Are the cracks staring to get bigger in the indian art market? 11 of 14 Indian Works At The Phillips Contemporary Sale In London Fail To Sell

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Permalink Reply by Manoj Israni on October 19, 2008 at 12:13pm

Personally speaking I would not have bidded on most of these works myself even during boom time.So lets be realistic whatever needed to be sold got sold.Some within estimate and some below estimate.I would not bother too much about this auction.What matters is what happens with Sothebys tommorow............cheers!

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Permalink Reply by IAN Editor on October 19, 2008 at 12:49pm

Manoj

I would not have bid on those works myself but the fact is that others would have. These "others" have become a larger part of the art market in the last three years and have helped drive up prices. These prices are not sustainable.

This is my perspective on where we are. This is based primarily on my own situation as a collector/buyer of art and someone who intends to build upon his collection.

* There is a real liquidity crisis. 3 of my friends have been laid off in the last 4 weeks. I expect more to be in this position in the next 6 months. Some of them have been buying are for 3-5 years. They have no intention of buying any art in the near future. They just are not able to.

* My art budget has been significantly cut back given my professional and personal circumstances. I have been collecting for 10 years and intend to keep collecting. I do not intend to sell any of my works so am not really bother with the ups and downs although on a MTM I expect to see a fall in the value of anyone's collection. However the budget I have depends on my availability of surplus funds. Although there will be people who have significant amounts of liquid capital, there are more who are tapped out and will not be able to acqure art.

* Prices in general will fall. Leaving aside the exceptions (there are always exceptions), I think we could see prices fall 30-50% over the next 12 months. We have seen crazy levels of appreciation for many artists only a few of which justify their position. In fact many works will not find a buyer and some will argue that does not constitute a fall in price. In a market like art it does!

* Art funds have been large buyers of art which have helped keep prices where they are. I do not see there being a significant pool of capital for art in the next 24-36 months which means that collectors, investors, speculators, funds, etc who purchased for $500,000 or $1,000,000 are not going to find it easy to find a buyer. Furthermore they are less likely to pay premium prices in this environment. Every fund, art or otherwise, is now hoarding cash.

Now the good news:


* Over the last 5 years there has been a real broadening of the collector and buyer base. More people are looking at art and buying art. I expect them to continue to buy art but on a lower budget. This means that there will continue to be transaction volumes but at more realistic prices. Buyers will not tolerate being told then have 2 hours to decide if they want a work.

* We can walk into a gallery and actually buy works from a show. No more red dots on the opening nights!

* Collectors who have the liquidity will now be able to cherry pick grade A works from the primary and secondary market over the next 12-24 months.

* We will see who from the current 'hot list' survive. Some may be able to maintain prices whilst others will see a significant deterioration. It doesn't matter so long as they survive. I will stick my neck out and say that the survisors will include Atul Dodiya, Anju Dodiya, Subodh Gupta, Baiju Parthan, Thukral and Tagra, Rashid Rana and a few others.

* We may see primary prices coming down! I for one am not even considering works by artists whose primary prices are at a premium to their last show unless they deserve it.

What must happen:

* Artists and galleries must appreciate this new reality. They must recalibrate expectations and pricing of works. If pricing continues to be at previous levels I expect demand to fall. What we need to see is realistic pricing.

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Permalink Reply by Bhupesh gupta on October 19, 2008 at 4:47pm

deepak,
as seen and expierienced by me before also once the aura or the fancy by which these hot names are hyped to unsuspecting gullible starry eyed so called collectors goes out it does not matter whether they survive or perish.
it would be extremely difficult to repair the confidence and the financial hit accompamying it to stage a come back of sorts.......i can stick my neck out and say that in some of the hot names the correction can be 300% to 500% and still there won't be many people rushing to buy these names at seemingly throw-a-way- prices!
if you check the price patterns of last 15 years some of the best sellers of yore have completely fallen out of favour and are hardly tradeable now.
the writing is already on the wall but it happens at what pace would be clearly evident in next 6 to 18 months as liquidity and buying capability of many a individual investors or collectors is severely affected!

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Permalink Reply by Manoj Israni on October 19, 2008 at 7:08pm

Deepak I completely agree with the "Good News" and "What must happen"and it should happen that way.But unfortunately its not happening in that manner.Galleries are not willing to budge from their price tags that have set for an exhibition.I'm talking about the top leading galleries here.Two things are happening here one the works still are being quoted at ridiculous prices, the other, all shows are 90% sold out (this is for artists in demand).I cannot understand it.Bhupesh a correction of 300% to 500% on works that Deepak mentioned I feel is impossible.One must understand that in the art market amongst the collectors there is a tremendous holding power.I don't see any top collector who has been collecting for 15 years or more suddenly parting with their works because the valuations have come down.I don't see top galleries selling their Husain's,Raza,Souza's and some of their new artists as Deepak mentioned ,offering a low price to anyone who walks through their door let alone offering the works in the first place.Galleries would rather hold on to their works than sell at a discount.Auction houses are refusing to lower their estimates but can lower their reserves(silly!)..............It looks like some people are trying to hold the market up till the world economy rebounds!

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Permalink Reply by IAN Editor on October 19, 2008 at 7:55pm

Manoj

I think the Masters will see less downside on their pricing. What I do expect is significant correction in the prices of the contemporary artists including what we consider the best of the best inc the ones at auction this weekend in London. Galleries will try and maintain prices and may be able to do so for a period, 3 or 6 or 9 months or longer, but longer term we cannot ignore the fundamentals of lower demand due to a combination of different factors including change in buyer base (collectors vs investors), affordability (less people can afford $500,000 paintings) and selectiveness (only grade A works of artists with potential).

Some galleries will ultimately shut shop or operate uneconomically. Hopefully collectors will step in and support the right artists and galleries.

This may take time to happen but I think it will.

I have been offered about 5 good works by emerging and contemporary artists at their last auction prices in the last 5 days. I would not pay half the price of these works. And these are good works. Why? Prices will start falling and the falls could be dramatic for some artists.

Let the party begin.

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Permalink Reply by Kapil Chopra on October 19, 2008 at 9:11pm

I think the results were on expected lines, maybe just a bit harsh, come on who puts Harshavardhan in an auction, every gallery has 10 of his works, Talha Rathore just had a show with Aicon 3 months back and had no business to be in this list, look at the Sothebys results for yesterday, they were good. The thing is that 5 minute decision making on a name is gone, people are just more careful now and there is no frenzy. Overall, its great for the art market, prices will fall but will take 6 months to really reflect on the ground, a nice TV for 40 lacs is a great buy, I got offered one at 1.3 crores ( which is ridiculous), I think still there is a great market in the 2 -5 lac range, people are still buying nice names there. Atul & Anju may survive at around the 20-25 lac bracket for a nice big work, Baiju is nearly gone like Jayshree Chakravarty, so at around 5-10 lacs they will still have a value. Rashid should come back to 20-25 for 50 by 70 kind of size, Subodh is terribly overpriced and maybe you could get lucky between 1.2 to 2 crores.So I would rather go out and buy Seher Shah, with so many musuems and 3 Art basels and a value of around 3 lacs for a huge work or in the domestic market a George Martin at around 8-9 lacs for a nice 5 by 5 canvas, not many works available, decent value and an upcoming show with Vadehra or wait for a NS Harsha at around the 25-30 lac bracket. The Masters are all over rated and held by art dealers who bought at 10,000 so some will try and exit and would buy a Souza but only if its real cheap. I think the dealers are in big trouble and so are these bored housewives club galleries. I know some of the readers of this note may own some of the artists that I dont have a good opinion of but thats my personal view, so if you dont agree, I appreciate your viewpoint.

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Permalink Reply by Manoj Israni on October 19, 2008 at 9:31pm

Agree with Kapil especially on the point of the Harshvardhans.No offence.Regarding the new estimates 6 months down the line doubt it.Works will not sell but prices will remain the same.I dont think Galleries will sell so low.Dealers in trouble yes.Lets see what unfolds.

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Permalink Reply by IAN Editor on October 20, 2008 at 8:35am

The Subodh failed to sell at Christie's last night !!!

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Permalink Reply by Manoj Israni on October 20, 2008 at 8:44am

Saw it last night.Highest bid was 220000 GBP if I'm not mistaken.Didn't come anywhere close to the lower estimate of 600K! Lets see what happens with Sotheby's today.

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Permalink Reply by IAN Editor on October 20, 2008 at 8:55am

For now the party is over. I expect a significant reduction in transactions as dealers and galleries struggle to realign prices at least in the near term. Buyers are on strike. I don't expect Sotheby's to do much better today and next real test is Christie's in HK in a few weeks. As we see auction houses and galleries realign prices, say subodhs at 300-500K, we may see buyers come back in.

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Permalink Reply by Bhupesh gupta on October 20, 2008 at 9:23am

manoj,
FROM 600 TO 200 IS ALREADY 300 % CORRECTION OR MORE APTLY BURSTING OF THE BUBBLE!
people who sold subodh canvases @ 1 million should count their blessings it is here that the correction can be a savage 500% in a matter of months........HAS NOT EVER HAPPENED WITH HUSAINS.....SOUZA'S .....RAZA'S EVEN IF THEY WERE BOUGHT @ 10000 AND HELD ON EVER SINCE.........signs of our times but alas do we learn !

Manoj Israni said:

Saw it last night.Highest bid was 220000 GBP if I'm not mistaken.Didn't come anywhere close to the lower estimate of 600K! Lets see what happens with Sotheby's today.

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Permalink Reply by Manoj Israni on October 20, 2008 at 10:04am

Never thought it would get so bad!

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