The Global Art Market Reached $67.4 Billion in 2018, up 6%

Global Art Market Up 6% in 2018 David Hockney

A good summary from our friends at Artsy on the 2018 market.

The global art market grew 6% in 2018 to $67.4 billion in sales, according to economist Clare McAndrew’s report The Art Market 2019, released by Art Basel and UBS on Friday. That total makes 2018 the second-biggest year for the art market in the past decade, trailing only 2014 when sales totaled $68.2 billion.

The market is expanding into fewer hands, however, the report suggests. Despite the 6% growth, 57% of dealers saw their sales decline in 2018. This follows a trend over the past decade, during which the value of all sales has gone up 9%, while the number of artworks sold has gone down 9%.

In 2018, less than 5% of dealers accounted for 50% of the sector’s sales. Dealers in the two lowest brackets of annual turnover, sub-$250,000 and $250,000 to $500,000, saw sales decline by 18% and 4%, respectively, while dealers in the two highest brackets, $10 million to $50 million and $50 million-plus, saw their sales increase by 17% and 7%, respectively.

This uneven growth has been a subject of concern and conversation across the industry in the past year. Combined with anxieties over Brexit, the trade war between the United States and China, slowing global growth, and a sense of political uncertainty, it contributed to a general feeling of consternation within the industry about the immediate future.

Whereas, in 2017, 58% of dealers surveyed by McAndrew expected sales to go up the following year, this year’s report shows significantly lower confidence, with just 30% of dealers expecting their sales to increase in 2019. McAndrew said this apprehension reflects a general level of macroeconomic uncertainty to which smaller galleries and those that haven’t modernized their business practices are especially vulnerable.

Collecting/Investing in Art

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A solid and timely article from the New York Times about the factors to consider when building a collection. Its not all about passion or all about investment but an informed balance of both.

Source: The New York Times.

Collecting fine art is as much about beauty and desirability as it about the investment value. Given how strong the art market has been over the past few years, many collectors may not be prepared if the economy slows and the appetite for art cools.

 

Roy Sebag, a hedge fund analyst turned entrepreneur, has a collection that includes a drawing by Pablo Picasso and works by 17th-century Dutch masters. He said he took an objective view of his collection’s value: looking at both the art’s intrinsic value — how an artist’s work has appreciated — and its social currency.

 

“It’s subjective,” but it still allows for analysis on historical pricing, said Mr. Sebag, founder of Goldmoney, a site for buying and selling precious metals, and co-founder of Mené, a jewelry line. “It isn’t a coincidence that Picasso is viewed by every high-net-worth individual as an asset they want to own.” There are supposedly 5,000 works by Picasso, he said, a stock large enough to build a network of interested parties.

 

By his analysis, avoiding emerging artists and buying works of a well-known artist like Picasso, despite having to pay millions of dollars to do so, is like buying a hedge against recession. “We know trends change quickly,” he said.

 

Such beliefs could be tested in the next few years.

 

In 2018, works by the 100 top-selling artists, as measured by the market research firm Artprice, rose 4.3 percent in value, but the art market as a whole lost 1.9 percent. The company explained that buyers were becoming more demanding.

 

“While happy to pay big money for rare and high-quality works with irreproachable provenance, they often ‘pass’ on other works,” its report said.

 

In 2008, the art market was not immune to huge swings in value. Sales of postwar and contemporary art fell by more than two-thirds from 2008 to 2009, according to data collected by Athena Art Finance, which lends against art portfolios. It took until 2012 for sales to surpass pre-recession levels.

 

To guard against seeing the value of an art collection plummet, dealers advise prudence and, not surprisingly, connoisseurship.

 

If there is a lesson to be drawn from the recession, it is that buyers become more discerning in both the artists they favor and the price they will pay, said B. J. Topol, co-president of Topol Childs Art Advisory, which works on behalf of wealthy clients.

 

“There’s a reshuffling in a recession,” she said. “The trendy artist of the time, people aren’t looking at him. People want to make sure they’re buying a known commodity and not taking risk.”

 

Ms. Topol said she saw signs of a slowdown in the art market at the Art Basel international art fair in Miami Beach in December. Art wasn’t being snapped up in the first few minutes. Instead, buyers had a chance to digest what they were seeing and negotiate on price.

 

Regardless of the climate, she advises not to buy on trends, yet she stops short of the adage to buy what you love. That could be financially disastrous.

