Why I Welcome an Art Market Correction
There has been so much speculation recently about the health of the art market that it’s beginning to get ridiculous, with any sign of a possible cooling of the art market, not matter how insignificant, being over analysed and blown massively out of proportion. To show just how ridiculous things are getting, one week ago headlines such as ‘Credit crunch hits home at Sotheby’s as Impressionist works fail’ dominated market news whereas one week later headlines such as ‘$325 million Christie’s sale reflects buoyant market’ are dominant. What really annoys me is that the media are portraying an art market correction as the worst possible scenario for the art market when in fact a correction is required if the art market is to be sustainable into the future.
First of all I think that is important that everyone understands exactly what I mean when I refer to a correction of the art market. The official definition of a market correction is: “A temporary reversal of the prevailing trend in price movement for a market or security. The term is most often used to describe a decline (of around 10%) after a period of rising prices. A correction is often considered beneficial for the long term health of the market, in that prices had risen too quickly and the drop put them back to more realistic levels where investors again see attractive value”. A correction of the art market would not mean that artworks would lose value permanently (as many people seem to think) but that they would lose a small percentage of value temporarily as a reaction to a market that has risen too quickly. As art is a long term investment, a market correction shouldn’t worry anyone who has invested sensibly and planned accordingly.
Think of the art market like an electrical circuit that blows a fuse when the load gets too much. The circuit is not permanently damaged but does require an analysis to identify and fix the weak points before being re-connected. Once the weaknesses in the circuit have been fixed the electrical circuit can not only be turned back on but can handle an even higher load.
The reasons that an art market correction would be a good thing are:
-A correction would allow the number of available artworks on the market to be replenished
-A correction would cause people to re-evaluate the factors that are driving the art market and act accordingly which would result in a much more stable and sustainable market
-A correction would highlight the weak areas of the art market allowing them to be rectified thus creating a stronger market for the future
An art market correction doesn’t seem so bad now does it.
**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of artmarketblog.com, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications.