Jan. 21 (Bloomberg) -- Average art prices at auction will drop by as much as 40 percent this year as many art speculators exit the market, said Daniel Komala, president and co-founder of Jakarta-based Larasati Auctioneers.

Larasati holds its next sale in Singapore on March. Its previous sale in the city on Oct. 11 raised S$2.1 million, less than the S$2.5 million predicted. A third of the lots offered didn’t find buyers.

“Now the game is back to the more experienced buyers,” said Komala at a media lunch in Singapore today. “You will see less speculators in the market -- this is the survival of the fittest.”

Art auction houses including Christie’s International and Sotheby’s, the two biggest, have missed estimates in the past three months as the global credit crisis and falling stock markets curbed buyers’ interest.

London evening auctions of contemporary art by Sotheby’s, Christie’s International and Phillips de Pury next month carry a total low estimate of 38.4 million pounds ($55.9 million), according to Bloomberg calculations, 77 percent less than the 164.3 million pounds in equivalent sales estimates in 2008.

Larasati’s October sale in Singapore was led by I Nyoman Masriadi’s “The Target,” which sold for S$156,000, with fees, compared with the S$150,000 presale estimate, the company said. The auction house plans to follow its March Singapore sale with an auction in Hong Kong during the Hong Kong International Art Fair on May 14-17, Komala said.

Price Outlook

Komala said prices will tumble 30-40 percent this year, partly because auction houses concentrated on promoting a small number of contemporary artists, whose prices became inflated.

“At the end of the day, you got sick of seeing the same thing again and again,” Komala said. “Even a beautiful girl, if you see her everywhere, all the time, she looks ordinary.”

Komala said collectors would continue to buy good works, while lower quality paintings, especially by artists who “mass produced,” will struggle to find buyers.

“At this moment in time, it will be hard to sell rubbish and the pressure is on the living artists” he said. “There are still people out there looking for good works and willing to pay a fair price.”

Confidence levels in the contemporary-art market have fallen 81 percent since May 2008 and may take between three and five years to recover, according to a survey released by research company ArtTactic Ltd. this week. Almost half the respondents to the survey expected auction prices would fall by 30 to 50 percent from their May 2008 highs.

“Artists used to think they are gods,” Komala said. “When you reach that stage, they don’t take criticism. I think that’s going to be different now.”

To contact the writer on the story: Adam Majendie in Singapore at amajendie@bloomberg.com.

Last Updated: January 21, 2009 03:35 EST