Published - Hoping That Art Will Continue to Pay Off

Investors in fine art are probably happy that the first half of 2012 is over: It has been a disappointing period, especially in Asia.  But investors and dealers are hopeful that the rest of the year will see a rebound, both in supply of fine art at auction and in the prices paid, if the world economic picture becomes clearer.

After results in 2011 confirmed the Chinese art auction market as the largest in the world, total auction sales for all categories this spring from the “Big Four” auction houses in Asia — Sotheby’s Hong Kong, Christie’s Hong Kong, China Guardian, and Beijing Poly international Auction Co. — were $1.5 billion, a 32 percent decline from the autumn auction season of 2011, according to estimates by ArtTactic, a market research firm.

Anders Petterson, managing director of ArtTactic, said he believed the recent cooling in Asia reflected a decline in speculative buying, as “short-term investors realize their ability to quickly flip works at a profit is no longer viable.”

Sales of Asian art in Hong Kong, which had expanded drastically in 2011, fell significantly in the first half of the year at a time when they were rising in Europe and New York, prompting commentators to wonder whether the art bubble in China had finally been pricked.

So far this year Asian art buyers have not made their presence felt as strongly in Hong Kong and on the mainland, though they have raised their profile elsewhere around the world.

In fact, Christie’s, which reported a 26 percent drop in sales volume in Hong Kong for the first half of the year compared with the period in 2011, also reported a 31 percent increase in the number of Asian clients registering to bid in New York and London.

Fran├žois Curiel, president of Christie’s Asia, said he believed that the Chinese art market was mainly in a consolidation phase, and that the poor performance of the Asian auction market in the first half, relative to that of Europe and the United States, was partly due to a drop in supply rather than demand.

“We had fewer works of art for sale in the first half of 2012,” he said by telephone, “one of the reasons being that there is so much financial uncertainty at the moment around the world, so many sellers are hanging on their property, rather than selling and having to decide how to invest the funds: in Hong Kong dollars, U.S. dollars, renminbi.”

Mr. Curiel also noted that the increase in sales volumes in 2011 over the previous year had been so strong, “it was difficult to sustain.”

Christie’s sales in Asia in the first half of 2011 totaled $488 million, but fell to $374 million in the second half of 2011 and then to $367 million in the first half of 2012. “So we’re on a par with the second half of 2011,” Mr. Curiel said, “and I think that’s what we will see in the fall of 2012, unless a fabulous collection comes up for sale in November.”

Auction houses around the world had mixed results in the first half of the year. Even as sales in Hong Kong were falling, Christie’s announced worldwide sales for the first half of 2012 of $3.5 billion, up 11 percent from a year earlier. Sotheby’s reported a 16 percent decline in total revenue for the first half of the year, to $408.9 million, even with the sale of Edvard Munch’s “The Scream” for $119.9 million, the highest price ever for any work of art at auction.

During an earnings call with analysts on August 7, Sotheby’s chief executive, William Ruprecht, attributed the decline in results to economic weakness worldwide and fewer single-owner sales than in the spring of 2011, a record-breaking season.

He acknowledged that the Asian business had slowed — Sotheby’s Hong Kong sales were down about $131 million from the previous year — but added that the auction house’s business in Asia remained “very profitable and a source of substantial opportunity with new wealthy collectors.”

He added that luxury goods companies, a barometer of spending trends among the wealthy, had posted higher first-half earnings in Asia, which was reassuring, he said.

Carson Chan, managing director of Bonhams Asia, said he thought the dip in sales to Chinese art investors reflected the economic turmoil.

“Chinese buyers may be in the art market 50 percent for the heart and 50 percent for investment,” he said by telephone from Taipei. “They buy because they like it, but they also want to invest.”

“I think Chinese buyers are now buying more carefully and more selectively,” he added. “They will only invest in pieces that have both a historical significance and art value. So you have to have extremely clean provenance and background, and this goes across the board between paintings and ceramics.”

Mr. Petterson, of ArtTactic, said the autumn sales would provide a good test of whether the art market in Asia was poised for recovery.

He acknowledged that there could be further declines if “the slowdown is triggering a significant negative shift in market confidence.” But he said he believed that Chinese buyers still considered art a good addition to their portfolios.

“With other investment asset classes performing poorly, art will still be viewed as an alternative investment,” he said.

Mr. Curiel, of Christie’s, echoed that sentiment. “Art is still viewed as a good investment in the Chinese collector’s mind,” he said. “I have yet to meet someone who buys art and think they are going to lose money.”