The Role of Art & Antique Dealers An Added Value
especially in the Modern and Contemporary sectors, and especially in New York. As art prices soared and returns and dividends on stock markets started to contract, speculators began to enter the market adding fuel to a market already heading for overheating.
Strong Japanese buying, mainly in the Impressionist and post-Impressionist sectors exacerbated the art market bubble at the end of the 1980s. This was basically a demand-induced bubble, largely fuelled by tax considerations and the inflation-induced build up of wealth in property. The Yen had also appreciated significantly against the dollar without a concurrent drop in exports, leaving the Japanese awash with money. Surplus cash was combined with insufficient knowledge on the part of new purchasers. As a result, prices rose sharply, with often huge sums paid for mediocre works. That art boom ended abruptly in 1989, with a sharp rise in interest rates by the Bank of Japan causing many speculative collectors to go under, often because of a collapse of liquidity from unrelated investments. Many collections are said to remain still in bank vaults, previously secured as collateral against corporate loans that failed during the Japanese recession that followed.
From its international low in 1990 and 1991, the art market steadily regained strength. In the major art centres, however, there was also a noticeable shift in competitive power within the trade. In London and New York, many dealers had been the beneficiaries of a lucrative post- war period, where supply was ample in one part of the world and demand was strong in another. The more successful business people of this period turned into wealthy dealers in the 1960s and 1970s with great collections of art and antiques. However, during the late 1980s and early 1990s, many dealers and art market observers described a pronounced shift in power toward auction houses. Auction houses, which had previously been largely wholesalers in the market, became better organised and actively wooed retail clients encouraging them to buy at auction rather than the traditional approach of purchasing via a dealer.
This competitive shift continued over the next 20 years, and although the balance of aggregate sales values on a global basis has fluctuated close to 50:50 between the two sides of the market, it has become a more actively competitive trading ground for dealers. Over the last 20 years, several sectors have gained significant ground, and more recently fine art in particular rose in value both in absolute terms and relatively compared to decorative art. Contemporary art showed exceptional growth up to 2008, with strong markets emerging, such as Contemporary Chinese art, and equally strong new buyers such as those from China, India, Russia and the Middle East making notable purchases at auction and through dealers. Many of the new wealthy buyers that have emerged over the last few years from India, China, Russia and the Middle East have shown distinct preferences for Contemporary art, and in many cases art from their own regions.
Today, the art trade functions in a large global market, where both art dealers and auction houses are subject to the competitive pressures of demand and supply. The business models and practices of many art dealers have begun to change and adapt to some of these pressures, but success has been mixed between sectors, countries and individual businesses.
14 Historical & Future Perspectives
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