 

“If you combine your passion with an informed decision,” she said, “you’ll have something you love every day and maybe it goes up one day.”

 

Other collectors amass idiosyncratic collections whose value is greater together than apart. Peeling off several pieces in a downturn could depress the value of the collection as a whole, said Jean Pigozzi, a venture capitalist and art collector.

 

“I’m not at all like all the other hedge fund collectors,” said Mr. Pigozzi, who has amassed a significant collection of contemporary African art. “I’ve never collected thinking what I collect would be a good investment.”

 

He said most of his pieces were not worth more than $100,000. Compare that with a work by Jean-Michel Basquiat, among the best-selling contemporary artists today. Mr. Pigozzi paid $1,000 for an artwork by Basquiat in 1982 and sold it last year for $3.2 million.

 

What he has is a unique collection that is often included in museum shows and sought after by auction houses. In its totality, it offers a window into sub-Saharan art of the past 30 years.

 

But Mr. Pigozzi knows selling it would be difficult without breaking it apart. Instead, he hopes to create a museum for it.

 

Approaching art as a pure investment can be difficult, because values of an artist’s work can change substantially in ways not associated with typical capital markets investing.

 

The value of works by Wifredo Lam, for instance, has doubled or even tripled in the last decade because of a reappraisal of his place in art history, said Isabelle Bscher, the third-generation owner of Galerie Gmurzynska, which has represented artists including Yves Klein, Joan Miró and Picasso.

 

Lam, who died in 1982, was Cuban by birth and grouped with other Latin American artists at auctions, which drew a specific collector. But he was later seen as a modern artist, because he was a friend of Jackson Pollock, Willem de Kooning and other midcentury artists. As his artworks moved to more popular auctions, their value has doubled or tripled in a decade, Ms. Bscher said.

 

A similar shift happened with Picasso about 15 years ago, she said. Collectors did not want to buy his work created after 1965, when the artist was in his 80s and seen as past his prime. At the time, the artworks were inexpensive, but they have since risen in value.

 

Her advice: “If you buy the period of an artist that is not in fashion, you can make a great investment.”

 

There are of course plenty of collectors with enough wealth to not really care about the short-term hit in value that the work on their walls may take. Hilary Geary Ross, an art collector and the wife of Commerce Secretary Wilbur Ross, said she had always loved the work of René Magritte, the Belgian surrealist, and began buying his work when she and Mr. Ross married in 2004.

 

She has 36 pieces by Magritte, worth in excess of $100 million. They include famous works like “La Clairvoyance.” The billionaire couple have rarely sold any of their works, but Mrs. Ross said they did take advantage of the 2008 downturn to buy paintings.

 

“People come to us with them, because they know we like them,” she said.

 

In distressed markets, social concerns may keep some people from working with auction houses. They can try private sales — as happened with the Ross’s acquisitions in 2008 — to sell something quietly.

 

But Ms. Topol said that even then, discerning collectors were going to drive a hard bargain. If that happens, she said, dealers and auction houses can step in to help. But her advice echoes that of others: Don’t sell art in a downturn unless other sources of liquidity have dried up.

 

Mr. Sebag said that the art he owned had increased in value far more than other investments he had made, but that he would sell it only if he ceased to enjoy it.

 

“I think art is something you purchase without an exit strategy,” Mr. Sebag said. “My idea of liquidity is in other investments.”

 

Having those other buckets to draw from is important — otherwise, you could be forced to sell a prized work for less than you would want to when the economy sours.

Perfecting the Art of Giving Art

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NEW YORK (Reuters) - Baby boomer art collectors have a problem: Their heirs may not know the difference a $100 print from a garage sale and a $1 million paradigm of Abstract Expressionism.

 

When investment bank UBS recently surveyed high net worth art collectors with more than $5 million in investable assets, their No. 1 concern was what happens when they pass on their art to the next generation.

 

The biggest intergenerational wealth transfer in history is already underway, with baby boomers handing down an estimated $68 trillion over the next 25 years, according to research firm Cerulli Associates. The trickiest part of this shift may not involve stocks, bonds or cash, but something hanging on a wall.

 

Educating heirs about art worries 58 percent of collectors in the survey, while 57 percent fret over the tax implications.

 

"I do see trends where more collectors are involving their families into the art-buying process," said Kipton Cronkite, a curator and advisor who divides his time between Los Angeles and New York.

