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Global Art Market Faces Price Crunch

September 12, 2003|From Reuters

The global art market faces a price crunch in the next quarter after liquidity hit a 20-year low, with weakness spreading from the United States to hitherto resilient Europe, the head of a leading art data firm said Thursday.

Thierry Hermann, chairman of Artprice.com, said art dealers and collectors had warded off a global economic downturn by narrowing down their purchases, but that method for supporting prices was no longer sustainable.

"Excluding one-off sales, there is a total absence of liquidity at present, which is exceptional. We haven't seen data like this in 20 years and therefore it's very inauspicious," Hermann said.

A report by Artprice this week said the market had come to a virtual standstill, with auctioneers' turnover since July 15 just a quarter of what it was in the same period of 2000.

"By Sept. 5 we had only had news of 228 auctions for the month, compared to 841 catalogs issued in September 2002," said the report, which compiled data from 2,900 auction houses accounting for 98% to 99% of the world market.

Demand has wavered in the face of a weak dollar, the war in Iraq and the SARS epidemic.

However, leading auction houses Sotheby's and Christie's were holding up well, jointly garnering 24% of all transactions in the first half of 2003, up from 18% a year ago, the Artprice report said.

"They tend to attract the more active buyers and are looking at a bought-in rate of 29%, compared to over 37% on average at other auction houses," the report said, referring to the percentage of auction lots that failed to sell.

Hermann said the fourth quarter would be crucial, with key barometers such as the FIAC contemporary art sale in Paris and the start of the annual winter art market season in New York.

"Everything is going to play out in the next two months," he said.

"It's a well-known fact that when there is no liquidity, mechanically prices are going to come down, maybe not for all artists; but at any rate we are going to see a massive return of artworks on the market," he added.

Although the art market has globally outperformed financial markets since the slump took root in the United States three years ago, interest has been focused on a cluster of specialty or high-profile sales, Hermann said.

Works by Austrian expressionist Egon Schiele and Renaissance master Andrea Mantegna set new auction records this year.

Hermann said the key signal that prices were about to buckle came from London banks, who recently signaled they were no longer willing to underwrite the storage of bloated art inventories.

"The London banks act as a green light. The City banks have just given the signal for sales to proceed," Hermann said.

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