This analysis of the 12 years of Evening sales at Christie’s, Sotheby’s and Phillips was made possible with data from our friends at Pi-eX. It is available to AMMpro subscribers. Subscriptions begin with a free month for the curious. (Please note: these numbers do not include single-owner and curated sales that have punctuated the market at various times. The point of these charts is to show year-over-year changes and so the single-owner and curated sales are thought to interfere with a consistent comparison.)
Making sense of the last 12 years of Evening sales at the three auction houses in London and New York, it helps to look at the breakdown of auction value by lot value. In other words, how much of the market is attributable to the most valuable lots or to the middle market lots. These are evening sales so the overall value of the lots is very high. Pi-eX has broken the lots down into those over $10m, works that sold for between $4m and $10m, works sold for $1-4m and works below $1m.
It is a bit easier to see the effect on market volatility that the over-$10m lots cause when we add some lines tracing the change in value coming from those lots versus the change in value coming from the base of lots under $10m. From 2010 to 2018, the lots below $10m have provided a reliable Evening sale revenue of $1.5bn to $2bn each year. The acceleration in Evening sale revenue from 2010 to 2014 was primarily due to lots over $10m.
The market pulled back in 2015 and 2016 across the board. But the sharpest drop came from the highest value lots that just weren’t present in 2016. Those lots came roaring back in 2017 and 2018. There was also a rise in the lower value categories those same two years but the over $10m lots had the most effect on the market value as a whole.
Pi-eX also keeps track of the guarantees used in the Evening sales over this period. Here we have a chart of the auction house value represented by works without guarantees (NG), direct auction house guarantees (AHG) and third-party guarantees arranged by the auction houses (TPG). One important observation is to note that the auction houses used direct guarantees in the period before the financial crisis as a way to increase revenues. During a period of rapid price movement, the auction houses have an information advantage over many, if not most, consignors. In 2006-2008, the auction houses were able to use that information advantage (knowing there were more buyers willing to pay more for a given work than the sellers might realize) to offer direct guarantees that would increase the auction house’s share of the sale over the guaranteed value.
That practice came to an abrupt halt when outside factors (the global financial crisis) made it suddenly a source of exposure for the firms. It is interesting to see from this chart that the practice came back into use briefly in a significant way in 2014 and 2015. But the auction houses remained acutely aware of the risks and consignors were less willing to take guarantees at anything but the fullest value of their works.
Since the financial crisis, the auction houses have increasingly employed third-party guarantees either in the form of so-called “irrevocable bids” or minimum price guarantees where the auction house specialists arrange for a buyer should there be no other bidders willing to exceed the pre-established price. The practice has created a variety of reactions from those who view these sales as some kind of padding or inflation to the auction house sales numbers and others who see them as simply a hybrid of a private transaction with a public option for bidders to participate. There have been recent concerns that the expansion of third-party guarantees has shifted liquidity in the art market from the private market to the auction houses themselves.
It is interesting to see here that third party guarantees actually peaked in 2017, not this past year. Sales in 2015 and 2017 were at very similar levels for the Evening auctions but the composition of those sales was very different. It looks like there was around three times the volume of third-party guarantees in 2017 compared to 2015. Third-party guarantees came down slightly in 2018 from 2017’s peak. But they remain among the highest proportion of the sales volume in the entire period and substantially higher than in any other year besides 2017.