How to make art go boom

It is a boom that has been driven by the “wallpaper generation”; people with money who prefer to spend their millions on art than a stately pile in the country. And there are no signs of a bust. Yet.

The British market reached boiling point, with records smashed, jaw-dropping amounts of money changing hands and frantic auctions taking place at rival London salerooms.
Sotheby’s sale of impressionist and modern art raised £88.7m, more than any auction held in London before. The star lot was a Modigliani that went for £16.3m – the buyer had ratcheted up the price by a cool £500,000 per bid. Then there was a £86.9m sale of impressionists and modernists at Christie’s, where a Schiele – Nazi loot that had hung unrecognised in a French apartment since the war - sold for £11.8m.
The titans clashed again in rival contemporary sales. At Sotheby’s 11 artists, including Anselm Kiefer and Rachel Whiteread, achieved record prices. Hockney’s The Splash fetched £2.9m, punching through his previous record, set last month, by £1m. Bridget Riley joined the handful of women artists to break the £1m mark, with her Untitled (Diagonal Curve).
The next night, Francis Bacon’s Three Studies for a self-portrait, 1980, sold or £3.8m at Christie’s. All this in the week when the most expensive painting ever was sold - Klimt’s Adele Bloch – Bauer I, for £73m.
The last time the market hit such heights was at the end of the 1980s, followed by a crash that saw New York’s SoHo, then the city’s main gallery district, end up a ghost town. Now a new boom has hit and, according to Christie’s European president Jussi Pylkkanen, “everybody’s talking about the Russians”. At its root is “the state of the global economy, and buyers from places such as Asia, the Middle East and Russia entering the market for contemporary and impressionist”, he said.
It was a neophyte Russian bidder, for instance, who took Picasso’s Dora Maar au Chat for $95.2m at Sotheby’s New York in May, the second highest sum paid for an artwork at auction. In Russia, dollar millionaires grew by 17.4 per cent in 2005, according to Merrill Lynch and Capgemini’s World Wealth Report, published this week. It also identified super-rich mushrooming in China, North America, Britain and the Middle East – all key growth areas for the art market.
Britain’s slow adoption, compared with the rest of Europe, of the droit de suite (a levy payable to artists on works bought on the secondary market) has helped establish London as the world’s second art city after New York. But it is its role as a global financial centre that is the main factor. Significantly, London is also the world’s second city for hedge-fund activity, creating a superbreed of new rich.
It is contemporary art that has seen the most inflation, a development unimaginable 15 years ago. According to Matthew Slotover, co-director of Frieze art fair, the taste-shift has deep cultural roots. “In the 1980s and 90s, if you made a lot of money you probably wanted to buy a country house and have the sort of things your ancestors, or other people’s ancestors, had. That’s changed. The people making large sums of money are the wallpaper generation — they want new things.”
London has adapted to that taste. It has Tate Modern, Frieze art fair itself — the most influential contemporary fair after Basel — and a host of high-end galleries. “Everyone feels the exuberance,” said Amy Cappellazzo, international co-head for postwar and contemporary art at Christie’s. “It’s an important crossroads for dealers and collectors. It’s chic-er, more interesting and has better restaurants than it used to.” It helps that the artworld is a circuit, a ready-made social scene. A calendar of events beckons, taking in Basel, Frieze and the Venice Biennale. At the same time, spending money on art is reckoned more sophisticated than spending it on vulgarities. “A lot of people have a private jet or a yacht now. Art distinguishes you,” said Mr Slotover. The kind of work being made at the moment also helps, he says. Only limited connoisseurship is required: anyone can tell what’s going on in a Damien Hirst.
The real question is: will the boom continue? Insiders will not mention the dread word “crash”, though they admit the market could be in for some “correction”. Pylkkanen said: “Without doubt the boom will continue. If the global economy continues to flourish, people will continue buying works of art.”
“There are no signs of its abating,” agreed Cappellazzo. “There might be a slowing with particular artists — a bit of correction with people who’ve gone very high very quickly.”
According to current wisdom, this boom is safer because the new globalised market means more stability. The last boom was all about one economy, Japan’s, so it was snuffed out when that economy collapsed.
But the new markets could be as yet too new and shallow to rely on. “If the European or American art market softened now, China, Japan, Russia, and the others could never take up the slack,” Anders Petterson, whose firm ArtTactic analyses the market, told New York magazine recently. And, though there is no immediate sign of hedge funds ceasing to yield giant bonuses, if the flood of new buyers dries up and prices continue to soar, the good times will cease to roll.

Auction terms
BID INCREMENT: The amount by which a bid is increased each time the current bid is outdone.
DEADBEAT BIDDER: A person who fails to actually purchase the item after posting the winning bid on an auction.
ESCROW SERVICE: The winning bidder sends payment to a third party — the escrow service — which, in turn, sends payment (minus escrow fees) to the seller after the item has been delivered to, and accepted by the buyer.
PROXY BID: When placing a bid on most major auction sites, the bidder can specify the highest price you are willing to pay. As other bids on the item are received, the auction site will automatically place proxy bids in your name at specified bid increments, until you have either outbid you opponents or reached the limit that you preset.
SNIPING: Placing a winning bid minutes or even seconds before an auction closes.

· Charlotte Higgins