New Challenges of the Digital Age: Vancouver Fine Art Auction Analysis
Lawren Harris, "North Shore, Lake Superior, Pic Island II", one of eight Lawren Harris landscapes offered in the Vancouver auction. Estimated at between $250,000-$350,000, it sold for a hammer price of $230,000.
Buyers, sellers face new challenges in information age
I preface my following comments with the acknowledgement that they are written in the spirit of competition, that being fixed-price private treaty sales versus that of selling at auction. The majority of what we at Galerie Walter Klinkhoff do is the sale of rare and precious works of art. It is very much a supply driven market and therefore the competition between our respective venues is to get the supply.
I have been around the auction world my entire adult life and admittedly well before that, too. So, although our business is on the other side of the coin, I am confident that I know more than a bit about the auction world. Their success in a sale is measured of course in part by the aggregate value of the sale and also by the buy-in rate that being the percentage of lots unsold. The key to selling at auction, if you elect that route, is to allow the “house” to maximize the number of bidders for your item accomplished ideally by teasing the buying public with a modest estimate. That gets prospective buyers pretty excited, each thinking he/she can "steal" the work. Then, with a bunch of them thinking the same thing, they battle, raising the price to what is its value, sometimes in excess of even the high estimate. So in recognition of the above "strategy", one shouldn’t be surprised when at auction a work does in fact sell beyond its estimate.
All this is pretty sound in theory but the major obstacle to the success of the sale of your work is the number of works being offered in the same sale or series of sales by the same artist. Let's face it: If, in the course of two hours, there are five, ten, or as many as fifteen works of art by David Milne, for instance, being offered for sale it is safe to suggest that this abundance of supply would distribute the competition of Milne buyers out among several works and presumably dilute prices. Then of course if another house has a few more up for sale the next week and yet another auctioneer a few days later, this short-term abundance of supply can negatively impact on auction prices within that short time frame.
With all this in mind, this week I attended an auction sale of Fine Canadian Art, a very well presented, heavily promoted, and elegantly hosted event, after which I came to some interesting conclusions, or maybe just simply observations. First and foremost, of the selection offered generally speaking I think it safe to say that the prices were on average lower for paintings by artists where there were numerous lots by the same artist. There were eight artists whose cumulative offerings represented to 70 percent of the entire fine art sale! Their results I do think confirm the position of momentary over-supply negatively impacting on prices at that time. Believe me, I understand the difficulty of finding rare and precious supply in that particular marketplace but I cannot be convinced that it is the optimum way to sell a fine work of art. Crunching the numbers of that particular sale, more than 65 percent of the works offered were knocked down at their high estimate or below, estimates that in my opinion were not in any way aggressive. Of that group more than half of them were knocked down at their low estimate, below their low estimate or unsold. A loose calculation suggests that 15 percent of the lots were unsold.
Another observation I have previously addressed in today's art world was confirmed by that sale. In previous musings I have commented that because the art market has a strong preference for "fresh goods" and because the retrieval of both images and prices of works sold at auction is progressively facilitated and used by collectors, generally speaking the art dealing trade is handicapped from buying, even very cheaply, a work for sale at auction. This type of purchase tends to be a nightmare with the reseller being defensive to his prospective buyer as to why he thinks the painting is worth more than he paid at auction. So despite what some of my colleagues may say publicly post auction sale that they bought "for inventory" I suspect that it is more likely that he/she made the purchase as agent for a collector.
It is similarly true that the same network which handicaps a reseller from buying at auction, even cheaply, also handicaps private collectors who purchase at auction and return to the market place even within four or five years. One of the unsold lots had been on the market several years ago but still too recently for today's market memory. Another, actually unsold some four years ago, this time was successfully sold for tens of thousands of dollars less than its low estimate the last time at the trough. In a previous but related auction sale, extraordinarily, one fine painting purchased at auction four years ago, this time was sold for only 60 percent of the amount it achieved the last time! From similar perspective, on a few occasions we have been approached by private collectors who purchased fine works of art at auction three, four, or even five years ago and, regrettably, because of the recent public exposure, its transparency as well as retrievability, with regret we have felt obliged to stand aside.
For potential sellers of fine works of art, if your are by nature gamblers, you will elect to go the auction route despite the risks or regardless of alternatives. But the more I reflect on the contemporary evolution of our marketplace and the abundance of supply of a limited number of artists' work during the most limited time frame the auction season defines, the more I think that the astute, knowledgeable, and prudent sellers of fine, precious, and rare works of art would be well-served financially and without risk by working with or selling to a fine art dealer like ourselves and other honourable colleagues.
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Copyright © Galerie Walter Klinkhoff, 2011