Both the New York Times and the Wall Street Journal (and a few weeks before them several art market sources) cite this paper from Luxembourg art economist Roman Kraussl and his colleagues to hint darkly that the art market is headed for a fall. It’s not clear that all of them have read the paper itself which is almost entirely a statistical study focusing on the rapid rise in art prices. In the paper, the “bubble” of 1980s where prices were driven by Japanese buyers is used as a benchmark.

The authors make no claims that the market is going to crash imminently. In fact, they go to great lengths to protect themselves by suggesting this new price level could last for several years. The authors claim that Postwar & Contemporary and, curiously, American art are all entering a bubble “still in the mania phase of its formation.”

Here’s what Kraussl told Scott Reyburn about Christie’s 5% fall in sales in 2015:

“It’s a healthy correction,” said Roman Kräussl, an associate professor of finance at the University of Luxembourg. […]

But now, seemingly, a measure of sanity has returned. “We won’t see many records in 2016 if the auction houses let the market correct itself and there aren’t too many guarantees,” Mr. Kräussl said. […]

But is the market for 20th-century art itself a bubble about to burst, just like the market for Impressionist art imploded back in 1991?

Mr. Kräussl doesn’t think so, at least at the very top of the market.

“Art is now a must-have for the rich,” he said. “There’s such a concentration of money in the 0.1 percent, and wherever they are in the world, these ultra-wealthy people want status symbols. Every collection has to have a Picasso, a Richter, a Warhol.”

Art World Prepares for a Challenging Year (The New York Times)

Is There a Bubble in the Art Market?