Contemporary art prices lead auction recovery

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German painter Gerhard Richter was recently asked his thoughts on the estimate of £6-9 million (about $9.4-15.7 million) placed on one of his ‘Candle’ series works due to go under the hammer with Sotheby’s in London.

“It’s bewildering – it’s absurd that within a financial crisis we can see these figures,” was his answer.

How prices are determined, particularly in contemporary art, is not a new dilemma for collectors or investors. The post-war contemporary art sector is traditionally the most volatile and this stands for a reason: it is very much regarded as a barometer for market confidence and as such, it carries greater risk than the more established sectors of the Old Masters like Leonardo da Vinci and Rembrandt, or Impressionists like Cézanne and Monet.

At present, the contemporary art barometer is rising, and the auction activity in that sector is perhaps the most fascinating in the Australian market.

When we look at the recovery in the auction rooms on a global scale, there is no escaping that it’s the growth in the contemporary sector that has (and continues to) underpinned the recovery in art prices. In fact, according to the Mei Moses Index – which tracks the financial results of the art market – the Contemporary Art Index is up 28.76% in the year to date, well above the 7.86% rise in the broader World All Art Index.

Contemporary art is as perplexing as it is fascinating as a market to monitor and analyse.

There are times when the cynic within can’t help but dominate a mindset. For me, lot 1 of Australian art auction house Deutcher and Hackett’s most recent sale was just one of those moments. Denis Beaubois’ Currency 2011 was presented for sale with estimates of a $15,000-$25,000 price tag. The ‘artwork’ – which was funded with a $20,000 grant from the Australia Council – consisted of two stacks of 100 uncirculated (legal tender) Australian 100 bills. That’s right, two piles of cash with a face value of $20,000. What is perhaps more perplexing than the essay accompanying the work was the final result, which saw the work set a new auction record for the artist of $21,000 (including the buyer’s premium).

But here’s the thing with contemporary art in particular; in this instance, you could be forgiven for wondering whether or not this is simply a case of the Emperor’s new clothes or a high-stakes game of Who’s the Greatest Fool being played out between high net worth individuals.

In the year to date, we have seen a total $71.12 million turnover at art auctions in Australia, which is up 8.23% on this time last year. Yet despite this, our market confidence is still shaky. The secondary market (sales of pre-owned works) is clearly going through a transition – something that is long overdue in my view – so recovery in this end of the market is likely to remain sporadic.

The continued concerns surrounding sovereign-debt are sending shockwaves through the broader markets, which is undoubtedly testing the resolve of investors – particularly when we see the volatility extending to gold.

Fine art, purchased wisely, continues to demonstrate its capacity as a strong long-term alternative to stock markets.

Investing £6 million in a classic Richter all of sudden doesn’t seem quite as bewildering or quite so absurd. Of course, the secret is buying wisely because the investment lies in the quality.

One name that has experienced explosive price gains in recent years is that of 2008 Archibald prize winner Del Kathryn Barton.

Barton’s painting Keeper of the Polka-Dotts was offered in the Deutcher and Hackett sale (lot 31) selling for $192,000 – a new auction record for the artist. I remember seeing her Confetti Rain (2005) go under the hammer with Bonhams and Goodman in 2007. It was up with estimates of $8,000–12,000, having been purchased in 2005 at her Melbourne exhibition for around the same price as the lower-end estimate. The work sold that evening for $49,000 (inclusive of the buyer’s premium), setting a then new record for her work.

What was perhaps even more interesting though were the results for lots 94, 95 & 96 – a series of limited edition lithographs by Del Kathryn entitled That’s when I was another Tree. Originally released as an edition of 50 for $3,500, the gavel fell with two of the three works selling for $18,000 and the other for $19,200.

What’s interesting about this is it very much bucked the trend we have seen in the rooms throughout the 2010-11 auction season where the ‘edition market’ has underperformed as a sector. Barton’s name is one that has enjoyed good momentum.

However, investing in a famous ‘name’ doesn’t guarantee that prices will always go up, demonstrated by Menzies’ sale of Country Child by celebrated Australian artists Russell Drysdale. The painting, circa 1948, sold for an impressive $1.32 million, however, it actually realised a $350,000 loss on its previous sale in 2008.

One observation from the season is that the work of Jeffrey Smart – one of the country’s most widely known living artists – is not enjoying as good a run in the auction rooms since breaching the $1-million barrier back in May. The major lots at both Deutcher and Hackett and Menzies both passed in.

Meanwhile, Sotheby’s Australia hit a winner with the sale of the 1958 Arthur Boyd’s The Frightened Bridegroom, which set a record auction price for the artist of $1.2 million.

The final and perhaps most striking aspect of the most recent auction season was the presence of new buyers in the market. This is encouraging, but also explains the sporadic nature of the recovery in the auction rooms and in part the variety filtering into the catalogues as a rule of thumb. Certainly, the nervousness in the rooms appears to be making the auctioneers work hard to get any semblance of momentum into the bidding.

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