 

That means getting the younger generation to get up to speed on fine art, a process akin to transforming Cockney flower girl Eliza Doolittle into the toast of society in "My Fair Lady." Crash courses on art history, tours of top museums, and mix-and-mingles at popular events like Miami's Art Basel can all be on the itinerary.

 

Of course, all the art education in the world will not solve the central question: Do you have a vision that you want your heirs to carry out? Or will you risk giving them total control of your collection?

 

That is why Daniel Lebensohn, a 47-year-old real estate entrepreneur, has already taken his two young daughters to New York to tour the iconic Metropolitan Museum of Art, and to Miami to see the famous Wynwood street murals. He has introduced them to artists from whom he has commissioned pieces.

 

"I believe that the most significant thing a collector can do is empower the next generation, not look to control it," Lebensohn said.

 

So what do art collectors need to keep in mind, when passing on their beloved works? A few pointers:

 

1. Outline a plan.

 

If you have a vision for your collection, you need to put it in writing. Some high-end collectors end up creating their own museums, like the Rubell Family Collection in Miami.

 

If you are divvying it up among heirs, explain why "one person gets this piece and another gets that piece," said Liz Jacovino, a Connecticut wealth strategist with RBC Wealth Management. Otherwise, you may invite family squabbles that often result from the reading of wills.

 

You may want to discuss your thoughts with your heirs because the truth is, they may not want a certain piece of art, or any at all. Often their primary concern is "liquidity," Jacovino said, as in "just the cash, please."

 

2. Think about early gifting.

 

The 2019 lifetime estate-tax exemption is $11.4 million, scheduled to sunset back to $5 million in 2025. So bequeathing high-priced artwork after you pass away could come to bite your heirs later on.

 

Gift it now into a trust, and only the current value counts against that estate-tax figure. So if a $100,000 painting climbs to $5 million in value, only the $100,000 will count against lifetime limits.

 

3. Appoint an adviser.

 

Most high-end collectors already have art consultants who can also serve the next generation in that capacity.

 

"Ideally collectors can leave guidance for executors, on who would be a good advisor to help oversee the collection," said Jacovino. "That way, the next generation can start to learn about what they have just inherited."

 

4. Give them some latitude.

 

As much as you love art, your kids or grandkids may not share the same passion. So while you can certainly try to spark their interest, there are no guarantees.

 

"Telling them exactly what they should do is a failing formula," advised Daniel Lebensohn. His hope for his daughters is that they keep the pieces most meaningful to them, and find good homes for the rest.

See full article

The Four Tribes of Collectors

Peggy Guggenheim

Peggy Guggenheim

Which kind of collector are you? Evan Beard, head of Art Service for Bank America contributed this insightful article to Artsy last year. (With a graph!) Enjoy.

“The most enjoyable part of leading the art division of a private bank is working with the great characters of the art market. In my experience, serious collectors tend to fall into one of four “tribes,” each with their own behaviors, insecurities, strengths, and motivations for seeking, acquiring, and appreciating art. You may recognize them wandering the fairs or waving their paddles at auctions; others tend to collect more discreetly, known mostly by the dealers who feed their obsessions. Below are the tribes I’ve known.”

Read more: https://www.artsy.net/article/evan-beard-four-tribes-art-collectors?utm_medium=email&utm_source=11999406-newsletter-editorial-daily-01-23-18&utm_campaign=editorial&utm_content=st-S

The Best Investments of 2018? Art, Wine and Cars.

The Wall Street Journal reports luxury assets have outperformed stocks and bonds this year.

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Who beat the market this year? Investors who like the finer things in life.

Luxury assets, including wine, art, classic cars and fancy colored diamonds, have outperformed stocks and bonds this year.

“People are looking for a place for their cash, and the security of holding something physical is appealing,” said Anthony Maxwell, director at Liv-ex, the London-based wine exchange. “They are looking outside securities, and gold is not what it used to be.”

Investors who put money into art at the beginning of the year saw an average gain of 10.6% by the end of November, according to Art Market Research’s Art 100 Index, the closest thing the industry has to a benchmark.

In November, David Hockney’s painting of a man in a pink jacket by a swimming pool set a record for a living artist at auction, selling for $90.3 million at Christie’s New York.

Those investing in wine have seen a 10.2% gain this year, according to the Liv-ex 1000 index, a broad measure that covers wines across regions.

Meanwhile, global stocks have tanked in the past quarter, reversing gains earlier in the year, as analysts fret over slowing global growth and trade tensions between the U.S. and China.

