Investing in 1994: ART
PRETTY AS A PICTURE? PRETTY MUCH
On five nights in November, a hearty band of bottom-fishers ventured out to New York's big auctions of Impressionist, Modern, and contemporary art. The time seemed ripe--with prices for paintings, drawings, and sculptures leveling off after three years of decline--to snap up a few bargains. "There was nothing for them," says Diana D. Brooks, CEO of Sotheby's worldwide auction business. On lot after lot, spirited bidding lifted prices above the low presale estimates--and sometimes above the high estimates. Christie's and Sotheby's sold $202 million worth of art, the best totals for these bellwether auctions since 1990.
Compared with the white-hot stock market, the art world is temperate at best. Prices generally are at 1988 levels. Says Christopher J. Burge, CEO of Christie's in the Americas: "We're not rocketing upwards." But that makes it a hospitable place for buyers willing to accept the slow, steady growth forecast for 1994. Impressionist and Modern art shows the brightest near-term promise.
PICASSO POWER. The whole market, though, has been buoyed by auctions. Both houses say the stock market's strength and low interest rates are spawning new buyers. Says Brooks: "We've had more new collectors this year than we've had in the last five years." Another good sign: Dealers are buying, suggesting that they have whittled down the massive inventories they have held since the market tanked.
Fittingly, Picasso, who after all revolutionized 20th century art, gets a lot of credit for changing the market's mind-set. On Nov. 4, Sotheby's put a collection of 88 Picassos on the block--horrifying many, who feared that so many works by one artist couldn't be absorbed at one time. All 88 sold, fetching $32 million and topping the high presale estimate of $31 million. "Because of that, confidence really came back," says New York dealer James Goodman. "People aren't as worried that prices will drop, so they're willing to buy."
Before you join them, though, remember the caveats of the art market: Buy because you love something, not to speculate. Know what you're purchasing, and buy the best you can afford. If you need liquidity, don't buy art. All but the best works can be hard to sell when the market isn't booming. In today's market, one clear, across-the-board trend is that collectors, not investors, predominate. "Buyers are more serious about the quality of paintings," Brooks says. "You can see that in the real strength of works on paper, which are bought by real collectors." And they often punish "flippers," who try to realize gains quickly, by spurning works publicly, making them even more difficult to sell.
With the market consolidating gains, Burge says it's too early to predict what categories will grow fastest. But knowing who's buying offers clues. U.S. buyers, many new to art, dominate--which helps explain the popularity of Impressionist and Modern (pre-World War II, 20th century) art. it's easily accessible and art-historically secure.
It's also available at many price levels. At New York's Jan Krugier Gallery, prices begin at $150,000 for a Picasso drawing and rise to $23 million for a painting of his sister. Deux Enfants Assis is tagged at $4 million. Goodman is offering a small painting by Mir , the subject of a huge show at New York's Museum of Modern Art, for $400,000. Elsewhere, $30,000 might get you a Matisse drawing, say, or painting by a lesser Impressionist.
OLDIES. For now, no one seems worried by the vast number of paintings the Japanese bought in the '80s, which might flood the market, given the economic woes of many Japanese tycoons. Sources say some $500 million of this art is sitting in the vaults of Japanese banks that repossessed it. They're holding on to most of it, hoping for prices to rebound.
Contemporary art hasn't quite caught up with Impressionist and Modern art--although some prices are improving a bit. Experts say they won't really start to rise unless and until auctioneers post good sales next spring. So far, the market is most solid for what Diane Upright, Christie's contemporary expert, calls "the classic golden oldies"--Willem de Kooning, Jackson Pollock, and the Abstract Expressionists. The verdict on more recent artists, the "young hipsters" like Julian Schnabel, isn't in. It's best to buy their classic images.
The market is slow but steady for traditional American art, such as the Hudson River School. Old Masters have a wider following in Europe than the U.S., and the market is mixed: Italy's troubles have prompted its buyers to cut back, yet their steady buying last year kept prices firm. Latin American art isn't as robust as it was two years ago, either, but it's better than it was in 1992: Although collectors in many South American countries have retreated, Mexicans still are in the market in big numbers. The North American Free Trade Agreement should keep them there--making Latin American art a good bet. "You can get a very good painting for $4,000 to $10,000," says dealer Mary-Anne Martin. "It's not a field reserved to millionaires."
The outlook on buyers from Asia seems more troubled: Japanese, Korean, and Taiwanese collectors have cut back dramatically. The auction houses predict a resurgence in Europe and Latin America before Asia--even, Burge believes, from the former East bloc.
IMPERIAL TREASURES. Still, the vast wealth that's accumulating in Asia is likely to set trends in the art market again at some point. And that suggests a new area for collectors with a long-term view: Chinese art. Newly wealthy Chinese and overseas Chinese are starting to buy these paintings, jade, porcelain, ceramics, and bronze vessels, which long have been of interest to a small number of knowledgeable connoisseurs. And, says New York dealer James J. Lally, there's interest building among Americans and Europeans, many with burgeoning business ties to the area.
Already, prices are rising for jade, particularly pure white jade and bright green jadeite pieces, Lally says. He's asking $85,000 for a carved white jade dragon bowl, for example. As the East prospers, Chinese art is likely to experience a phenomenon peculiar to the art world: As pieces get more expensive, more people get interested, and prices spiral up. That'll take time. Sotheby's Brooks believes Chinese works "will have strong growth in the next 10 years, but not in the next year or so." And Chinese art isn't for the uninitiated. Minuscule firing flaws in porcelain, for example, can render a piece worthless. Imperial pieces--made for an emperor or at least for the palace--are the safest buys.
Another area with potential is contemporary design: glass, ceramics, fibers, and jewelry that rise above craft. Dealers handling these media are sprouting, and a few painting dealers, such as Charles Cowles and Max Protech in New York, include some of these artists in their stables. The auctioneers have mounted a few separate design sales, too. Lakeside Group, which holds a "new art forms" fair in Chicago, says attendance at the October show rose 15%, to 18,000.
Easy entry is the advantage: Although a Dale Chihuly glass chandelier at Cowles' gallery costs $100,000 to $150,000, you can buy pieces by other artists for $1,000 or so. The disadvantage: Growing interest doesn't always mean growing prices. Photography, for example, regarded as a boom area a few years back, hasn't met expectations.
For the overall art market, though, the picture looks brighter than it has in years. Sotheby's stock is selling around $15 vs. a 52-week low of $10.75. Christie's is going in London for 227 pence vs. a '93 low of 144. It's not just collectors who are again buying into art.Judith H. Dobrzynski in New York