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The Present and Future of the Art Market

Max Donner

Dozens of new records were set at the historic auction of the Elizabeth Taylor Collection December 13-17. This crowned two years of historic new price records for all types of art, all around the world.

The momentum began with the auction of Alberto Giacommetti’s “Walking Man I” for $104 million at Sothebys-London in February 2010. The sale remains the highest auction price for sculpture, but a new record for art at auction was reached just three months later with the sale of Picasso’s painting “Nude, Green Leaves and Bust.”

New artist and category records have continued to impress the art world almost daily ever since.

Research indicates that art market prices will continue to increase for several years and that art organizations need to plan ahead for this.

One important trend is “White Glove Auctions.” These are auctions at which every single work offered for sale is sold. While they used to be rare, this phenomenon accelerated at the auctions of photographs by Richard Avedon in Paris in November 2010 and drawings by Egon Schiele and Gustav Klimt in December 2010.

Over two dozen occurred in 2011 and even some auction catalogs sold out. By the time this trend repeated at all six auctions of the Elizabeth Taylor Collection in December 2011, many prices exceeded four times minimum estimates.

A drawing by Andy Warhol sold for forty times the minimum estimate. In addition, these record setting auctions registered record numbers of new art auction clients, many from countries which had no private art imports twenty years ago.

Two extremely important records have been overshadowed by headline news from art auctions. The first is the record price paid for any painting. This was a May 2011 private sale of “The Card Players” (1896) by Paul Cezanne for $275 million. The price was more than twice the next highest private sale amount.

“The Card Players” has not been considered Cezanne’s greatest work and the sales price suggests that the world’s five thousand most valuable masterpieces are collectively worth over a trillion dollars. Insurance premiums for rare museum collections confirm that estimate. The means the world’s five thousand most valuable artworks are worth more than the capitalization of the stock markets of Italy and Spain combined.

The second important record is for an art statistic that is rarely mentioned outside meetings of estate attorneys and art accountants — the number of works of art above the $20,000 threshold for which a written appraisal is required for official financial reports in the United States. These are for inheritances, bequests to museums and colleges, and sales of businesses displaying art.

Many works of art, such as select Warhol and Baldesarri prints, have doubled in price within the last three years. Some categories, such as Klimt drawings and Chinese rose quartz figures, have tripled.

In America, at least one million works of art that were purchased for under $20,000 are now worth more than $20,000. These will require “Fair Market Value” appraisals.

Many prominent art institutions have asserted that it is not possible to value works of art with the rigor that is often used to value real estate and other assets.

The International Council of Museum’s policy is that works of art are priceless and cannot be valued. The website of The European Fine Art Fair says curtly that the value of art is unknown.

The Smithsonian American Art Museum reports: “It is hard to establish fixed values for antiques, artworks, and other collectible items.” There is little basis for such assertions, which often weaken the credibility of the entire art community. That in turn has raised doubts in the minds of potential benefactors about the community’s financial expertise.

Accurate, dependable, and proven methods for valuing works of art were developed by one of the most celebrated artists of all time, the Spanish master Diego Velasquez. Velazquez was appointed the royal court artist of the Spanish Crown at age 24 was ultimately promoted to the position of chief accountant for the entire Spanish Empire. The master artist also managed a large studio with dozens of craftsmen who painstakingly reproduced royal portraits for display on five continents.

Velasquez’ meticulous records showed dependable ways to measure differences between originals and authentic copies as well as works in different media. Spain employed his valuation expertise to negotiate purchases of many works of art from Italy and the Netherlands. Many are now in the famous Prado Museum collection. Banks and insurance companies have employed Velazquez standards for four centuries with excellent results.

Very few professionals have had an opportunity to acquire Velazquez Valuation expertise. NYU and the School at the Art Institute of Chicago are the only American universities with accredited art finance courses and very few of their students have completed the courses required to take them.

Many continuing education programs have the infrastructure to train accountants and financial analysts; but, the need for qualified financial analysts to properly value art is large and no endowment or foundation has stepped up to the challenge of addressing this need.

Clearly there is a need and any institution willing to create such a program would certainly be rewarded.

What institution of higher education, nonprofit, for-profit, or foundation (or combination of all four) is in the best position to do so?

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