Below is an excerpt from Artvest’s September report on the art market. A full copy of the report can be downloaded here: Artvest_Newsletter.1

Amidst rumors that Picasso’s 1905 Garçon à la Pipe is for sale, we thought it would be interesting to speculate how the current market would react to the painting, which had a 6-year reign as the most expensive work of art ever sold at auction. The market for paintings by Picasso, in terms of both top prices and transaction volume, far surpasses that of any other Modern artist by a wide margin. According to one database, in the past decade paintings and sculptures by Picasso have been publicly sold 1,255 times. Included in these sales are ten of the thirty highest prices ever achieved by paintings sold at auction.

Adjusted for inflation, the 2004 price for Garçon à la Pipe would be an astonishing US$ 120.3 million in today’s dollars. Perhaps this is one more reason that some art professionals thought the Brody Picasso might sell in the range of US$ 120 million.

If Garçon had continued to appreciate at the same compound annual growth rate (CAGR) of 16.20% realized by it previous owners, the Whitneys, the putative value today would be a staggering US$ 256.4 million. While a growth rate of 16.20% seems exceptional, it is not dissimilar to the CAGRs achieved by other top Picasso paintings and numerous financial investments.

That being said, it is inconceivable that the painting’s value has continued to appreciate at this rate. The current market is not willing to support such a high price for a single work of art, especially due to the limited number of possible buyers at the US$ 100+ million level of the market.

It is our belief that the largest gains in the Picasso market for many of the works purchased since the early 2000s have already been realized. While these works by Picasso may continue to appreciate in value at a moderate rate, we do not foresee their price levels continuing to rise in accordance with their historical rates.