A hesitant third quarter [11/24/2009]

After promising signs of a nascent recovery in the first half of 2009 (+1.2% according to our Art Price Global Index), the third quarter generated another negative reading. This means that art prices have apparently contracted a total of 37% since 1 January 2008. However there are a number of encouraging signs suggesting a gradual recovery.

Firstly, it’s worth pointing out that third quarters are nearly always weak on the art market: over the last 10 years, only 12% of auction lots sold during Q3 (July, August and September).
Moreover, in the past this low volume of sales has always gone hand in hand with a contraction of art prices. Between 2004 and 2008, against a general backdrop of rapidly rising prices, the third quarters always posted morose figures. In fact we have to go back to 2003 to find a third quarter in which art prices actually grew.
It is therefore not surprising to see a slight fall in art prices for the third quarter, especially after the market adjustment of the previous 2 years.

It looks increasingly clear that the art market reached its low point at the end of the first quarter of 2009.
At that moment, art prices had fallen by 38% over the previous 15 month, the confidence of art market professionals (as measured by Artprice’s Art Market Confidence Index – AMCI) was well in the red, and stock markets were flirting with historical lows (on 6 March the S&P 500 fell to 666.8 points). In just 15 months art prices were reduced to their 2004 levels and more than two thirds of AMCI respondents were expecting a further deterioration of economic conditions and a further contraction of art prices.

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Since March 2009 prices have climbed 1.2% integrating a buoyant spring season followed by a less dynamic summer period (see above) ahead of the major sales in November.
The first results are encouraging: the price indexes per art period and per art technique – corrected for seasonal variations – show strong progressions for Post-War Art (+2.1% since March 2009) and Old Masters (+4.5% since March 2009). And the good results from prestige sales at Christie’s and Sotheby’s suggest a return to a firm growth path for the last quarter of the year.
The bought-in rate, which reached 45% in the autumn of 2008, has contracted to below 40%. Only 38% of lots failed to sell over the last two quarters and preliminary analyses of the months of October and November suggest a similar ratio.

The confidence of art market professionals has returned to a growth path oscillating between +20 and +40 since March. And the AMCI also shows that medium-term confidence is substantially improved with 60% of respondents expecting to see art prices increasing over the next three months.