pushing into boom territory, as last week’s London auction sales attest. Christie’s evening contemporary and post-war auction saw twenty-five works sell for over $1 million, including a 1953 Study for a Self-portrait by Francis Bacon for $28.6 million, two-and-a-half times above estimate. Netting $126 million, it was the second biggest sale in its category for Christie’s in London. Sotheby’s contemporary art evening sale did even better, totaling more than $174 million, the highest ever for a contemporary auction in London, with forty-five lots going over $1 million. Both sales produced stellar sell-through rates, set numerous records, and drew buyers from all over the world.
In the early build-up phase of a boom, the market can achieve a kind of self-reinforcing pattern. Formerly cautious sellers offer up material they were reluctant to test on the market earlier. Quality work stokes more buying and bidding, which coaxes more quality inventory off walls and storage racks, propelling yet more sales and price increases.
Will it last? Not all aspects of the market are doing equally well, and buyers are still sane enough to shun second-tier work. In an increasingly investor-driven market, some of the euphoria may ebb when the vast amount of capital currently waiting on the sidelines is poured back into the “real” economy. A national default or a US debt downgrade can quickly spook the market into paralysis. Yet once a cycle starts, it builds its own momentum.
The deeper cause of bullish buying is hardly a mystery, and it portends more record-toppling to come. According to the latest Merrill Lynch Cap Gemini World Wealth Report, wealth has further concentrated since the financial crisis. Between 2008-10, North America saw the number of millionaires rise from 2.7 million to 3.4 million. The ranks of millionaires in the Asia-Pacific region soared even faster, from 2.4 to 3.3. million. China alone has 535,000 millionaires. The report takes special note of a rebound in “investments of passion,” especially in Latin America and China.
What other early boom indicators are you seeing out there?