Art Market Debt Devils –

 Art Market Debt Devils Do I believe that that Sotheby’s boosted their sales and created a false impression of the health of the art market when they loaned Alan Bond $27 million towards the purchase of Van Gogh’s “Irises”, yes I do. Do I believe that the sale of just one work could have such a major effect on the art market – when the sale is for US$54 million and a new record for the most expensive artwork sold at auction I certainly do. In fact I know that even a work sold for a relatively small amount of money of around $100,000 that was, say, four times the estimate and an auction record for the artist can have an effect on the market let alone a painting that sold for US$54 million It wasn’t until the late 80’s when the art market started to really heat up that lending money to buy art became relatively common place. During this time, loans to purchase artwork were not only provided by banks and specialist art lenders, but also by the auction houses who were selling the works.

The art market boom encouraged many financial institutions to venture into unchartered waters and take advantage of people’s desperation to be involved in the art market and their willingness to pay above average interest rates to get the money to do so. The problem was that because a lot of the loans were made against people’s existing art collections when the art market took a dive, so did the value of people’s art collections. Consequently, the ability of these people to repay the money they had burrowed should they become insolvent and have to sell their art collection to repay the loan was severely reduced. Not only did the loaning of money to people to purchase art put these people at risk of ending up owing money burrowed against a severely depreciated asset but it also potentially provided the means for people to unintentionally create an incorrectly positive perception of the art market.

Sotheby’s stopped providing loans for the purchase of art with the collateral being an object purchased at Sotheby’s within 90 days of the date the loan is issued after Alan Bond defaulted on the payments for “Irises”. Regardless of this, there is still a question as to whether the neutrality of auction houses is compromised by any lending of money to clients whether it be against a work they intend to purchase or against works in the clients existing collection. I personally think that it is irresponsible for any auction house or any other art business to provide financing to their clients to purchase works from them because of the potential implications for the whole art market.

 Art Market Debt Devils**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of http://www.artmarketblog.comt Art Market Debt Devils, writes the art column for the magazine Antiques and Collectibles for Pleasure and Profit and contributes to many other publications

share save 256 24 Art Market Debt Devils

Related Posts:

Plugin from the creators ofBrindes :: More at PlulzWordpress Plugins