The Future of the art market – by an expert trader

2014 was a year of records for the art market and it seemed highly unlikely that it could be beaten, but this year Christie’s and Sotheby’s pulled off another tour-de-force, selling just under €1.5 billion of modern and contemporary artworks last week. ArtViatic’s founding President, Antoine Van de Beuque talks to us about the record-making sales and explains how and why the art market is at a crossroads.

In 2003, the art market was worth €18.6 billion; by 2009 it was worth €28.3 billion; and in 2014 it hit €51.2 billion, virtually doubling in a little over five years. How do you explain such massive growth?

AVDB: Until the financial markets improve and stabilize and people start to feel reassured, the art market will continue to expand. There is a direct correlation between finance and art. The figures speak for themselves: between 2003 and 2009, the art market grew 38%. As consequence of the subprime crisis, which began in 2007, the art market witnessed up to 81% growth between 2009 and 2014. In the face of on-going economic instability, a liquidity glut in global financial markets has quite naturally driven banks, investment funds, and the like, to move into the most favourable sector, which happens to be art, especially given its increasing globalisation, which is creating new opportunities and we are seeing the rise of China, South America, and India.

Once again according to the TEFAF report, works by artists born after 1910 represent 48% of the market in terms of value. Why is contemporary art so popular?

AVDB: What could be more normal than being interested in contemporary art? Contemporary art echoes the times; it shows just how dynamic the cultural scene is; and it reflects our interest in the future. Supporting the art industry financially is one way for investors to leave their mark on a given era. It is also fundamentally a way of circumscribing the times. Today’s contemporary art is unique in that it is the buyers who determine if “it’s art”. This value-driven market, almost half of which is made up of the works of artists born after 1910, is perfectly in line with contemporary society.

These days, the United States are the undeniable leaders, accounting for a 39% share of the market, followed jointly by the United Kingdom and China with a 22% share. France now only represents 6% of the market. France has been gradually losing ground for years. Why?

AVDB: There are precise reasons for France’s poor performance. Despite works of art being totally exempt from fortune tax, over the past few decades France has been severely penalized by excessively protectionist legislation governing everything from determining a work’s right to leave the country, customs procedures, the State’s right of pre-emption, and a lengthy period of right of withdrawal for purchasing museums that can last for months, without mentioning the reform to the auction laws, which came too late. All of this has benefited the Anglo-Saxon countries, to the detriment of the French market.

Do you think that China could overtake the United States one day?

AVDB: China’s history dates back thousands of years and, what is more, 56% of the world’s billionaires now live in Asia. Therefore, I do not see any reason for the Asian the giant not to lead the market in a few years. However, I would put a dampener on that: given the Chinese’s nose for business, there is no reason why, just because they are buying up art today, that they would not turn to another even more profitable sector tomorrow.

How and why does Britain manage to stay afloat?

AVDB: Britain not only has good economic growth, but is also committed to globalisation and it has gone all out to attract art investors by developing marketing, access to information, etc. With the prices of exceptional works sky-rocketing, there has been a real pull towards the United Kingdom.

Last year was a record year. Gaughin’s Nafea faa ipoipo, which Qatar purchased privately for €265 million, became the most expensive work in the world. At auction, 1,530 lots sold for over €1 million… Has the art market gone crazy?

AVDB: As I like to say to clients whom I have been advising for over 30 years (who have become friends), “We’ll see!” But, seriously, we need to remember that we are talking about masterpieces here, artistic assets of outstanding quality, that are increasingly hard to find on the market, which add substance to collections. Admittedly, these works, some of which sell for stratospheric prices that most people cannot even begin to imagine, are no longer accessible to any but a rare few. That said, they are still safe investments: they are impervious to fashions and whims.

Do you think that the prices will remain this high?

AVDB: Every day, someone is born who wants to acquire something that others are lucky enough to possess. For this reason, I expect that rarity will hold its value, but it is a case of no longer seeing the forest for the trees!

What do you think will be the great challenges for the art market in the years to come?

AVDB: Without a doubt art’s transformation into a class of asset. And the definitive acceptance of online transactions.

The online art market was worth €3.3 billion this year, or 6% of worldwide art sales. Who is buying online?

AVDB: Buyers used to the traditional art market (collectors, galleries, investors, etc.) are increasingly taking advantage of the internet, although about half still prefer brick and mortar venues. However, that is changing very quickly, because online platforms are a great entry point for the new generation of buyers. The social networks are playing an increasingly powerful role in influencing this.

Do collectors behave differently when they are in a gallery or auction room compared to when they are on the Internet?

AVDB: Many users, especially novices, find online transactions less intimidating than if they have to face gallerists or auctioneers. They also like the fact that it is very easy to buy and sell, they can search for artworks easily, and there are a wide variety of pieces on offer. Therefore, there is a noticeable emotional benefit for online buyers and sellers. All the same, they are not yet 100% confident. A lot of users still dislike the fact that they cannot inspect the works first hand, that it is difficult to have the works authenticated, the lack of information, and logistical transaction or shipping issues.

What do you consider to be the limitations to the de-materialization of the art market?

AVDB: The factors I have just mentioned. But the limits are being lifted – the online buying and selling platforms offer ever more secondary services that balance the equation between the useful de-materialization of the art market and the necessary materiality of the work in situ. The internet is in no way an end, but rather an extraordinary means to an end. It makes it easier to buy and sell tangible works of art, by offering it initially in a de-materialized form. As long as we are careful to maintain this distinction, I see no reason why the online art market could not become an everyday thing.ai13 ah288 ah361