Investors who put money in the S&P 500 at the beginning of the year have lost 5.1%, based on estimates of total return. Those seeking refuge in cash equivalents have gained 1.9% this year, while those holding gold have lost 2.2%.

Yet, the fall in stocks is a recent trend. Analysts say equity markets may well strengthen in the coming months, while the trend for luxury investments could reverse.

“Wine is something to drink and enjoy, and art is something to appreciate,” said Robin Creswell, managing principal at Payden & Rygel, a Los Angeles-based asset manager. “You might enjoy the updraft of higher prices in beneficial markets but you shouldn’t be surprised if there is a downdraft.”

Meanwhile, those who own luxury investments can revel in their relative staying power.

“They will always have some sort of market because somebody loves them,” said Andrew Shirley, a partner at global real-estate consulting firm Knight Frank and editor of the group’s Wealth Report. “With a share, there is no sense in owning it for the sake of owning it.”

The market for high-end diamonds has been steady, gaining 0.4% in value in the first three quarters of 2018, according to the Fancy Color Research Foundation in Tel Aviv.

Eden Rachminov, chairman of the FCRF, a diamond-industry body, says the gemstones can help diversify an investment portfolio and there is almost no volatility in prices.

There are risks involved in holding alternative assets, from regulatory reform to changing tastes, such as a recent shift in demand beyond traditional Bordeaux wines to top-end Burgundy and other varieties.

And the wealth effect that people feel from higher stock markets can reverse itself quickly.

“If people make money on the stock market, they have more money to spend on their hobby,” said Dietrich Hatlapa, director of Historic Automobile Group International.

Luxury-car prices were down slightly this year, according to HAGI’s Top Index, which covers rare collectors’ automobiles—a correction, Mr. Hatlapa says, that was expected given the rate at which investors poured money into the vintage-car market following the 2008 financial crisis.

“They decided to allocate more to classic cars as part of their portfolio because they couldn’t find returns elsewhere, but there are more alternatives as interest rates normalize,” he added.

Cars have been the best-performing luxury investment over the past 10 years, gaining 289%, according to a report published by Knight Frank earlier this year. Coins gained around 182%, wine 147% and jewelry 125% over the same period, while antique furniture and Chinese ceramics lost value.

Emerging markets represent a large part of demand growth for luxury assets, leaving prices vulnerable to moves in currency markets too, analysts say.

Wine analysts point to the boom that followed the United Kingdom’s decision in 2016 to leave the European Union. Political uncertainty over Brexit dragged on sterling, the main currency for trade in wine, creating a buying opportunity for international investors.

Write to Avantika Chilkoti at Avantika.Chilkoti@wsj.com

Appeared in the December 31, 2018, print edition as 'Few Investments Beat a Life of Luxury Luxury Items Turn Out Winners in 2018.'

How Old Master Sales Are Like the Tortoise and the Hare

Lucas van Leyden’s early-16th-century black chalk drawing of a young man sold for 11.5 million pounds, or about $14.6 million, at Christie’s.

Lucas van Leyden’s early-16th-century black chalk drawing of a young man sold for 11.5 million pounds, or about $14.6 million, at Christie’s.

In an uncertain economic environment Old Masters have long been considered a “safe” bet. This December article from the New York Times gives a timely overview.

The memories of Beyoncé, Victoria Beckham and othersdisplaying a fascination over the summer with European old masters have faded. Auctions of such works have once again reverted to traditional type.

At least, that was the impression in London this week when Sotheby’s and Christie’s held their regular December sales of pre-Victorian art. The wall colors might have been different (black at Sotheby’s, blue at Christie’s), but these latest old master offerings — featuring a “Head of Christ” by Rembrandt, portraits by Anthony Van Dyck and Frans Hals, and landscapes by the Brueghel family — were put on show much the same way they have been for centuries.

“We’re the tortoise to contemporary art’s hare,” said Johnny Van Haeften, a London-based dealer in old masters. He acknowledged that collecting fashion had shifted toward more recent artworks, but added that old masters represented an alternative investment strategy. “It’s about preservation of capital, he said. “It’s safe, and people are realizing what good value they are.”

