Sporting slimline retro glasses, new look over-stitched denim trousers, an open-fronted, zip to the neck, leisure wear-inspired stripy cardigan and lime green Bailey shoes, my good friend and 20th century design guru Geoffrey Hatty raised a very important point the other day. Over a glass of dry white wine he announced that the values currently achieved at auction for 20th century art and design do not represent the value of the objects themselves.
Bear with me on this one. Geoffrey’s clarity of view fundamentally contradicts the widely accepted and long-held art market belief that values achieved at a public auction, an ‘open and fair market’, create the floor price for an artwork within the secondary market. For decades it has been accepted that if, say, a Nathan Taylor painting achieves $20,000 at auction, then a new floor price has been set for all Nathan Taylor paintings of that date, quality, subject and size. In effect the public auction benchmark, secondary market price trickle down effect. Well Geoffrey and I say that this is often not the case.
Geoffrey’s theory states that a price achieved at auction, for example for a Modernist c1940s vase, is the price achieved at the time, at that particular auction and under those particular circumstances only. Essentially, the price realised at auction is not generally indicative of what Geoffrey believes to be the value of the artwork or what he would pay. Geoffrey states (and I fully agree) that the auction sale price in many, many instances can now no longer be considered the benchmark of an artwork’s value.
The general idea that auction values are in an outer parallel universe of their own is no recent discovery. After all, over a decade ago I raised in the press the phenomenon of ramping in the art market – that is, the very public pushing up of secondary market auction values by some dealers and artists’ agents in order to establish a false primary market (art gallery) price.
Alongside this there is the increasingly common practice of a few disreputable minor auctioneers whereby artworks are knocked down as sold, when in fact they were unsold. The auction houses simply tell out and out porkies (lies), often telling the vendor that the artwork has sold (and taking the recorded sale to the press) only to tell them several weeks later, that the imaginary sale has fallen through–oh my God, shock horror. All these shenanigans take place so that the auction houses can temporarily prop-up their turnover and ‘sold by value’ figures; those all important statistics they use to market themselves as successful sellers of art.
These all too common dirty tricks, undertaken in order to falsify public auction values, are widely perpetrated and known about. What my discussion with Geoffrey Hatty added to this mix (again, over more dry white wine) were the new, unexplored and additional features that have come onto the art market to distort auction values further–the rather odd actions of many of those who now buy art at auction.
We are all well aware that over the last decade the Australian economy has been moving through the longest sustained economic boom in Western history (market correction or no market correction). An economic boom that has been fuelled by the resources boom in Western Australia and value adding financial services sector explosion along the Eastern seaboard. A hallmark of this economic boom in these two fields has been the concentration of significant wealth into the hands of those professionals who have equity in or work in the resources and finance industries.
You see, added to all this value dislocation of auction prices is the business and personal psychology of those cashed up resource and finance industry players (particularly finance) who have come a-galloping to the art market at auction and who now make up one of the most significant bodies of art collectors. These largely young to middle-aged male professionals like to win as distinct from merely obtaining or collecting. The act of getting what they go for, of sweeping aside all opposition, of grasping the prize, of openly winning on their terms, is part and parcel of surviving their day job. When taken into the public forum of the art auction these business behavioural traits also play right into the hands of the auctioneers.
Collecting art by winning plays havoc with values. Over the last few years or so I have stood next to art buyers at auction who fit this psychological profile perfectly. I have heard and seen art advisors frantically whispering to their clients in an attempt to stop them from bidding but to absolutely no avail. What the art advisors had failed to grasp is that for their client, the act of purchasing had passed being about collecting art, one or two hundred thousand dollars ago. It was all about the public affirmation of their business success and many men who lead highly stressed professional lives, decompress publicly at an art auction. They probably do the same, but not nearly as often, at real-estate auctions.
Hand in hand with bidding as winning, the return of the Australian money explosion has birthed an easy come, easy go attitude to flouncing around big bucks. Much of the truckload of cash held by some bidders at auction has been accumulated in five years or less. Not having built up wealth steadily, over time, means that, for some, letting it all flash about in a short period carries no anxiety whatsoever. It came, so it will come again. And quite possibly it will. If cash has come so quickly and in such volume, then often spending of said cash quickly and in volume becomes a business norm and it is a way of behaviour well suited for the spectacle that is an art auction.
So, taking into account this distorting auction combination of some sellers manipulating the final sale price and a major tranche of buyers with a ‘win at all costs’ mentality, it is hardly surprising that in many instances the auction price realised for an artwork may be a far cry from its true value. Be aware of this one, it may at the moment be a predominantly Australia art market phenomena- but hey, as a nation we tend to get around the world.