Lights, Camera, Auction!
PRICES for Indian contemporary art have been exploding with new records being set with every successive auction. A new breed of
‘Investor-Collector’ is waiting in the wings to claim its pound of flesh in this new found ‘bizarre’ where literally anything goes with the strike of a hammer.
What are some of the key drivers of growth in the Indian art market? How sustainable are the current price trends? Who are the market makers and what are some of the tactics being employed to drive prices upward? Can art be considered a viable asset class offering the same level of financial reward as stocks, bonds and bullion? What are the risks associated with it?
In this series of articles, I will shed some light on these and other questions that are looming large in the minds of art buyers, dealers, gallery owners as well as the artists. I will provide a broad brush overview laden with data driven insight with a view to inform & provoke. As always, your comments and feedback and welcome and solicited.
We end 2005 with an analytical look at the performance of auction houses over the past three years, see how they stack up against each other and explore the role they play in the art value chain.
TABLE 1
shows the total sales of Indian Contemporary Art through auctions houses such as Bonhams, Christies, Osians, Saffronart and Sothebys in the past three years.
The explosive sales growth of over 200% from 2003 to 2004 and over 300% from 2004 to 2005 show that buyers are flocking to the auction houses who in turn are not missing any opportunity to cash in on the euphoric buying and have since become one of the most influential sales channel in fueling the growth of Indian art.
This is largely driven by the fact that buyers especially the new and uninitiated, looks to the auction houses as their beacon of hope in a quest to acquire the next Garcon a la pipe and generally sees them playing the following critical role:
• Providing a stamp of quality
• Lending credibility
• Having access to rare inventory
• Offering transparency
Thus despite the high transaction costs (buyers typically pay anywhere from 10-20%
on top of the hammer price as premium) and notwithstanding the tendency to sometimes overpay in the euphoric bidding process, the auction houses function as a kind of ‘sorting mechanism’ and provide buyer confidence and peace of mind and are not only here to stay but in my view are only going to grow in stature and importance in the coming years.
Let’s take a closer look at how the various auction houses stack up against each other and see the trends that emerge.
Note:
• All sales converted in US$ using Federal Reserve exchange rate on the day of the sale.
• Figures include hammer price plus the buyers premium but does not include any local taxes such as VAT or applicable duties
• There may be an error of omission where one or more sales of the auction houses may not have been factored into the analysis
Saffronart seems to be the leader of the pack with Christies as a close second. Saffronart has the distinct honor of being the only online auction house amongst its peers with highest total sales and highest average sale per auction despite the fact that they have the second lowest average estimate and average sale price.
They are able to achieve this mostly because they follow a winning strategy that is fairly straight forward and goes something like this.
Offer a large number of fashionable lots at reasonably low estimates thereby encouraging more bidders to bid for any given lot with a view to create healthy competition and rivalry between the buyers who invariably bid up the prices - in this case to over 67% of the high estimate.
Saffronart is clearly focusing its energies on catering to the market demand with the in vogue progressives accounting for nearly half of all sales.
Osians is on the other extreme with lowest metrics all around except number of lots offered for sale. It is plagued with the lowest yield of 61% with only 16% of the lots selling over the auctioneer’s average high estimate.
This is partly due to the fact the unlike the other auction houses, Osian has not had a very strong offering of the more fashionable lots with the progressives accounting for as little as 8% of totals lots sold. Another factor could be the estimates themselves which are often too high thus discouraging active bidding. Buyer psyche also plays an important role as they may be reluctant to pay premium prices for works sold by this indigenous auction house for various reasons including the difficulty that NRI sometime face in bidding for works in India and dealing with RBI regulations and thus prefer to deal with international auction houses such as Christies and Sotheby’s.
The strategy of creating a market for lesser known artists rather than catering to the market will have long term payoffs for this homegrown auction house but for that to happen, art buyers need to look beyond the 7-8 names that today make up over 60% of the market
Sotheby’s and Bonhams both on opposite sides of the Atlantic have the fewest number of auctions under their belt but both are doing reasonably well with a clear focus on the progressives and their contemporaries.
Bonhams, a London based auction house serves the growing pool of Europeans (mostly NRI’s) who have of late renewed their interest in Indian contemporary art. Bonhams thus far is treading carefully and has offered a small but fine selection of works by FN Souza and other progressives in the two auctions it has held this year.
Going forward, we do not expect to see any material change in the strategy by these two auction houses for this auction year that kick starts in March.
posted by Sundaresan @ 8:58 PM
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