Since the financial crisis began, the art market has taken a series of severe blows and is now subject to various external and internal pressures. In the United States, for example, the fall in private subsidies to the Arts has led to significant personnel reductions at some of the most prestigious museums (the Detroit Institute of Arts and the Museum of Contemporary Art in Los Angeles have both cut staff by 20%).At the same time, an enormous volume of cash that was fuelling the market has literally disappeared as the new ultra high net worth individuals in Russia, India and Turkey have seen their fortunes substantially diminished (by the end of Q1 2009, the world counted 300 less billionaires) and the banks have stopped financing acquisitions of art works: the giant UBS has closed down its art advisory pole dedicated to buying and selling artworks.
In this unfavourable context and after the seizures the market suffered at the 2008 autumn sales, the major auction houses have had to react rapidly to prevent further auction failures at the big sales of 2009. To mitigate the risk of losses, they have curtailed or stopped the practice of offering guaranteed minimum prices, reduced the numbers of lots in their catalogues, negotiated lower reserve prices with sellers, cut back their price-range estimates and adapted to a generally less top-end level of demand. These strategic changes have not prevented staff lay-offs, and Philips de Pury has even closed its Cologne branch.
On a global scale, the bought-in rate has risen to 37%, not particularly alarming since it compares with an average bought-in rate of 33% over previous years. However, if one looks at the high end of the market, the picture is considerably worse. With art collectors carrying tighter budgets and, above-all, exercising a far higher degree of acquisition prudency, auctioneers have substantially reduced their top end offer. In the first quarter of 2009, only 79 sales generated bids above the million-dollar line, just half the number recorded in Q1 2008. So far this year, the proportion of lots presented at auctions with attractive estimates below $5,000 is 77%, i.e. 10% higher than in 2008, and there has been a significant reduction in the ratio of works proposed at above $50,000 from 6% to less than 3% (Q1 2008 vs. Q1 2009).
After the euphoria of 2007 which pushed up Fine Art prices rise by 18%, we are now in the second consecutive year of a generalised price correction. In effect, having contracted by 30% in (dollars) in 2008, the fall appears to be continuing in 2009. At the end of the first quarter of 2009, the Artprice Global Indices shows a contraction of 10% since the start of the year.