Wealth - Hammer Time

Foreign collectors keep money flowing through the U.S. art market


For a reality check into today’s fine art market, listen to collector Faye Sarkowsky, former president of the Seattle Art Museum and board member of the Palm Springs Art Museum. “To get into the market now and buy top-quality art is just incredibly tough,” she says, referring to headline-grabbing prices major auction houses have enjoyed this year. Take the mid-September Damien Hirst sale at Sotheby’s in London. For months, the art world speculated how Hirst, whose work fetches the highest prices of any living artist, was “testing the market,” bypassing his galleries. His strategy paid off with $126 million in sales for 54 of his works.

Newly minted billionaire bidders from Russia, the Middle East, India, and China have catapulted prices to record highs. “We couldn’t reproduce our collection now,” Sarkowsky says. “It’s a totally different ballgame. I’m amazed at the calls we get from dealers asking if we want to sell and the prices being offered.”

Christie’s International announced worldwide sales of $3.5 billion for the first six months of 2008, a 10 percent increase over the same period in 2007. Million-dollar-plus sales also increased for the blue-chip art business, with 457 works of art selling for more than $1 million, compared to 430 sold during the first half of 2007. Sales from Asia and the Middle East rang in at $351 million, an 81 percent increase from last year. It’s no surprise U.S. sales declined a percent as the credit crunch tossed Wall Street hedge fund managers, private equity players, and investment bankers out of the market.

“The number of new collectors continues to increase from emerging markets like Dubai, China, India, and Russia. We’re also seeing increased confidence from Hong Kong,” observes Rik Pike of Christie’s. It’s not uncommon for a Russian buyer building a mega mansion to plunk down $50 million in cash for a trophy piece. “Russians are building private museums where money is no object, and they simply don’t mind making up for lost time by overpaying,” observes Steven Nash, Palm Springs Art Museum executive director.

Though artists such as Mark Rothko, Francis Bacon, and Lucien Freud fetched upwards of $50 million at last spring’s sales, predictions of an inevitable “correction” abound. “Everyone is waiting for the other shoe to drop,” says Tom Danziger, Art & Auction columnist and senior partner in Danziger, Danziger & Muro, a New York law firm specializing in the fine-art market. Meanwhile, his clients are buying Chinese contemporary and Indian art whose prices have escalated over the last five years. “They still see room for appreciation in those markets,” Danziger confides.

“There is loads of speculation in the contemporary market from other countries,” says former New York gallery owner and Palm Springs Art Museum board member Marilyn Loesberg. “These people have vast amounts of money and pay $35 million for a token piece to make a statement about their collection. I’m buying photography myself.”

The U.S. market still depends on disposable cash. “In 1989, the market went straight up and then just died,” Loesberg says. “I had friends who bought Warhols and Rauschenbergs at the top of the market then and couldn’t sell them for $400,000. Of course, today they would be $6 million to $7 million.”

No matter the market climate, Nick Korniloff, director of Art Miami, the largest satellite art fair held this month during Art Basel Miami Beach, cautions to buy from those who stand behind their artists and their prices and who will buy the piece back from you for what you paid for it. “This is a market that thrives on confidence,” explains Korniloff, who saw Art Miami’s gallery participation increase 10 percent this year.

When considering donating your works to museums or gifting it to family, consult recognized experts, such as those from the American Society of Appraisers. “The tax code is in disarray on fractional giving and remains problematic for collectors,” Danziger cautions.

“Despite our wobbly economy, the very global nature of the art market makes it an attractive investment with long-term appeal and liquidity,” observes Dr. Philip Eliasoph, a professor of art history and fine-art consultant in Connecticut. “I’m always asked at dinner parties by the Wall Street equity folks about the long-term viability of the market. It’s one sector of the economy where money is still flowing in.” 

In his book The $12 Million Stuffed Shark, Don Thompson asserts that most art bought today won’t appreciate enough to eclipse high transaction costs, including buyer/seller premiums, commissions, dealer markups, insurance, and capital gains tax when selling. His advice for investment-minded collectors is to seek works priced in the $50,000 to $100,000 range.

Edit Module
Palm Springs Life
Edit ModuleShow Tags

Related Articles

Gene Jr & The Family Spurs Gabriella Evaro's Creative Projects at Joshua Tree Music Festival

Desert native Gabriella Evaro, who planted roots in the artisan village of Joshua Tree with her mother and siblings as a young girl, returns to the Joshua Tree Music Festival with a new musical production.

The Last Internationale Bring Provocative Edge to Joshua Tree Music Festival

The Last Internationale, appearing at the Joshua Tree Music Festival, are a powerful trio of modern day musical revolutionaries that ride the cusp between hard rock and folk-protest music.

The Real Estate Match Makers

When Coachella Valley visitors went searching for the perfect residence, they turned to real estate professionals to help them. Here’s how these experts match their clients with the right home.

Songs From the Heart

After decades of singing backup for such legends as Elvis Presley, Dionne Warwick, Marvin Gaye, The Righteous Brothers, and Tom Jones, Rock and Roll Hall of Famer Darlene Love — now 73 — is busier than ever.

The Case for Country Clubs

The country club, that kissing cousin of the city club, has long held a firm grip on America’s imagination.
Edit ModuleShow Tags

Promotions + Contests

2014/15 Best of the Best

2014/15 Best of the Best

Palm Springs Life’s annual Best of the Best. Readers tell us who their choice is for the “Best of the Best” of the Coachella Valley in over 40 categories.
GuestLife Magical Monterey Bay Experience

GuestLife Magical Monterey Bay Experience

Palm Springs Life's Women in Business

Palm Springs Life's Women in Business

Winner profiles will be highlighted in a special section in Palm Springs Life’s May 2014 issue. Nominate Your Top Women in Business!
Pets on Parade 2015 Photo Contest

Pets on Parade 2015 Photo Contest

Enter your “Cutest Pet” photo in the Pets on Parade 2015 Photo Contest. Online users will be able to like the Cutest Pet photos from six (6) categories.
Cartoon Caption Contest

Cartoon Caption Contest

Each month, we provide a vintage 1950’s cartoon illustrated by Alice Rovinsky. You are invited to submit a caption or vote for your favorite caption.