Are we in an Art Market Bubble?, by Jamesy Wamesy on Oct 1, 2007 14:39:00 GMT 1, This was in The Telegraph, a bit more upbeat....

Art laughing all the way to the Banksy
By Godfrey Barker and Mark Choueke
Last Updated: 12:15am BST 01/10/2007


Soaring sale prices for works by the likes of Damien Hirst and Banksy have sparked a 55 per cent jump in the value of contemporary art in the past 12 months.

Chinese dealers get in the swim

Klimt’s Adele Bloch-Bauer of 1905

sold for $135m and Banksy’s Space Girl and Bird graffito went for £250,000

Pieces by living artists are appreciating at a radically faster rate than those by established past masters.

English watercolours have fallen out of fashion, dropping in value by almost one third. Portraits have lost almost 20 per cent of their value.

The figures, compiled in the latest Hiscox Art Market Research index, comes at the end of a year that has seen all manner of art sale records smashed.

One of Damien Hirst's trademark medicine cabinets sold for £9.65m at a Sotheby's auction in June, breaking the European record for a work by a living artist.

Banksy, the invisible graffiti artist, who paints London walls at night, broke through the £250,000 mark for the first time with the sale of Space Girl and Bird.

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Christies enjoyed its highest ever total for a week of art sales in June, when London art auctions raised a jaw-dropping £237m.

"Prices have risen in the last two years to levels even higher than the art boom in the late 1980s," said Robin Duthy, the art world's leading statistician, who compiled The Daily Telegraph's art index in the 1990s.

"Enormous sums, especially for contemporary art, have invaded this tiny market from investors disillusioned with the far slower returns on the Dow Jones and Nasdaq. They have pushed some artist prices to previously unimagined heights."

Duthy's rosy view is backed by the facts. The record price for art in 2004 – $104m for a Picasso at Sotheby's in New York – has been trounced four times in the past year.

Gustav Klimt's best portrait of Adele Bloch-Bauer, 1905, was sold last summer for $135m. Soon after, music and movie mogul David Geffen sold 1951 painting Woman V by Willem de Kooning for $137.5m. Then Las Vegas casino king Steve Wynn agreed to sell Picasso's 1932 Dream, to S I Newhouse, owner of Vogue in New York, for $139m.

That deal collapsed but the record price agreed still sent reverberations around the world of art collectors. Finally, Jackson Pollock's No 5, 1949, was sold for $140m in a deal arranged by Sotheby's.

Since then British painter Francis Bacon trebled in top value to $52.7m in New York last May, while portraitist Lucien Freud reportedly changed hands for more than $15m.

Damien Hirst's diamond–encrusted skull, For The Love Of God, was put up for sale in the White Cube Gallery in June with a $50m price tag. Since then he formed a consortium to buy it himself.

Collectors say the high prices paid for art in recent times have depended largely on a constant flow of cheap money. That theory suggests we might now see an end to new records being set with every passing month.

But Duthy rejects the idea that the whole art market depends on the world credit markets. "Contemporary art can be bought quite cheaply as well as at market-busting prices," he said. "Andy Warhol was cheap once, Hirst could be freely bought at under £10,000 in the early 1990s, as could Tracey Emin and Chris Ofili. All you have to do is spot where the genius is hiding now and buy it while it is still cheap."

Many art collectors believe the paintings, sculptures and art objects destined to rise fastest are now lurking in China, India or Russia – emergent economies with emergent cultures.

"The difference between the art market 20 years ago and the market now is that it is global," says Christie's chief executive Ed Dolman.

"Ever rising sums are coming out of China and Russia while India shows an interest in art investment hardly equalled elsewhere. And they are not just buying in their own markets, but across the board."