For those clients with an extra $20 million or so burning a hole in their pocket, is it time to invest in—or bail out of—the collectible art market?
Prices paid at the high-end auctions certainly have been drawing attention, with Christie’s and Sotheby’s selling over $2 billion in art this November.
Million-dollar prices for fine art objects are becoming mundane; nowadays, it takes eight- and nine-figure values to make headlines. At these prices, it’s natural to start asking if the art market has entered a bubble phase. It wouldn’t be the first time: Prices corrected sharply in 1990 and in 2007.
Speculating on whether or not the market is in a bubble—based on headline auction results—isn’t a particularly rewarding exercise, experts caution. One reason is that the mega-sales are only a very small slice of the overall art market.
Roman Kräussl, a professor at the Luxembourg School of Finance, has compiled a dataset with over 10 million fine-art transactions from the past 100 years. He reports that just 1% of paintings auctioned from 1970 to 2013 were worth more than $1 million.
Those transactions are not corrected for inflation, Kräussl says, and an adjusted number would be even smaller. Additionally, in 2013 over 80% of all transactions on the global auction market were for less than $5,000.
While the $100 million-plus prices for Swiss sculptor Alberto Giacometti’s works make good newspaper copy, they don’t represent the broader market.
The Broader Market
Once you move beyond the ultra-high end, it’s hard to see evidence of excessive speculation, says Evan Beard, a leader in U.S. art and finance for New York-based Deloitte.