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Art market: lockdown vs. online boost?

16 October 2020

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Frederik Balfour, guest author

Museums and galleries are shuttered. Art fairs have been cancelled. Live auction sales have been forced to go online. How do collectors and the art market adapt?

As the world reels from the COVID-19 pandemic, economic activity everywhere is grinding to a halt, and the art market is no exception. Not since the global financial crisis of 2008-2009 has this sector faced such a disruption, and the art world is scrambling to adjust to the new reality.

Luckily for budding collectors, digital technology has transformed the art market in recent years, so the lockdown is actually an opportunity to spend more time looking at art. Today you can browse hundreds of thousands of artworks for sale on online platforms like Artsy, while buying works at online live auctions is now routine.  Meanwhile social media has turned the traditionally secretive world of collecting art into an Instagram moment.

Millennials are the most comfortable buying online, as they grew up with the internet. According to the latest Art Basel & UBS report, 92 percent of young high-net-worth collectors surveyed have made online purchases in the past two years. Overall, online purchases accounted for 9 percent of the USD 64.1 billion in global art sales last year. Under the lockdown, that portion is likely to soar this year.

Half the online bidders at Sotheby’s under 40

Young Asian buyers are particularly active, says Yuki Terase, head of Contemporary Art, Asia at Sotheby's in Hong Kong.  At an online-only auction that closed on April 16, about 50 percent of the bidders were under the age of 40. "Younger collectors are more accustomed to using these digital platforms so there is more active participation," she said. "Asian clients are frontrunning this habit of buying."

In April, after the lockdown in London forced Sotheby’s to take a scheduled live sale online instead, a 2005 painting by American contemporary painter George Condo entitled “Antipodal Reunion,”  sold for GBP 1.035 million, evidence that collectors will plunk down seven figure sums even when they cannot see a work in person.  In the same sale, a small Andy Warhol pencil drawing executed in 1982 fetched GBP 106 250, more than five times its high pre-auction estimate.

Uli Sigg, who has amassed a collection of more than 2500 works of Chinese contemporary art (including a huge chunk he donated to Hong Kong’s M+ Museum), has been on lockdown at his lakeside villa outside Zurich for weeks. The 74-year-old normally attends six or seven art fairs a year, but when Art Basel cancelled its Hong Kong fair, Sigg took marathon tour of the fair’s online viewing rooms. "I may be the only human being to see all 2000 works at the Art Basel space," he says.

Kaws paintings sell well online

Of course, digital technology is no substitute for viewing an artwork in the flesh, as anyone who has stood in front of Picasso’s monumental “Guernica” or Monet’s “Water Lilies” can tell you. Still some contemporary art, especially more cartoonish works by artists like Kaws and Takashi Murakami, which reproduce well digitally, are more likely to perform well in online auctions.

When home quarantine is preventing you from seeing art in person, it’s doubly important to make sure you do your homework before buying, collectors say. If something catches your eye, google the artist for   other works. You may find something more to your taste (and budget). It’s also important to track how an artist’s style has evolved over time, whether he or she has been bought by museums and reputable  collectors, and how they perform at auction. When works reappear in the secondary market too quickly, it’s often a sign the market is being driven by speculation. You can check an artist’s sales history for free on the websites of all major auction houses while paid subscription websites
such as  ArtnetMutual Art and Ocula also contain excellent art market databases.

Avoid spreading yourself thin across artists

Filipino collectors Kim and Lito Camacho, who keep hundreds of works in their Manila home, caution against buying works online sight unseen, unless you know an artist well. The best way to do this is by “buying deep,” many works from a single artist rather than spreading your art budget among many. Unlike other asset classes, diversification doesn’t work the same way in art.  They have collected more than 250 works by Japanese artist Yayoi Kusama.  Some of their first purchases from 2005 have appreciated as much as 30 times. 

Don’t buy an artist just because they are trending. “Instagram and social media influencers are becoming the new art critics and that is a great problem,” says Hong Kong-based dealer Pascal de Sarthe. “You need to understand what artists have done in the past to understand what happening today and what’s coming in the future.” He recommends using all that time in lockdown to catch a new PBS-BBC nine part series  called “Civilizations,” to educate yourself on the history of art, which will help sharpen your eye before you make your next purchase.

It’s also a good time to take advantage of virtual tours currently offered by some of the world’s great museums. Check out collections at the Guggenheim in Bilbao and the Musée d’Orsay in Paris.

Don’t expect fire sale prices

Despite the global economic meltdown, you aren’t likely to find things at fire-sale prices. While the aftermath of the Lehman Brothers 2008 collapse forced art speculators from the finance sector to liquidate their holdings, most collectors today aren’t facing the same cash crunch. Still, it’s a good time to seek bigger discounts or more flexible payment terms, as dealers still need to cover rent and salaries during lockdown. Try asking for a discount of 15 or even 20 percent, instead of settling for the standard 10 percent.

Dealers are more likely to accept trade-ins too, says Ben Brown, who runs galleries in London, Hong Kong and New York. In this way, existing art owners can buy more expensive works without having to fork out as much cash.  "Now is a good time to upgrade,” he says.

Avoid fakes, forgeries and guaranteed returns

But bear in mind the art market remains opaque, unregulated and illiquid. Now, more than ever vigilance is paramount when you cannot see a work physically or meet the seller.  Beware of forgeries, fakes and fraud. Just ask Hong Kong-based dealers Mathieu Ticolat and Kyoko Tamura who paid GBP 1.1 million for a Kusama pumpkin in 2017 to socialite collector Angela Gulbenkian. Though London police issued an arrest warrant for the seller earlier this year, the dealers still haven’t gotten their hands on the massive sculpture. 

Also, avoid so-called art investment advisers who flog overpriced works to unsuspecting clients with the promise of guaranteed returns, says Edie Hu, former art adviser for Citi Private Bank who now works in Hong Kong with Centerpiece Art Advisory.  “With the stock market so volatile right now, people may be thinking of alternative investments including art.  Like any investment, there are no guarantees you will make money. Just steer clear of these companies." 

Finally, remember the golden rule of collecting: Buy something you would actually want hanging on your living room wall. As long as things remain basically the same around Covid-19, you will be spending a lot more time with it than usual.

This article first appeared in MAG/NET.

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