Theory of errors: bubble art-рынка
ARTinvestment.RU   20 февраля 2020

In category "Theory of errors" we are eradicating the myths that successfully disguised as fact and negative influence on the development of the art market and the investment climate. Today we tell whether there exists in the art-рынке financial bubble

When the art market want to offend, it is called a financial bubble. This phrase you can hear from the artist whose art did not meet the response of the feelings of the collector, from a collector who has not found your gallery, or from the investor who initially was misinformed and directed art-консультантом, — in short, from people offended by the circumstances having little to do with the art market as a mechanism. For the final parting with the myth of the market bubble we offer a short survey.

so what do we know about the financial (economic, speculative) bubbles? A common definition is: a financial bubble — is a sharp deviation of the asset's market value from its base value. In other words, trade large volumes of goods at a quite inappropriate to a fair level, much too high price. This situation occurs when increased demand for a product, resulting in price increases, which leads to even greater demand among speculators. At some point the demand falls, offer instantly tipping the scale — and the bubble collapses: in the hands of speculators remains a commodity, and in the pockets of market participants — emptiness.

In the process of economic development the world has experienced more than 10 large bubbles ranging from Tulip fever (1636) and "Southern seas" (1720) to the modern dotcom Market (2001) and subprime crisis (2007). They share one thing: the presence of ephemeral to the core product and inflated investment expectations. And most importantly, speculative operations with the goods was done at lightning speed: it resold, barely having time to get it.

for Example, the Dutch sold each other the bulbs until they sprout, — and the last in the chain of speculators've only had joy from the contemplation of a blossoming flower at a price equal to the value of 850 grams of gold. Shareholders of the "Company of the Southern seas" traded their deposits, while the ships of the occupied lands were not returned to the port of departure. The dot-com bubble inflated by the ignorance of people who believed that the Internet perspective, without any-либо price statistics and forecasts. Finally, the mortgage crisis in the US arose as a result of speculation, collateral loans ten times the value of the collateral.

Legitimate to talk about the bubble in relation to the art market? The paintings are not written in disappearing ink, and sculptures are not all over the floor — is a solid asset. Customers of the gallery to acquire works that you see on the wall, and not subsidize the trip Larry Gagosian in a conditional Honduras, hoping to unearth a new vein of art. Art-рынок in its present form exists and develops for the last 30 years, leading auction houses for nearly 300 years, and the first mention of art-продажи — 3 thousand years, i.e. statistics are more than enough. The cost of the works included in the collateral is $21-24 billion is only 0.7% of the value of all art in private hands.

in short, the comparison of the art market with other bubbles in the first stage of the analysis confirm the finds. We will not stop here: maybe we can find them among the causes of financial bubbles? Economists identify five suchreasons:

1. Unfair the cost of the product

the Pricing of works of art is the subject of scientific research, these data are in the public domain. Works of young artists is the formula of setting the initial value at the first appearance on the market: the cost of the work equal to the cost of creation, multiplied by two. Further, to career development, the cost increases taking into account additional indicators: exhibitions, catalogues, competitions and grants. The contract with the gallery adds your coefficient is equivalent to the amount invested in the promotion of the artist means. Moreover, at the price of emerging artists sold an average of 90% of the work on the market — and young authors, both old and departed.

Another thing — remaining 10 % of the work: the authors — original blue chips creating price records art-рынка. Here the pricing rule another: the work is as much for her willing to pay. But again, given market realities: inflation, taxation, General economic situation and purchasing power. Those who dare to such a purchase, usually keep in possession the work of decades. A "pure" investors in art, which accounted for up to 25 % of the market, prefer the category to $1 million

2. The result of unscrupulous speculation

If the collector acquired the work of an artist of the XIX century without documents in the basement of disadvantaged district of Paris, and only then began to doubt its authenticity, — is not a puncture of the bubble, and his personal downfall. Such a collector has a choice: either to admit a mistake and to leave work at home or try to sell it on the market, start the process of creating a financial bubble. Buyer who purchase this work will be forced to do exactly the same, and further up the chain. However, unlike Dutch bulbs fake work on the art market with each change of owner will fall in price, not rise. Another possible situation — deliberately inflated the price of original work based on the buyer who is not familiar with the pricing — today is practically impossible. Most collectors have access to databases of auctions Artnet, Artprice or ARTinvestment.RU.

3. Unnecessary excitement on the part of buyers

the Rule followed by all the famous bubbles in history: overnight, the demand for assets reaches 80 % of the market. In other words, the buyers in the amount willing to buy 4/5 of all that is. That's just the art is totally irrelevant: this market is regulated by the contain suggestions, not provoking unfounded demand. Collectors are not storming the Sotheby's call to "give more Basquiat": they trust the auction house, do not allow more than necessary, the concentration of works by one artist on a particular auction or in the auction season in General. While statistics show that on average only 5% of annually generated by the artists work appears at public auction in the author's life.

4. The collusion of large enterprises on the subject of monopolization of prices

the favorite argument of conspiracy theorists. The art market is a natural oligopoly and does not hide it. There are Sotheby's and Christie's, then — abyss, and the rest of the market. The same is observed and in other segmentssales and services: great galleries, Analytics company, warehouse located at a considerable distance from its competitors. In theory they can set prices and dictate the offer that generates the demand. In history there were a few "local bubbles" created by public market participants. However, they were either directed at maintaining the status of art as a whole, against the background of a temporary market downturn, or had an entirely different economic target. The project of Charles Saatchi and Steve Cohen on the launch of Damien Hirst was created in order to pull up the status of conceptual art to the level of modernism and postwar art, and Japanese inflated collectors prices in the early 1980-х was triggered by the desire to promote the Western market a new brand of electronics and cars. Such actions invariably ended the same way: after the first "significant" purchases of art-рынок came back to normal and was able to clean itself from unscrupulous players — collectors, artists and dealers.

5. The decrease in commissions per transaction, and the absence of tax regulation

For involvement in a Scam of an increasing number of speculators, the organizers of the financial bubble, lower the fee per trade, and initially choose the field of minimally available to the tax regulation. Look at the art market: average Commission of the buyer at auction over the last 20 years increased 45 %. In the market of private sales, the Commission of dealers, over 70 % is accompanied by only 5 % of transactions. The most common (30 % of transactions) in recent years was the Commission of 40-50 %. The legislation of the EU 2020 has introduced additional checks for all sales at a price in excess of €10 thousand in short, the Commission is growing, and the number of countries with attractive tax base is shrinking: the signs of a bubble is not detected.

in Other words, if the correct hypothesis that the art market — is the collusion of big players, it will not collapse ever. If the art-рынок — independent unit, self-regulating balance of supply and demand, the collapse of her need to seriously increase the mass demand for art. And that, unfortunately, no.

Denys Belkevych, AI