Art Dealer Doldrums

Vienna auctions continue strong even as the crisis hits world markets

On The Town | Natascha Eichinger | November 2009

Just one year ago, the art market was booming. Liquidity was flowing through the global economy, and the top echelons of society were flourishing. Auction houses were raking in money with record high sales. In May 2006 Picasso’s Dora Maar au Chat sold for $95.2 million followed by Klimt’s Adele Bloch-bauer II reaching $87.9 million at the November auction within that same year. The world-record for the highest price ever to be paid for an artwork was already set at Sotheby’s auction in May 2004 by Picasso’s Garcon a la Pipe selling for $104.2 million.

That was – until the financial collapse of September 2008. But we’re getting ahead of our story.

In the first years of the new millennium, auctions became an exciting arena. "They would go on for an hour and a half, almost two hours, because there were so many items and so much action," reminisced art dealer Richard Polsky, in an interview with The New York Observer.

Contemporary art hit unprecedented levels. According to Art Market Research contemporary art prices in 2006-08 increased by 313% – a trend that was reflected in the legendary Sept. 2008 auctions at Christie’s when Damien Hirst’s works all together reached a whopping £111 million! Russian oligarchs and many other newly established billionaires were jumping on the band-wagon of contemporary art.

"Billionaires enjoyed extravagant life-styles buying cars, and villas furnishing these with their newest contemporary paintings and sculptures," said Angela Baillou, managing director of Christie’s in Vienna in an interview with The Vienna Review.

The global financial downturn swiftly took its toll on the art market. Only a few weeks after Lehman Brother declared bankruptcy, sales at auctions plummeted. In Nov. 2008, Christie’s was unable to sell almost 30% of their art works, among which were customary big ticket sellers by Manet, Cezanne, Rothko and de Kooning. This trend continued at auctions months later, as was seen at the Sotheby’s auction in May 2009, when a painting by Picasso and a sculpture by Giacometti failed to find a buyer at all. At this same auction, 29 Impressionist and Modern art works only received a total $61.3 million, instead of the estimated $118.8 million.

Contemporary art had been most dramatically affected by the financial downturn, compared with other sectors of the art market. According to the Financial Times in October, contemporary art prices have come down 63 per cent this year. Speculative buyers looking for turn-around profits with contemporary art have simply left the market.

Hans Knoll, owner of the Knoll Gallery in Vienna and Budapest considers this a positive development.

"The financial crisis has cleared up the art market: speculative buyers who were looking for quick money have left and loyal collectors have remained," said Knoll.

Genuine art lovers are still buying the art they most desire.

"I have generally decided to post-pone my purchases until the global financial situation has improved," said collector of Latin American art, Peter Klaus Graetzer. "However, if I were to be offered an interesting piece at a relatively attractive price, I would undoubtedly make an offer, no matter what the current financial climate may be."

Passionate art collectors such as Graetzer now steer art demand.

"The main drivers are the devoted art collectors who live and die for their art," says Baillou. "They were the drivers of the art market in the past and remain so today."

However, unlike speculative buyers these loyal collectors bide their time before they make any rash contemporary art purchases.

"Serious collectors have become much more cautious in the contemporary art sector," explains Knoll. "They make their buying decisions at a much slower pace, during which they carefully evaluate artists’ careers, artistic development, exhibitions, shows, and compare the quality of their work to that of other artists."

Even though the speed of contemporary art sales has slowed down, there is still high demand for quality art, regardless of the financial environment. The consensus is that rare, quality art will always sell well – a long-standing trend over the last 10 years.

Art works today are no longer sold at inflated prices as they were during the boom. But nevertheless sales are robust at slightly reduced prices. By June, auction sales for post-war contemporary lots, at both Sotheby’s and Christie’s, perked up contrary to all predictions. Sotheby’s triumphed with Nicholas de Stael’s Nature morte à la carafe sold well above the estimate at £870,050 and Damien Hirst’s Homage to a government, the Dwelling Place at an astonishing £657,250 contributing to the evening’s total sales at £25.54 million.

Christie’s had a slightly lower overall turnout at £19.06 million with other items of great notoriety.

A major transformation over the last year is that far fewer pieces are showing up for sale. In spite of the crisis, many collectors are so wealthy that they have not been affected enough to feel obliged to sell.

Art dealer Richard Polsky mentioned the example of art collector Don Fisher, owner of the Gap.

"He’s a billionaire, and maybe his collection’s worth less now and maybe Gap stock is down, but he’s someone who’s not going to miss any meals. He doesn’t need to sell anything" said art dealer Polsky.

Many wealthy art collectors chose to weather out the worst of the financial crisis until they believe that they can obtain the best possible price. This has become a worrying trend for auction houses.

"It is very problematic for us at Christie’s, as it is for all auction houses, when we can only offer half the art works at auction than we used to," said Baillou. "This is the challenge we are currently facing."

One might have expected that major banks have begun to sell their own vast private art collections, to bail them out of financial ruin. But banks have been selling only very selectively, with expert advice at a very tentative slow pace.

"They do not want to flood the market, because this would lead to a drop in art prices," said Dorotheum press officer Doris Krumpl.

The Vienna-based auction house Dorotheum is also having diificulties with the supply-side of the art market. But in terms of sales, art prices in Austria do not appear to have been affected by the financial crisis, as they have on the international level.

"Circumstances change at a much slower pace in this market than they do in the financial market," said Krumpl. "Thus the effects of the crisis are visible, but less so."

In this year’s October auction of 19th century paintings, the Dorotheum in Vienna had spectacular results. The stars of the show were Ferdinand Georg Waldmueller’s Children decorating a Conscipt’s Hat surpassing all high estimates at €490,300 and Friedrich Gauermann’s Harvest in the Foothills of the Alps fetching €237,300.

International bidders, particularly from Russia kept the October auction of Old Master Paintings lively, during which Rubens’ Judgment of Paris sold at an impressive €352,000 and the Medieval painting by Lambertini, John the Baptist and Apostle at €271,800.

So in spite of the financial crisis the Austrian art market is very much alive.

"We had a higher turnover in the first half of this year than we than we did in the same period last year before the financial crisis," said Krumpl.

As for the international art market, the future is less certain. In the past high profits were too easy, and now the market offers more challenges – the need to create new niches, to discover new markets, interests and to spot incipient trends, requiring experience and skill. More than ever, this is an experts market.

Other articles from this issue