By Tom Johansmeyer. 25 Jan. 2010. Daily Finance.com.
If the recent art market boom had a poster child, it may have been the British painter Lucian Freud. Before the boom ended suddenly in summer 2008, Freud’s paintings (like The Sparrowhawk, pictured here at a 2008 Christie’s auction in London) fetched sky-high prices, buoyed by an auction scene that seemed intent on adding zeroes to integers. It was stunning that any work by a living artist could fetch more than $30 million — but then the bottom fell out, the exuberance ended, and the market reeled from a year and a half of anguish.
Now an art-market recovery could be in effect — and that it should be led by a Freud self-portrait is nothing short of poetic. In London, contemporary auctions are coming to the three major houses — Sotheby’s (BID), Christie’s (CRUPF) and Phillips de Pury — and signs look positive. Along with Freud, coveted pieces by Peter Doig and Yves Klein will go on the block; the season’s presale estimate is set at $104 million, up 68% from the same set of auctions held a year earlier.
$80 Million Paintings, Then Freefall
The market peaked in May 2008, with the $86 million sale of a Francis Bacon triptych: part of a $120 million shopping spree by Russian tycoon Roman Abramovich that included Freud’s $33.6 million Benefits Supervisor Sleeping. High prices persisted into June, when Abramovich was outbid for Monet’s $80 million Le Bassin aux Nympheas. That’s when the celebration ended. The market was limping by September, when the global financial meltdown sent it into freefall.
In the journey of despair that followed, every aspect of the market has been challenged: guaranteed minimum pricing, auction inventory, auction house organization, sales strategy. Contemporary art prices fell more than 70%, auction house revenues suffered, and many lots failed to move. The art market lost most of its liquidity as collectors held their best pieces, understanding that they risked fetching low prices if they sent art to auction.
With lower-quality art on the block, buyers stayed away, and prices fell further. Throughout 2009, a self-reinforcing toxicity gripped the market. But by the end of last year, hints of a recovery took root. Buyers and sellers took risks, but the results were mixed. At a Christie’s sale, an aggressive presale estimate for an Andy Warhol painting was not met, and the piece failed to sell. But a day later at Sotheby’s, Warhol’s 200 One Dollar Bills moved for a monstrous $43.8 million. The discrepancy exposes the market’s recent unpredictability: Every nagging malaise seems paired with a glimmer of hope.