Art Market Appears on Strong, if Cautious, Footing After London Sales
4 min
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Major auctions in London this week are proving the art market is in solid health at the start of 2023, yet high interest rates and inflation in addition to the war in Ukraine continue to keep enthusiasm in check.
Overall, more than 90% of the lots were sold at combined evening sales of modern, contemporary, and ultra-contemporary work at Christie’s and Sotheby’s, while Phillips evening sale was 100% sold. Those are unquestionably good results.
But there are signs throughout the market that consignors and collectors are holding back a bit, says Drew Watson, head of art services at Bank of America Private Bank.
“The sales were fairly solid, but there was kind of a lack of major headliners,” Watson says. “We’re seeing some increased conservatism among the collector base. There’s more of an emphasis on people looking at established categories like modern masters, blue-chip post-war, [and] Surrealism.”
A dedicated evening sale at Christie’s focused on Surrealism did well, for instance, realizing nearly £39 million (nearly US$47 million) with 30 of 32 lots sold. Sotheby’s will hold a dedicated Surrealist sale on March 15 in Paris.
But works by young contemporary, often female, artists continued to attract interest all week. At Phillips, “it was the cutting-edge woman artists who stole the show this evening,” Olivia Thornton, head of 20th-century and contemporary art, Europe, said at a news conference following an evening sale on Thursday.
Most notable among these artists at Phillips was Caroline Walker, whose large-scale work Threshold, painted in 2014, generated consistent back-and-forth volleying for more than 11 minutes. It eventually sold to a bidder in the sale room for a hammer price of £730,000, £927,100 with fees—a record for the artist.
Other records were achieved by Sarah Ball, whose Elliot, sold for £120,600, with fees, above an £80,000 high estimate, and by Angela Heisch, whose Egg White Blue sold for £76,200, above a £30,000 high estimate.
The results followed strong bidding for female artists at Christie’s earlier in the week, which included the previously minted record for Walker of £693,000 for The Puppeteer. Cristina Banban’s La Fatiga Que Me das (You Exhaust me) also achieved a record, selling for £163,800, above a high estimate of £70,000, and Michaela Yearwood-Dan’s Love me nots achieved £730,800, far above a £60,000 high estimate.
But also at Phillips, a dynamic canvas by Gerhard Richter offered by French collector Marcel Brient for between £10 million and £15 million, was withdrawn at the last minute. Although the work “generated interest from collectors,” it was not at a level that met Brient’s expectations, and so he “was not prepared to let it go,” Cheyenne Westphal, Phillips chairman, said at a press briefing after the sale.
The absence of the Richter resulted in a dramatically different overall auction total of £20.3 million for Phillips. The revised estimate for the 23 remaining works was between £15.8 million and £22.2 million.
Another work offered by Brient, an untitled late work by Willem de Kooning from 1984, sold for a hammer price of £5 million, £6 million with fees, below the presale low estimate of £7 million.
While the froth may be out of the market at the moment, there is some cautious optimism of the future, with a handful of single-owner collections anticipated for May. Already announced at Sotheby’s is a group of works to be offered by Jan Shrem and Maria Manetti Shrem of San Francisco, including a major work by Pablo Piccaso, in addition to the Erving and Joyce Wolf Family Collection of decorative and fine arts. Christie’s, meanwhile, will be selling 16 modern and post-war paintings from the collection of S.I. Newhouse that could realise more than US$144 million.
“We’re only going to see more as we get closer to those sales,” Watson says. It’s a sign, he adds, of “cautious optimism for the higher end of the market in New York.”
Buyers, however, remain more conservative, as was evident with some of the major works offered this week, such as Lucian Freud’s portrait, Ib Reading, 1997, which sold for £17 million, within expectations, at Sotheby’s. They are willing to buy, but at the right price.
“Buyers are pretty savvy, especially at the high end, and will kind of expect a bit of a discount” considering current macroeconomic and geopolitical conditions, Watson says. As a result, auction houses will need to be disciplined in how they price works. “It’s not really a market where you want to push estimates,” he says.
One notable shift this week was renewed active bidding from buyers in Asia, Watson says.
At Christie’s, a bidding war between collectors in Japan and Singapore for a painting by Shara Hughes, Rough Terrain, ended in the hands of the collector from Singapore who placed a bid of £500,000, well above the £300,000 high estimate. Overall, 13% of bidders were from Asia during Christie’s evening sale of 20th- and 21st-century art and a separate sale of Surrealist works.
Sotheby’s, meanwhile, credited “deep bidding” from Asia for driving results at its evening sales, with several of these collectors noted as the “underbidder.” Over half the lots in Sotheby’s The Now sale of ultra-contemporary works received bids from Asia, while Asian buyers secured Barbara Kruger’s Untitled (Out of your mind… In your face), 1989, which realised £889,000, above a high estimate, and Andy Warhol’s portrait of Debbie Harry, which realized £6.9 million, also above a high estimate, after spirited bidding in both instances.
