Sept. 27 (Bloomberg) -- Works by Banksy and other graffiti painters failed to sell in London today as buyers stayed away from an auction of contemporary and urban art.

Less than a third of the 270 lots found buyers at Lyon & Turnbull's sale, which was the latest gauge of demand for street art after prices surged to records in the last three years. Dealers said demand, reduced by worries about the economy and confusion about the authentication of Banksy's pictures, may be an ominous sign for the mainstream art market.

``Things are difficult at the moment,'' said Annabel Thomas, an executive director at the London-based dealers The Fine Art Society, who attended the auction. ``There's a definite retreat to the blue-chip material.''

The 74 lots sold went for 300,000 pounds ($553,400) with fees, said the Edinburgh-based auction company, which held the event in a decommissioned 19th-century church on the Marylebone Road. The presale estimate was at least 1 million pounds.

The auction included many items priced in the 1,000-pound to 5,000-pound range.

``Everything was well priced and interesting,'' said Ben Hanly, the auction company's modern and contemporary-art specialist. ``But the timing of the sale was difficult. There's a simple lack of cash at the moment. The market's not good.''

Pest Control

The early part of the auction featured five site-specific spray paint and stencil works by Banksy that the graffiti artist's authentication agency, Pest Control, refused to endorse. Instead, they were declared genuine by Vermin, an alternative authentication service set up by the dealer James Allen.

These included the ``Photographer Rat'' traffic bollard, valued at 30,000 pounds to 40,000 pounds, and the steel panel triptych, ``Fungle Junk,'' painted on the side of a trailer at the 1999 Lizard pop festival, Cornwall, at 100,000 pounds to 150,000 pounds. All failed to sell.

``The fact that people are arguing about pieces can't help the confidence of the Banksy market,'' said Lyon & Turnbull's managing director, Nick Curnow. ``A lot of Banksy buyers are new to the market and it's difficult for them to back their judgment when things get difficult,'' he said.

Only five out of the 20 Banksy prints in the auction found buyers, led by the lower-estimate 15,600 pounds with fees given for the 2004 screen print ``Bomb Middle England.''

Kate's Lipstick

Also prominent among the unsolds was model Kate Moss's 2005- 6 lipstick-and blood-on-canvas painting, ``Who Needs Blood When You've Got Lipstick?'' which failed to achieve a lower estimate of 30,000 pounds. The self-portrait in lipstick was by Moss, the inscribed title in blood was by her then boyfriend Pete Doherty, a musician. It was described in a telephone interview by its seller Robin Barton of the Bankrobber Gallery, London, as an ``iconic piece of nonsense.''

Lucian Freud's ink and chalk ``Study of a Head,'' drawn on a letter in 1941-42 when the artist was 19 years old, sold to a telephone bidder for 22,800 pounds with fees, just above the upper estimate.

The last lot of the sale was Michael Andrews's 1958 mural, ``After Bonnard,'' from Francis Bacon's old Soho drinking haunt the Colony Room Club, which is due to close in December.

The 12-foot 4-inch-wide oil-on-Hessian canvas of a garden scene was offered with the original green banquette and a pair of lamps from the 60 year-old drinking club. It sold for 38,400 pounds with fees to an executor of Michael Andrews's estate, who was bidding on the telephone, said Lyon & Turnbull. It was estimated at 20,000 pounds to 30,000 pounds.

(Scott Reyburn writes about the art market for Bloomberg News. Opinions expressed are his own.)

To contact the writer on the story: Scott Reyburn in London at sreyburn@hotmail.com.

Last Updated: September 27, 2008 13:41 EDT