New markets and the crisis
Source - Art Market Insight
The most speculative and volatile markets over the last four years, emerging art markets have propelled a number of Chinese, Indian, Russian and Middle-Eastern contemporary artists into the global limelight with extraordinary speed. But with so many young artists fetching such big figures at auctions, some kind of meltdown was inevitable. The first consequences of the global financial crisis on the art market were felt in Hong Kong in 2008 at the Christie’s and Sotheby’s October sales. Indeed, China's art market has proved to be particularly sensitive and thousands of art market professionals are keenly watching developments in that country where the price index of contemporary art rose 583% between January 2004 and January 2009.
In 2007, driven by the financial strength of Hong Kong and the dynamism of Shanghai, China took third place on the global art market podium behind the United States and the United Kingdom. The rocketing price indices of Fanzhi ZENG, Xiaogang ZHANG, Lijun FANG, Minjun YUE, Guoqiang CAI and Guangyi WANG fuelled an unprecedented optimism, inspiring thousands of would-be artists across the country, prompting hundreds of new gallery openings and giving a very substantial boost to the Chinese art auction market. Just when our figures showed that one third of the world's top 100 contemporary artists (ranked by auction revenue) were from China, Bonhams decided to set up shop in Hong Kong (26 November 2007) alongside Christie’s and Sotheby’s who were already well established on the island. After Bonhams, Artcurial decided to head East with a first sale in Shanghai in January 2008. The following month in London, Sotheby’s was unable to sell Overwhelm by Minjun YUE, despite his leading position on the contemporary Chinese art scene. At the time, this was a rare event: only 9 paintings by the artist were bought in over 10 years (between 1997 and 2007). In 2008, the number was 12 …
After the record bought-in rates posted in October at Sotheby’s and Christie’s Hong Kong, the November and December sales confirmed the contraction of demand and the choosiness of buyers. Sales have not been frozen, but we are definitely seeing a sharp correction of the Chinese art market. Collectors are now being extremely selective both in terms of quality and price. Numerous works by the stars whose prices had risen too high (e.g. Lijun FANG, Minjun YUE, Xiaogang ZHANG and Fanzhi ZENG) sold below their low estimates or were bought in. The recent failure of an attempted quick sale of a painting by Xiaogang ZHANG at Est-Ouest Auctions Co. Hongkong drew a definitive veil over the speculative mood. The work in question is a portrait from the Big Family Series. Initially selling for CNY 8.5 million (USD 1.15 million) in November 2007, it failed to sell in December 2008 even after a substantial trim of its estimate (roughly USD 554,000).
The stars of contemporary Indian art are in more or less the same boat. Despite a 957% increase in the price index between January 2004 and January 2009, more than half of Subodh GUPTA's works offered from October to December 2008 were bought in. His important work Vehicle for Seven Seas III was bought in on 13 November, 2008 in New York despite carrying a reasonable price estimate (300,000 to 400,000) compared to the USD 625,000 that a work from the same series fetched in April 2008 (Artcurial, Paris, EUR 425,000). We find the same scenario in the field of Iranian art where nearly half the works offered for public sale by Farhad MOSHIRI (1963) have remained unsold. Back in March 2008, collectors at the Dubaï sales were a lot more extravagant, pushing up the price of Eshgh (Love) to USD 900,000, which was six times the estimated price (Bonhams).
The February Contemporary Art sales in London timidly propose 2 to 5 Chinese and Indian star attractions at Sotheby’s (5 February) and Christie’s (11 February), including the unavoidable Fanzhi ZENG and Anish KAPOOR. However, the real test will be in March and April 2009 with sales dedicated to Asian art. On 12 February, Phillips de Pury & Company will be offering works by six Chinese artists, one Korean (Kim Whanki), two Indians (Hema UPADHYAY and Jiten & Sumir THUKRAL & TAGRA) and one Pakistani (Rashid RANA). Phillip’s is also participating in the emergence of the African artist El ANATSUI whose 2006 work entitled Congress of Elders is expected to fetch around GBP 200,000. Almost a complete stranger to the secondary art market, a work by this artist entitled Healer fetched USD 500,000 at Sotheby's London in October 2008… not the most favourable period for generating a new record…
Still buoyant throughout the first half of 2008, demand on these highly dynamic new markets has substantially contracted since the autumn. In a global crisis context, many works have become too expensive and speculative temptations are no longer on the agenda. Nevertheless, among the major buyers of contemporary Russian, Chinese, Korean, Indian or Iranian art, profit is often not the primary motive. In recent years, many Russian and Chinese collectors have invested in the works of their compatriots in order to build coherent collections for foundations or museums.