An Asian buyer also bought Richter’s Abstraktes Bild, 1986, at Sotheby’s, in another active bidding round. The final price, with fees, was £24.2 million.
At Phillips, the last two lots attracted several online bids from China, although the paintings—Ball’s Elliot, and Danica Lundy’s Bonefire—went to a collector bidding via a specialist on the phone and to a Canadian online bidder, respectively.
Whether the results in London portend the future for the art market this year remains to be seen. It may be best at this point to consider a post-sale press conference comment from Phillips CEO Stephen Brooks, who said, “It’s difficult to draw conclusions from one week of sales.”
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Many people are spending more than they think as inflation stays elevated
3 min
Many people have a gap between what they think they spend and what they actually spend. This gap has widened recently as the financial and psychological effects of higher prices further strain people’s budgets.
Elevated inflation has rippled through American’s wallets for more than a year now. Some have cut back, while others have increased their spending to keep up. Credit-card balances were staying relatively flat for a while, but have jumped higher recently.
In the fourth quarter of 2022, the average household’s credit-card balance was $9,990, up 9% from in the fourth quarter of 2021, according to WalletHub, a consumer-finance website. Meanwhile, the average credit-card interest rate rose to a record high of about 20% last week, according to Bankrate.
Financial advisers say the larger amount of credit-card debt while rates are higher is one indication that some Americans are spending more than they think they are. This type of spending can reduce people’s ability to pay for important items down the road, such as college for a child or even fund their own retirement. More immediately, it will put people in costlier debt.
“If people spend too much on credit, they could end up trapped in a cycle of debt,” said Courtney Alev, consumer financial advocate at Credit Karma.
Spending less isn’t always possible when everything from groceries to travel is generally more expensive. Still, people can find ways to cut back if they understand more about why they are overspending and take a closer look at their finances.
Inflation on top of inflation
The power of compounding is a boon to investors, but not to shoppers.
Money grows much faster than most people expect because interest is earned on interest, said Michael Liersch, head of Wells Fargo & Co.’s advice and planning centre. A similar concept applies to inflation: Prices rise, and if inflation remains high, prices continue to grow on top of already-inflated prices, leaving people off guard.
“People get constantly surprised that their money isn’t going as far as they thought it would,” he said.
The cost of eating out and going for drinks continues to take Dina Lyon aback. Even though the 36-year-old married mother of one is dining out and ordering in far less than she did a year ago, some prices still give her sticker shock.
“The difference between cooking at home—about $10 for nice pasta and quick sauce from canned tomatoes—versus Italian takeout of $50 is astronomical,” said Ms. Lyon, who lives in Brooklyn, N.Y.
Outdated budgets
People tend to underestimate their future spending in large part because they base their predictions on typical expenses that come to mind easily, said Abigail Sussman, a professor of marketing at the University of Chicago Booth School of Business.
She and other researchers found that when people are coming up with predictions, they tend to think about what they usually spend money on—such as groceries, rent and gas—and base their predictions primarily on these expenses. They are less likely to consider atypical expenses, such as car repairs or birthday presents, the researchers found.
This pattern is particularly problematic when inflation is high, said Prof. Sussman. When the price of the same basket of items rises, people might not account for these price increases in their future budgets, she said.
Further, times of stress cause people to be less intentional about tracking their money, said Mr. Liersch. They might also spend more than they know they can afford to soothe feelings including anxiety and depression.
According to a recent survey by Credit Karma, 39% of Americans identify as emotional spenders (defined by the study as someone who spends money to cope with emotional highs and lows.)
Take control
You have a better chance of staying under budget if you become more aware of your spending instead of sticking your head in the sand, financial advisers said.
One thing Adam Alter, a professor of marketing at New York University’s Stern School of Business, does is create a line item in his monthly budget for one-off expenses, such as an unexpected medical bill. This gives him a cushion in his budget and enables him to more fully examine how much he is spending each month, said Prof. Alter, who has studied overspending.
People might also wish to include an escalating buffer into their budgets of say, 2% to 5% a year, to account for inflation, he said.
Jay Zigmont, a financial planner in Water Valley, Miss., looks at clients’ total take-home income from the year, subtracts everything they must spend money on such as their mortgage and how much they saved. The remaining number is how much they spent on discretionary spending.
In most cases, clients are surprised they spent so much, he said.
Once people know how much they spend, Britta Koepf, a financial planner in Independence, Ohio, suggests they practice mindful spending. Before any purchase, ask yourself if you really want or need what you are buying. Frequently, the answer is yes, but sometimes waiting five seconds will prevent you from overspending, she said.
You can also practice mindfulness by delaying purchases further.
“A lot of the time, if I tell myself that I will purchase it next week, I find that I am no longer interested a week later,” she said.
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