Tuesday, 25 July 2017

It's all about context: assessing the old master market

The old master auctions that I wrote about recently did ... OK. Sold percentage was high, but the major Turner that I didn't care for just squeaked by at £18.5m. Some wonderful Northern pictures did deservedly well, a portrait of Anne of Hungary's court fool (above) that they gave to Jan Sanders van Hemessen making £2.2m against an upper estimate of £600k. A marvellous Murillo made £2.7m, a little less than it made in 2005, adjusted for inflation. Conventional wisdom is that the market doesn't like 'stale' pictures, but twelve years is enough of a gap for a new generation of collectors to come through. And whilst novelty doubtless has some inherent value, there are other reasons for recent returns to do poorly at auction. The person willing to bid highest last time has dropped out - because they're selling it. The last auction established an anchor price, so it's easier to offer around the market than something with uncertain value. Auction might be the last resort. And they might be selling because it wasn't as good as they hoped, after cleaning and research. Finally the market is inherently volatile. There just aren't that many people chasing after each lot, and indeed some pictures returning to auction do very well indeed, from this to this.

Art market reports tend to read to much into each auction. It's a small sample, and it's mostly noise rather than signal. The July sales were solid, but not spectacular, so people tended to read into them what they wanted. Some old master dealers are too keen on talking up their market. Short term fluctuations are market volatility are literally their living, but sometimes being too close to the action means missing the context. Just because some dealers might be making a killing doesn't mean the market is in splendid good health. So I find myself again in disagreement with Art History News.

Supply of old masters fluctuates a bit, but not by as much as you might think. Great things do still come to market, and there’s a fairly steady stream of material. But they’re not making any more, so it is a finite market. The key change is demand. Art and antiques are bought by the affluent and the rich. And their ranks have been multiplying. There’s been a massive growth of global wealth, and a particularly striking growth in the super-rich. The potential market has been growing.

If a population increases and grows richer, a car manufacturer with static sales shouldn’t get too excited. There are more potential customers, but they’re not buying cars. If it turns out that all the other manufacturers are selling more and more cars, as you’d expect in a growing market, our manufacturer ought to get a bit worried. That's the situation in the old masters market; other sectors in the art market are booming.

Bendor Grosvenor references a lightweight report by Arts Economics. It’s hard to assess the report because there are so few references. The lack of caveats (uncertainty about size of market given different definitions and different sales channels) makes it look more like a marketing brochure than serious research. But it’s still hard to read as an endorsement of the old master market. Old masters are ‘best performing’ in the UK market only in the context of relative increase (of 16%). But that’s against a decline of 50% the year before ($438m to $219m). Of course that’s partly driven by decisions about where to sell, but it shows the danger of cherry-picking data.

The report confuses regions and hubs, and is padded out with unsubstantiated claims about the “knowledge-intensive and gender-balanced” jobs that are provided (what is a ‘gender-balanced’ job?). But it does show that the old master market is almost the smallest segment of the fine art market: 45% post-war and contemporary, 30% modern, 12% impressionist and post-impressionist and just 13% old master. So the market post-war and contemporary – just a few generations – is nearly as large as the seven previous centuries.

Billionaires' net worth has increased roughly fivefold since 1995. Globalisation has created a vast new upper middle class in developing countries who are able to afford works of art. The boom in contemporary art isn't surprising. The remarkable thing is that so few rich people are spending their wealth on old masters.

It’s not a slight on old masters, or on the people who market them for a living, to say that the market is weak. I see it more as an indictment of the taste of the rich, but we shouldn’t take rich people’s taste too seriously. If you have even a little spare money you can buy pictures that really ought to be out of your league. Enjoy it while it lasts.


  1. I think Bendor deep down inside knows you're right. Art History News tweets during the Christie's auction about a Van Dyck (Saint Sebastian) being cheap whereas in his article afterwards he is buoyant about the result for that picture... The old masters market is not unhealthy I suppose but it is an underachiever.
    By the way, I love reading your blog and I hope more posts will follow soon.

    1. Thank you. And I agree. It's about perspective.