“… this time the art market will not be a war victim”

[30/03/2003]

  by Thierry Ehrmann
The Artprice founder Every art market player has in mind the crash that hit the market during the first Gulf war. How do people feel about the current situation?

War in Iraq stirs up bad memories. The first Gulf war in 1991 triggered a dismal slump in the art market.

Between 1985 and 1990, on the eve of the Iraqi invasion of Kuwait, the art market was riding high on a speculative bubble. Price-setting at the time was very subjective. Buyers and sellers were starved of information and tended to act on behaviour and rumours traceable to a very small number of market players. Bidding battles by Japan’s Ryoei Saito for the odd Van Gogh or Renoir were read as indicative of the general trend even though such million-plus sales only made up a thousandth of the market.

In the aftermath of the Gulf war, record sales dried up. Investors, reasonably enough, read this as a sign that the market had run out of steam and got out. Worse still, 1991 was not so much a quick crash as the start of a drawn-out slump that was to last nearly five years. Most market professionals reacted stoically, saying nothing, doing nothing and going down with the ship.

© Artprice 2003

Evolution of prices for the art market

Artprice Global Index
(base 1997=100)

 
Why the long slump?

In the early nineties the art market had no reliable source of real-time information comparable to the stock market. Remember that, not so long ago, if you wanted to find an artist’s benchmark price you had to flick through thick books and even then you would only find a sample of results from the previous year. Viewed through this lens the slide in prices at the start of the nineties looked like a catastrophe.
Only a small circle of market insiders continued to trade in the market in a well-informed and risk-free way.

Will the present war bring another catastrophe?

Twelve years on, the geopolitical and economic backdrop is similar, even worth, but I am convinced that this tragic piece of history is not about to repeat itself.

The creation of Artprice has given the market a catalyst in the shape of fluid, instantaneous, worldwide information driven by the latest technology. Our data are accessible cheaply online – 92% of art professionals have internet access – and underpin the dynamism and hence the health of the market.

The price of artworks has been rising for 7 years on a regular and objective manner. Any risk of irrational speculation has now been ruled out.

In 2003, unlike the last decade, the art market has taken on the trappings of a true regulated market. A new transparency has modernised the market. Internet access with 700 million internet users has democratised the market, stimulating even more transactions.

The rules of the game have got tougher but in the new more rational and fiercer market, among the million professionals and 9 million art lovers and collectors, the only survivors will be those who can access exact information.


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