The REAL State of the Art Market

Art auction results are usually used by the media as the primary indicator of the health of the art market and have received a huge amount of press since the financial crisis took hold as reporters and journalists try and make sense of what is going on. The problem is that while most reporters and journalists have been using art auction results to determine the health of the art market during the financial crisis, buyers and sellers have been changing the way they buy and sell in response to the financial crisis. One of the main characteristics of this change in buying behavior has been a reduction in the number of people buying and selling at auction and an increase in the number of people buying and selling at fairs and galleries which has resulted in a significant decrease in the price being paid for works and the number of works being sold at auction. To the uninformed spectator the lack of success being achieved by the auction houses indicates that the art market is in a bad way but in reality the poor auction results are a result of a change in buyer and seller behavior as opposed to a market meltdown. In fact, many art fairs and art galleries have been reporting very strong sales and an increase in the number of people showing interest in buying from them.

At a time when people feel the need to control their spending and be cautious with their money the art gallery or art fair is a far more suitable option for buyers and sellers than the art auction. The stock market meltdown and general financial crisis has resulted in people being far more cautious with their money and wanting more control over their finances. The characteristics of the art auction are at odds with the current sentiment and mentality of art collectors and investors which has resulted in more buyers choosing to make their purchases at galleries and fairs as opposed to at auction. Art auctions are usually emotionally charged, high pressure events that require quick decisions and a high level of confidence that can often see people spending more money than they had planned on or making purchases that they had not planned on making. On the other hand, art galleries and art fairs offer the buyer a more controllable, lower pressure and less emotional method of buying that allows for contemplation, consideration, analysis and justification of potential purchases as well as the ability to make far more discreet purchases.

While the future of the economy and the status of many people’s financial situation is uncertain it would make sense that people would be far less likely to make emotionally based purchases or be take part in any sort of transaction that they don’t have total control over. Just because people are experiencing a time of economic turmoil and financial crisis that requires a more cautious approach to spending and investment doesn’t mean that people aren’t going to continue investing money. Likewise, just because people are not buying at auction doesn’t mean that people have abandoned the art market all together and are not buying art. In fact, the recent stock market meltdown and poor performance of other investment markets has resulted in an increase in the desirability of art as an investment because art is a tangible asset and has proven to offer a relatively high level of insulation from the effects of economic and financial market crises. It is important to remember auction results do not necessarily reflect people’s confidence in the art market or the overall health of the art market as can be seen by the current situation. As far as I am concerned the art market is still showing plenty of signs of strength and resilience which I believe will continue to be the case.

**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.