BBC Culture

The Art Market

Collectors pay billions for art’s hot property

About the author

Georgina Adam has spent more than 25 years writing about the art market and the arts in general. She is editor at large at the Art Newspaper. She writes a weekly column for the Financial Times and lectures at Sotheby's and Christie's institutes in London.

  • Bring home the Bacon
    Francis Bacon’s Three Studies of Lucian Freud became the most expensive work of art ever sold at auction when it fetched $142.4m at Christie's in New York last week. (Reuters)
  • Costly canine
    Jeff Koons’ Balloon Dog (Orange) also set a new record. An unknown bidder snapped it up for $58.4m, making Koons the world’s most expensive living artist. (Getty)
  • Off the scale
    That title had previously been held by the German painter Gerhard Richter. The electronics giant Siemens paid $37m for his rendering of Milan’s Cathedral Square in May. (AP)
  • Smashed record
    Andy Warhol’s grizzly Silver Car Crash (Double Disaster) set a new top price for a work by the pop artist when it sold for $105.4m at Sotheby’s last week. (Getty)
  • Enfant terrible
    Even in his short life, Jean-Michel Basquiat was a darling of the art world. Since his death in 1988 at the age of 27, prices have soared to dizzying heights. (AP)
  • Prolific Pablo
    Picasso produced so many works – one estimate counts 50,000 – that there is always a steady supply to the market to satisfy collectors. (Getty)
  • Join the dots
    Roy Lichtenstein is another artist whose works can be relied on to bring in enormous bids. A recent retrospective at Tate Modern seems to have pushed prices even higher. (Getty)

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Last week’s New York auctions saw a frenzy of bidding that smashed records. How do the works of some artists come to attract these astronomical prices? Georgina Adam investigates.

Art market history was made in New York last week when Christie’s racked up the highest amount ever made for an auction. In just two frenetic hours the firm raised over $691m, and set a new record for any work of art ever to come under the hammer when an eye-popping $142.2m was given for a portrait of Lucian Freud by Francis Bacon.

The same sale also saw Jeff Koons crowned as the world’s most expensive living artist, when an unidentified bidder paid $58.4m for a 10-foot-high polished steel sculpture of a balloon dog in a vivid orange. And the following night collectors and dealers demonstrated the same appetite for classic blue-chip art, spending another $380.6m at Sotheby’s and setting new records for seven artists including Andy Warhol. His silver silk-screen of a grisly car crash shattered expectations of $60m to make $105.4m. When the dust had settled and everything totted up, over $1.1 billion had been splurged on contemporary art – in just two evenings.

Such astonishing figures show that a clutch of big-name artists, both dead and alive, are currently the hottest property in the market: Andy Warhol, Francis Bacon, Lucian Freud, Willem de Kooning, Roy Lichtenstein, Jean-Michel Basquiat, Jackson Pollock, Cy Twombly. Their paintings are  icons of their age. And living artists, such as Jeff Koons, Christopher Wool and Gerhard Richter can also fetch eye-watering prices

Billionaires’ playground

Driving their prices higher and higher are a group of ultra-wealthy buyers, who are indulging in a form of gladiatorial combat to win the most glittering trophies. Owning a major Bacon, Freud, Basquiat or Koons immediately sets them apart from other billionaires, giving bragging power as no other possession can. Displaying such a prize in their penthouses, luxury yachts or private museums is the equivalent of hanging a cheque on the wall, asserting that they can afford these multi-million-dollar baubles.

The pool of these mega-wealthy buyers is growing; they come from Asia, the Middle East, Latin America and India, and have entered the fray alongside the more established American and European collector base. The market is now so global that taste has become homogenised: billionaires across the world know who are the top artists and want the same recognisable things – pushing up prices even further. Two Asian bidders, for example, went after the Bacon at Christie’s, one pushing it right up to its final price.

And unlike in the market for impressionist and modern works – the Picassos, the Cézannes, the Monets and so on – there is better supply in the market for more contemporary pieces. Most of the top impressionist paintings are in museums, with only the prolific Picasso still in good supply. But with post-war and contemporary art, the market is more liquid. The owners of these works, seeing the astronomical prices, are encouraged to send them back for sale quickly. The beleaguered Steve Cohen, whose SAC Capital hedge fund has just paid a whopping $1.2 bn fine for insider trading, resold a Gerhard Richter for $26.5m at Sotheby’s this month; he had bought it only last year at Art Basel for about $20m. As for Richter, Koons, Wool and other living artists – well, they’re still producing, so supply is assured.

Safe bets

There is no doubt that investment – and speculation – is also driving this market. With stock exchanges unpredictable and interest rates pathetic, the blue-chip artists are seen as a safe place to park money. As the prices rise, so does the incentive to buy more – and bidding up works by a name already in your collection increases their value even more, which might be really useful if you want to use it as collateral for a loan one day.

Is there financial manipulation going on as well? A small group of dealers and collectors are certainly encouraging this inflation, by giving so-called guarantees on works sent for sale. Under this system, they promise to buy a work of art at a secret price, so ensuring it will sell. If it goes over their bid, then they share in the extra money generated. So the work is sold even before it hits the auction block. The system has become a fearsome weapon in the auction houses’ armoury when they are fighting for consignments: many blame it also for inflating prices. Christie’s sale this month was underpinned by no less than 22 guarantees, some given by outside investors, others by the firm itself.

So at the upper reaches of the market, buying the top names is also a pretty safe bet. Today, the world’s richest people are worth multiple billions, so putting even a sliver of their fortune into art will hardly dent their bank balances – and buying art is a sure-fire entry ticket to what has become a very exclusive, billionaires’ playground.

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