The Australian looks at the state of the local art market neatly capturing all of the important factors that drove the worldwide boom in art sales. The story explains how a country with 22 million citizens wound up with eight auction houses. In 2007, the Australian market peaked. Though everyone is looking toward a tough year in 2009, many have already begun to point out that 2008 sales are above the totals for 2006.

Auction results, the only public indicator of how art is faring, are down nearly 35 per cent, with a gross figure of $114.5 million sold in 2008 compared with 2007’s $175.6 million.

Yet compared with 2006 ($104.8million sold), it is still ahead, and these figures reflect buying demand as a whole rather than the market worth of any individual work.

“It’s still a bit early to say and we won’t know for sure until we see what happens in 2009, but it appears as though 2007 was an aberration,” says art adviser and government valuer David Hulme. “People were feeling very rich, it was a buoyant economy.” [ . . . ]

Paul Sumner, director of Mossgreen gallery, was working at the Melbourne office of Christie’s and recalls its November 1991 auction vividly. “I think we sold only 25 or 30 per cent of the catalogue that night. It was grim.” The present scenario, he says, “is probably a wake-up call. The industry’s had a minor stroke rather than a fatal heart attack, and I honestly believe this is not a crash but a readjustment of the market.”

If 2007 was a market irregularity, as some suggest, when was its high point? The release of Australian Art Sales Digest’s 2007 art auction figure of more than $175 million last December certainly caused great excitement. But most industry identities remember the Sotheby’s Sydney auction in May 2007 as the boom’s climax. [ . . . ]

New collectors were buying art. The financial sector was flourishing and many of its executives – among them David Coe of Allco – had turned to paintings for their investment and aesthetic possibilities. A thriving economy meant more people had more disposable cash. They were buying new homes, bigger apartments and holiday houses, and art seemed a clever way to decorate the walls.

A new breed of art adviser had also emerged. “We called them the Bored Wealthy Housewife’s New Best Friend,” says Savill. “They helped with the decorating.” These advisers had significant power in galleries and auction rooms, paying big prices and earning hefty commissions.

Buyer’s Market in the Galleries (The Australian)