Art Market Resurgence: A Lesson in Market Rebound

What do the art markets know that we don’t?

Here we are in the depths of the second dip to this recession, and art is selling at auction at prices nearly double the predicted selling price. Mark Rothko’s White Center (Yellow, Pink and Lavender on Rose), 1950, sold at Sotheby’s this week for $72.8 million, more than twice the anticipated $40M price tag.

Art dealers are experts in appreciation and market tastes. If anyone can predict what will appreciate into the future, it’s this savvy bunch.

But…weren’t real estate moguls the ones who should’ve been savvy enough to quit while they were ahead on the last speculative bubble?

Perhaps the difference is in approach. Art markets face little regulation, and rest entirely on private research and insurance. Evidently market leaders are worried about suddenly resurgent art prices, but this is a self-regulating market that corrects only by investor action — or inaction, as has characterized much of the past two years.

Perhaps opening the market to international clientele has also increased prices. While a domestic demographic dominates the real estate market, fine art finds increasingly high bids coming from abroad. Reports AP:

If US and European buyers used to be the heavy hitters, they are now increasingly joined by the Chinese, followed by other Asian, Russian, Middle Eastern and Latin American collectors.

“People’s lifestyles get closer: they buy boats, they drink French Bordeaux,” said David Norman, Sotheby’s director of impressionist and modern art.

“Mainland Chinese in their 40s to 50s make money and aggressively buy Asian art, but a part of them become more international and want to be diversified,” Norman said.

Sotheby’s sent a wide smattering of European art to Beijing last week to help Chinese collectors and the public get acquainted.

Or perhaps the art surge suggests a recovery. After two years of dampened sales for both Sotheby’s and rival Christie’s, those who are filthy rich enough to hold fine art seem to think the comeback is upon us.

Either way, the character of such high-priced art reflects a distinct step forward. Filthy-rich Chinese collectors once interested only in Chinese artists have skipped the European renaissance entirely in favor of modern American and European collections. These are no Renaissance collections; it’s contemporary artists like Rothko, Chagall, Seurat that have led the resurgence in international art prices:

A Mark Rothko abstract painting absent from the market for four decades could lead the sale, with an estimate of 20 to 30 million dollars.

On November 10, Christie’s will feature what it hopes will be 240 million dollars worth of sales led by Andy Warhol, Roy Lichtenstein, Jeff Koons, Gerhard Richter and Rothko.

Robert Manley, head of contemporary art at Christie’s, said the good times are back for art.

“It’s amazing what a year can make. The estimate sale has quadrupled in one year,” he said.

Newly willing to take risks, cautious investors have come out of hiding. The good times are back for art! Now the public needs only to be savvy enough to approach all investment markets the same way — increasing transparency, decreasing government intervention, encouraging private research and insurance — and the good times will be back for other markets too.