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| | The Art | Collectors | Investors Network is not currently active and cannot accept new posts | | Beautiful? Only inside your head | Views: 558 | | Dec 10, 2008 7:54 pm | | Beautiful? Only inside your head | # | 
Jasmine Jehengir | | Beautiful? Only inside your head
The contemporary art market has collapsed as quickly as the securities industry
“I think the market is bigger than anyone knows, I love art and this proves I’m not alone and the future looks great for everyone!” This was the optimistic view of Damien Hirst, the controversial British artist, commenting on the unprecedented £111m sale of his works through auction house Sotheby’s in September on the same day that Lehman Brothers collapsed.
Two months on, and Hirst may yet have to eat his words. In the same way that the collapse of Lehman Brothers helped accelerate the credit crunch into a full-blown financial crisis, rocking world stock markets and the global financial system, the contemporary art market has collapsed in the few months since the hubris of Hirst’s auction, modestly titled Beautiful Inside My Head Forever.
The sale by Hirst, often seen as the poster child of the contemporary art market, smashed its estimate of £98m and suggested that the market was still buoyant. According to the results from Sotheby’s, four works sold for more than $5m, and 48 for more than $1m. A work called The Golden Calf – a dead bull suspended in formaldehyde – commanded the highest price of the sale at £10.3m, a new auction record for Hirst.
But in just a few weeks, a more depressing picture has emerged. Charles Dupplin, chairman of art and private client division at Hiscox, a London art insurer, said: “Parts of the contemporary art market are going into free fall.”
Sotheby’s is having trouble collecting payment for works sold in Beautiful Inside My Head Forever, according to six sources in the art world, although Sotheby’s denies this. Hirst’s own work has also struggled to sell. At a contemporary auction by Sotheby’s in New York on November 11, a signature Hirst dot painting called Ethionamide did not attract a single bid and a painting of butterflies called Midas of Phrygia, was bought for $900,000, less than half its upper estimate.
The next day Sotheby’s rival Christie’s failed to sell a Hirst called Calcium Gluconate Injection at a sale in New York, and the smaller auction house Phillips de Pury sold only one of three Hirsts the day after.
The speed of the turnround in the contemporary art market is reflected in the 19.4% fall in the contemporary art index compiled by art data provider artprice.com between the beginning of October and November 15, compared with a 25.1% fall over the same period in the S&P 500. This year, the contemporary art index has tumbled 36.8%, compared with the S&P 500’s fall of 40.5%.
This has brought the market down to earth after the contemporary art index soared 108% to its peak over the previous five years, compared with a rise in the S&P 500 of 47.5% to its peak last October.
Last month’s contemporary art auctions were disappointing for Sotheby’s and Christie’s. Only 66% of the lots offered during the two evening sales found buyers, and the total sales revenue generated amounted to $204m, well below the most pessimistic estimates of $429m, according to artprice.com.
As with the financial markets, warning signs of a bubble bursting were evident months ago, according to analysts at ArtTactic, which provides research and advice for collectors. Analysts say the correction of the contemporary art market comes as no surprise, and alarm bells were ringing this time last year.
Anders Petterson, managing director of ArtTactic, said: “In November 2007, the confidence indicator fell 40%, but record volumes and prices disguised the fact that the trouble had already started further down the food chain.”
The sharp fall in the market is in part the result of the sudden contraction in the wealth of many potential buyers, and has implications for the clients of the specialist art teams at wealth managers and insurers. Charles Thomson, co-founder of art group Stuckism, said the volte-face of the contemporary art market was directly correlated with how much people could afford to show off.
He said: “A lot of contemporary art over the boom period achieved incredible prices because very wealthy people were willing to pay millions for art that was really just a status symbol. Now the recession has hit and the wealthy are feeling a lot poorer, art is the first to go.”
Annabel Fell-Clark, chief executive of insurer Axa Art, said: “We have seen some of our clients revalue parts of their collections since the recent falls in the contemporary market… Confidence plays a big role and much of that has been lost or dented recently, although we are seeing some of our clients making large acquisitions still.”
The fate of Lehman Brothers and the art world are linked in other ways.
The same fear and panic that are permeating the financial markets are creeping into the art world. This month Hirst is reported to have laid off half of his studio staff, adding to the tens of thousands of staff at Lehman Brothers and in the rest of the securities industry who have lost their jobs.
Dick and Kathy Fuld, the former chief executive of Lehman Brothers and his wife, sold some of their collection of abstract Impressionist drawings including three Willem de Koonings at Christie’s. And Lehman Brothers’ administrators are trying to raise some extra cash by selling off the bank’s art collection.
They filed court papers on November 10 seeking authority to pay $20,000 in fees to art handlers who provided warehousing and framing services before its bankruptcy. They said they needed to pay the fees to access the $8m worth of art, stored in warehouses in New York and Paris, and show it to potential buyers.
Sotheby’s share price has fallen 76% in the past year, putting it in the same performance league as a Wall Street bank.
Auction houses are selling works at knockdown prices – last week Christie’s sold a Russian painting earmarked to fetch £2,000 for just £10. They are looking east for new sources of money, and shifting their focus to less speculative parts of the market such as Old Masters.
The only contemporary sales scheduled on Christie’s website are taking place in Hong Kong – four out of the eight upcoming auctions are in the region. Christie’s is also holding an Old Masters and British pictures auction in London on December 2-3, two sales in Paris and one in New York.
Sotheby’s lists only three out of 10 upcoming auctions in London.
Senior industry figures believe demand for contemporary art will be replaced by interest in vintage furniture and jewellery as the recession sets in. Dupplin believes the contemporary market will take a long time to recover and may never reach the giddy heights of earlier this year.
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