Art Market Blog – The Art Market Explained

With all the talk of an art market correction I thought it about time that I explained exactly what is going on and why. It is obvious that a correction of the art market would be the result of over-inflated (represented as greater than is true or reasonable) prices. The problem is that in order to have any idea when the art market will correct one would need to know at what point prices become too high and exactly what causes people to decide that prices are too high. Because there are so many variables that have an effect on the value of art it is almost impossible to determine which of these factors will be the straw that breaks the camels back, so to speak, which means that it is basically impossible to know when the correction will occur. The fact that different artworks, artists, movements, countries, are affected in different ways and to different degrees adds further complications.

value Art Market Blog   The Art Market Explained

One of the things that we can actually get an idea of is how over-inflated the price of a particular artwork is. In order to determine how over-inflated the price of a work is there needs to be some sort of comparison which is where the diagram above comes in. The dotted line represents the current market value of the art market over time and the solid line represents the assessed value of the art market over time. I have included an explanation of assessed value and current market value below.

The current market value is based on the:
-current prices being achieved
-auction prices
-perceived maximum price people are willing to pay

The assessed value is based on justifiable and quantitative indicators such as:
-past performance of similar artworks
-average percentage increase of the prices of a particular artist, medium, school, movement, etc.
-number of artworks put up for auction
-percentage of artworks put up for auction that were sold
-price range of works
-provenance

The diagram is by no means an exact or precise representation of art market progression but it does give a general idea of what happens. The assessed value of an artwork is based on facts and figures which means that it is far more stable and more accurate whereas the current market value is dependent on a wide variety of factors many of which are not measurable. The factors that affect the current market value are also prone to being artificially manipulated by the art market which means that the current market value is usually higher than the assessed value. An art market correction is basically a sign that the current market value has become too high compared to the assessed value and needs to re-align. The good thing is that the art market has shown to be very resilient and bounces back pretty quickly.

As long at the art market continues to encourage over-inflated prices (which will be forever) the art market will need to correct which I hope people will begin to realise is not such a bad thing.

 Art Market Blog   The Art Market Explained**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.

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  • http://www.fineartamerica.com/profiles/debra-brettonrobinson.html Debra Bretton Robinson

    Man, how do you do it? You have these fabulous articles every few days! It takes me that long just to read all the content in them. I would like to thank you for it though. Your blog has more information in it that I can really use than any other site I subscribe to or surf to. Bravo!

  • http://www.artforprofits.com artforprofits

    Thanks for the comment, I am glad that you enjoy the blog. I really like your paintings by the way, very nice indeed.

    Nicholas Forrest
    artmarketblog.com

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    thanks for the link findanyposter.com

    Nicholas Forrest
    artmarketblog.com

  • http://www.EuropeAntiqueTrip.com Felicia D.

    Wow, That was quite the explanation of the art market! I am an antiques dealer and always keep an eye out for artworks. I can tell that something is valuable, but I still have no idea how to figure out: how valuable is it? So I put my finds in auctions and let the public decide. I have concluded that the price of art has nothing to do with the intrinsic quality of the work and more to do with whos ego sits in the audience and who the artist hung around with. I’ll be going on an antiquing trip to Europe this winter and hope to find some unrecognized treasures. Check out the website: http://www.EuropeAntiqueTrip.com Thanks for the info. Felicia

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