Market Headlines
High Net Worth Individuals drive the Art Market
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Whether driven by personal enjoyment or pure financial
return, HNWIs continue to be drawn to art as an investment.
While HNWIs cited Jewelry, Gems, and Watches as their
preferred Investment of Passion (IoP) with a 31.6% allocation
among their IoP holdings, Art remains one of the most
dynamic IoP markets, having experienced significant growth
in recent years, especially in the emerging markets.
Now in a rebound following the financial crisis, art
is increasingly becoming a meaningful element of HNWI
portfolios, comprising 16.9% of IoP allocations, making it
the third largest popular category. Not only can a well chosen
piece of art act as a hedge against inflation, it has
the potential to outperform over the long-term, along with a
low correlation with traditional asset classes.
Driven by auction house sales, the art market is lively
compared to other categories that are characterized more
by inheritance and private sales. Many auction houses
report that art far exceeds sales of other IoP categories.
Growth in art sales is being driven largely by wealth growth
of HNWIs in emerging markets. Buyers purchasing art for
the first time make up around 20% of contemporary art
sales, with many of these new buyers coming from
emerging markets such as U.A.E., Mexico, China, and
Brazil, according to Lisa Dennison, Chairman, Sotheby’s
North and South America.
Led by the continued recovery, the global art market is
beginning to approach the peak levels of 2007. Buoyant in
the initial years after the crisis, the recovery lost some of its
momentum in 2012 due to a major contraction in the Chinese
art market, as China experienced slower economic growth.
Investigations by Chinese authorities on the declared value
of art imports by collectors may also have had an impact.
Other parts of the market grew substantially in 2012,
particularly the Old Masters market, which spiked as art
investors signaled a desire to take advantage of its perceived
reliability. Sales of Old Masters at the leading auction
houses, Christie’s and Sotheby’s, increased by 56.5%.
Newly created wealth in emerging economies has brought
new participants into the global art market in recent years,
while also spurring the rise of regional art and artists in
Asia-Pacific, Latin America and the Middle East. In a sign of
expanding interest, auction houses are vying for licenses to
hold auctions in emerging markets. Christie’s recently won a
license to operate in China and will be holding auctions in
Shanghai starting this autumn.8 The establishment of new
museums and galleries in the Middle East, Latin America,
Hong Kong, and China is further aiding development of an
international art infrastructure, helping global sales.
A look at art-purchasing behavior across the emerging
markets reveals a rich diversity of interest. Much of the art
growth in China is coming from new HNWIs in the provinces,
with tastes tending towards buying cultural pieces
synonymous with Chinese history. In Brazil, many
international galleries are helping to sustain rapid art market
growth and interest from HNWIs. The U.A.E. has risen
quickly within art circles, thanks largely to infrastructure
support from the royal families, who focus on not only
showcasing global art through fairs and events, but also on
developing the local artist community. HNWIs from one
notable emerging market, India, are at an earlier, more
nascent stage in terms of art buying, with HNWIs not yet
allocating much of their portfolio into art compared to other
emerging markets.9
The rise in the global art trade has also helped catalyze the
development of art-focused investment funds and
exchanges, though these vehicles remain a small corner of
the total art market, partly because they remain mostly
outside the purview of traditional regulatory oversight. The
art finance industry is more developed in the U.S. than in
Europe due to the existence of a Uniform Commercial Code
(UCC) lien system, which lets borrowers keep possession of
the art while allowing lenders to place a lien.10 Europe
remains an underdeveloped market for art finance in part
due to a strong cultural stigma against borrowing where art
is used as collateral.
Looking forward, the art market, particularly at the upper end,
is expected to remain strong. Demand far outstrips supply at
the high end, not just because of the rarity of masterpieces,
but also because their owners are often unwilling to sell,
given the difficulty of finding assets with comparable return
characteristics. Sophisticated investors are likely to build
upon a historical preference for “real” assets during times of
economic uncertainty by seeking out exemplary works of art
with high intrinsic value. The Chinese art market, which has
been driving art market growth in recent years, is also likely
to veer toward the high end as the cooling economy restricts
demand to ultra-wealthy purchasers.
Published by Cap Gemini and RBC Wealth Management in “Cap Gemini Wealth Allocation and the Art Market Report, 2013″
A U C T I O N H O U S E S B A T T L E
F O R C H I N E S E M A R K E T I N 2013
By Associated Press
HONG KONG — Mainland Chinese and international auction houses are encroaching on one another’s territory in Hong Kong and Beijing for the first time as they step up the battle for the Asian art market.
Sotheby’s, meanwhile, has big plans to expand into mainland China after setting up a joint venture allowing it to be the first foreign company to hold art auctions there, in a leap over Christie’s, a rival.
The expansion plans highlight how the thriving demand for art from Asia’s growing class of wealthy collectors is leading to intensifying competition in Hong Kong, the region’s auction hub. Many of the collectors flocking to the city for twice-yearly sales are mainland Chinese, but a rising number come from other Asian countries, like Indonesia.
Guardian and Poly have “been watching and seeing what Sotheby’s and Christie’s have been doing, and I personally think they’ve been back in the wings saying, ‘The time is right,”’ said Jonathan Macey, senior broker with the Art Futures Group. “You’ve got a sea of money coming into this business from across Southeast Asia” in addition to Hong Kong and the mainland, he said.
Guardian’s Hong Kong auction, held Sunday in a ballroom in the Mandarin Oriental hotel, raised 454 million Hong Kong dollars, or $58.6 million, more than double the presale estimate. It drew people like Wu Jia-lin, who lives in the manufacturing hub of Dongguan, in Guangdong Province in southern China, and has been collecting art for 10 years.
“There are fewer artworks here but they’re good quality,” said Mr. Wu, who had his eye on a Wu Guanzhong scroll painting of a bamboo grove with a presale estimate of 403,000 to 600,000 dollars.
But the din died down when the highlight of the daylong sale, a landscape series by Qi Bashi, went on the block. Bidding opened at 10 million dollars and rose rapidly until the hammer went down at 40 million dollars, which did not include a 15 percent commission.
In a bold move, the event was held the same day as the auction by Sotheby’s of contemporary Asian art, traditionally the most prestigious of the company’s multiday semiannual sales.
A similar rivalry is set for late November, when Beijing Poly International Auction’s first Hong Kong auction coincides with the autumn sale by Christie’s.
The expansions by Guardian and Poly come amid signs of a cooling market. China is estimated to be the biggest fine art market in the world, accounting for 30 percent to 41 percent of global sales, according to various estimates. But the research firm ArtTactic says the market is slowing, with results showing Sotheby’s, Christie’s, Guardian and Poly raising $1.5 billion in their spring sales, down 32 percent from the autumn 2011 auctions.
Sales volumes are “significantly down,” said Michael Frahm, who runs an art advisory firm based in London and specializes in new Asian art. “I think the overall market is cooling a little bit, and it’s definitely down from last year.”
Sotheby’s invested $1.2 million for an 80 percent stake in the venture, which held a symbolic first sale last month of a single sculpture. Mr. Ching said Sotheby’s had spent six months in a “laborious and protracted process” trying to set up the venture.
“Different licenses, different authorities, different government levels would be approving 10,000 things that would be needed for the company to be operational,” he said.
He said he was not worried about Guardian and Poly expanding into Hong Kong, saying they were “healthy competition” rather than a threat. Sotheby’s, which rang up $1 billion in sales in Hong Kong last year, may even benefit from the Chinese collectors whom the mainland rivals bring to Hong Kong.
R E C O R D S E T T I N G C H I N E S E V A S E S E L L S A T $40M
O R H A L F I T S O R I G I N A L P R I C E
Bloomberg’s Scott Reyburn brings some closure to the long-running tale of the Chinese vase found in a British home that was bid furiously to $80+ million only to have the buyer get cold feet and fail to pay. Considering the number of doubts surrounding the authenticity of the vase (whether it was a later copy, not a fake), the £20-25m price reported is still a huge win for the sellers:
The owners, a retired solicitor called Tony Johnson and his mother Gene, waited two years for a resolution. They have now sold the vase to another buyer for an undisclosed price between 20 million pounds and 25 million pounds, said a person with knowledge of the matter.
The private transaction was brokered by the London-based auction house Bonhams. The vase has now been exported. The new owner has been identified by dealers as an Asian collector.
U K R E G I O N A L A U C T I O N S A L E S A R E R O B U S T I N 2012
Above: the £2.6m Yongzheng bottle vase that sold at Tennants.
The hammer price matched that bid for a 14th century Yuan dynasty porcelain double-gourd vase sold by Woolley & Wallis in July 2005 (the very first £1m-plus price in the UK regions), now represents the 12th time the seven-figure barrier has been passed by Britain’s provincial salerooms.
The Fine Art Auction Group, who in December were acquired by Noble Investments, reported 2012 hammer sales at Dreweatts at £13.7m. Achieved without the benefit of a six- or seven-figure ‘windfall’ lot, this included solid trading in all four of its saleroom locations: Donnington Priory, Bristol, Godalming and select events at the Mayfair premises of Bloomsbury Auctions.
A further £8.8m in sales at London books and works on paper specialists Bloomsbury brought the aggregate figure to £22.5m (in 2011 TFAAG reported premium-inclusive sales of £27.4m across its three auction houses: Dreweatts, Bloomsbury and BCVA).
The View from the SOFAA
Commenting on the wider marketplace in his capacity as chairman of the Society of Fine Art Auctioneers, Paul Viney gave ATG this brief summary of the feedback received from various SOFAA members.
1. For most salerooms 2012 was a pleasingly satisfactory year, if not exceptional.
2. One or two have commented that the brown furniture market may finally be showing signs of awakening from its slumbers of the last few years, but it’s too early to be sure.
3. Middle-range Chinese items seem to have plateaued but for the very best pieces prices are still stratospheric.
4. As well as wine, the Chinese have shown interest in jewellery, clocks and mechanical objects.
5. Silver and jewellery both performed strongly over the year.
6. The old adage of ‘the best is the easiest to sell’ remains a truism.
7. Most members were surprisingly optimistic about the prospects for 2013
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