How Investors Can Thrive in a Lopsided Art Market

Andreas Backoefer
May 1, 2014 7:47AM

Art collectors are advised to buy what they love rather than what they think will increase in value. But wealthy investors have bid up prices for works by a handful of Contemporary artists so high that it’s turning the heads of collectors of more modest means. Authorities on art investment worry that the budding romance could end quickly and badly.

The market for fine art seems benign, even healthy, on the surface. Global sales rose 7.5 percent last year, to €47.4 billion or $65.5 billion, a shade under the 2007 all-time high, according to the recently published annual report of The European Fine Art Fair.

But those figures are distorted by developments in the stratosphere. A small fraction of auction sales were executed for eight- or even nine-figure sums and were concentrated in one segment of the market, Postwar and Contemporary, and one country, the United States. Prices and numbers of sales in the other three main groups into which Tefaf divides the market — Modern, Impressionism and Post-Impressionism, and Old Masters — were all lower in 2013 than in 2011.

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Andreas Backoefer