Buyers much more cautious at New York sales

The financial crisis is taking its toll on the art world. The prestigious and high-profile Modern and Impressionist Art sales in New York were very disappointing. Moreover they suggest very difficult times ahead. The results recorded by Sotheby’s and Christie’s from 3 to 6 November 2008 are way below the auctioneers’ expectations proving that even the ultra top-end of the market is now impacted by the crisis. After these sales, the Art Market Confidence Index took a substantial nose-dive. Pessimism appears to have overtaken the market and more than two thirds of the players anticipate price contractions. In August, only 20% anticipated such a strong market depression during the autumn months.

This indicator only confirms a trend that was already clearly visible. Price adjustments have been substantial. To guarantee sales, auctioneers have had to convince sellers to adjust their reserve prices. As a result a large majority of last week’s sales were negotiated below low estimates and the bought-in rate was high. At Sotheby’s, on 3 November, 45 of the 70 lots presented found buyers generating a total revenue of $223.8m, compared with a total anticipated revenue (calculated on low estimates) of $338m. Major works by Cézanne, Van Gogh, Matisse, Monet and Modigliani were bought in. Nevertheless, new records were generated for two rare works, one by Kasimir Malevitch ($53.5m) and the other by Edvard Munch ($34m). 24 hours after Barack Obama’s election victory, the first salvo of evening sales at Christie’s confirmed the lacklustre results generated by Sotheby’s: The first sales at the auction house owned by François Pinault tallied $47m compared with a total of $103m anticipated on low estimates. Among the big-name works that did not sell: a key painting by Edouard Manet (est. $12-18m) and an important work by Mark Rothko (est. $20-30m). The following day, the second session of the sale vaporised any illusions of a recovery: 44% of the 82 lots presented were bought-in, and the net result of the entire sale was $146.7m compared with a low estimate forecast of $240.7m.

As the IMF announces that the developed economies can expect a 0.3% contraction of their combined GDP (the first such contraction since 1945), on the art market…. we now know roughly what to expect. The market has apparently not learned the lessons of history. Enveloped in a speculative bubble for at least three years, a worst-case meltdown scenario now looks inevitable… the bad results posted over recent days will serve as a barometer for the market as a whole and it is highly likely that between now and 2010 we will see an average price drop of 30 to 40%, taking valuations back to 2003-2004 levels. Locomotive of the speculative bubble over the last 4 years, contemporary art is the next segment of the market to be exposed to the fire of this new reality… on 11 and 12 November.