Read More: https://www.nytimes.com/2018/12/07/arts/auctions-old-masters.html?mkt_tok=eyJpIjoiTUdVME1XSmpZakEwTkRNNSIsInQiOiJoT2xYY0kxd2srR2hsTVRCb0h0ekZ5THN6a2tKWFBwNEF0UHZHM205anBkOXUwdllCXC91TCtvNmJrWndERkJDVXZSeE5CV2ZTRHBwMExBV3FaK2dyaTV0d1wvazQ3M3ExSDNVekthSTBrQngxdGUwSkh0azFFVXo2TU1rNlBRK0pkIn0%3D

The Specialized Art of the Appraisal- NY Times

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I recently came across the excellent article from the New York Times wealth management archive. My takeaway: choose an appraiser who has extensive expertise in your specific property! This is particularly true if the item has significant value. While any appraiser who is properly trained and certified can produce a credible report with the proper format and cataloguing, values could vary significantly (either high or low) if the specific expertise in the subject property is lacking.

https://www.nytimes.com/2011/10/19/business/choosing-experts-to-appraise-collectibles-and-valuables.html

Authenticity and the Appraiser

Ralph Osman wrote this thorough and thoughtful essay on authenticity and appraisers several years ago. I’m pleased to share it again with our followers here.

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Art appraisers are often asked to appraise art objects and antiques with no guarantee of the item’s authenticity. In some cases the owner of an object believes he knows what he owns, in other cases he hopes the appraiser can help identify the object. In a few rare cases, the owner may hope to have something appraised as authentic when in fact he knows it is a fake or forgery. Authentication, the process of accurately identifying on object, is important because of its potential impact on the value of the work of art being appraised.

When an art appraiser has reason to question the correct identity of something he is appraising, he often calls on an expert in the field to authenticate the object. By doing so, the appraiser is employing “due diligence” in valuing an object. “Due Diligence” usually translates into hard work, research, a bit of detective work, and ultimately it means honesty and therefore complete disclosure.

The appraiser’s responsibility in this process is to alert the client to the problem, provide advice regarding experts, record and interpret the information obtained from experts and other sources, and, finally, to determine the object’s probable market value.

The question of authenticity really hinges on “adequate identification” as stipulated by the Appraisal Standards Board of the Appraisal Foundation in Washington, D.C., which regulates the appraisal profession. One of the best means of establishing adequate identification is to have clearly documented provenance for the work of art. Provenance is a history of ownership for the piece, ideally from the time it left the artist’s studio to the time it entered the subject collection. Recording and interpreting the history of ownership, exhibition and past research done on a work of art is part of the appraiser’s responsibility in reaching a value conclusion. Appraisal is not guess work. It is the result of assembling hard facts and then interpreting them.

The quick answer to the question of whether an art appraiser is responsible for determining “authenticity” is a qualified “yes.” As a function of the requirement of “accurate identification” and of the legal principle of “due diligence,” along with professional ethics involving a “standard of care,” the appraiser must exercise reasonable care and produce substantial evidence to justify the value conclusion.

The best policy - for the appraiser as well as the client - is that of complete disclosure. One nationally prominent appraiser and a regular adviser and expert witness for the IRS, the U.S. Customs and major insurance companies says with regard to disclosure, “...tell them everything you know and tell them everything you don’t know.” Inevitably there will be situations when the authenticity of a piece will be disputable. In such cases the appraiser must use “due diligence” and completely disclose his procedures, keep accurate records, build a convincing case for his conclusion and hope he is right.

Many collectors wonder when and if they should have artwork authenticated. For older works of art, where the provenance is not entirely clear, and where the dollar value may be high, it is advisable to have an authentication on record. To achieve this, the best thing a collector can do is to engage the appraiser with the best credentials, the least potential conflict of interest and the best client referrals. Although art appraisers are not licensed, the best are certified and tested by several appraisal associations. Membership in such an organization, while it cannot guarantee an appraiser won’t make a mistake, does guarantee that the appraiser knows the proper procedures, has gone through peer review and adheres to strict ethical guidelines.

 

As Art Collections Grow, So Do the Places That Stash Them

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Yes, even the biggest collectors run out of wall space! Great article from the NY Times about where all that art goes.

Art sales are climbing worldwide, according to a report on the art market, rising to $63.7 billion in 2017. Which raises the question: Where are people putting all that art?

“Dealers have to store it, then they sell it to collectors who have to store it, then they donate it to museums that have to store it,” said Todd Levin, an art adviser in New York.

As a result, storage companies are scrambling to keep up with the growth by expanding their facilities and offering more services to meet demand as collectors and galleries run out of room.