Why New York Owns the Top End of the Auction Market
In case there was any doubt, New York is the dominant city in the global art market for selling big ticket works. Among the 100 artists whose works top the list of most expensive pieces sold at auction, 56% set the record for their priciest work in the Big Apple. New York was also the site of every single sale currently in the top 10. London was second, serving as the home to 25% of the sales, while China (including Hong Kong) came in third at 18%.
But what explains New York’s undisputed place at the top of the heap? Frank Sinatra glory aside, it’s the major concentration of wealth in New York, said art adviser Todd Levin. “And not just people who live here full time, but even people who are outside of the city or outside of the country but also have either business interests and/or part time homes here.” An enormous amount of wealth is required for an individual to be liquid enough at any point in time to purchase works over the $20 million mark. And while London is undoubtedly a major conduit of global capital, coming in second to New York in terms of financial and art market influence, “there’s a substantially smaller amount on a relative scale,” said Levin. That is both in terms of “the amount of actual money flowing through the City at the ultra-high-net-worth level and the number of people who control that money,” he added.
New York’s incredible amount of wealth has made it not only a center for the top end of the art market but the mecca of the art world itself. “New York is the contemporary art world,” said Don Thompson, economist and author of the The $12 Million Stuffed Shark. There are of course numerous factors to explain the disparity between London and New York, some impacting consignors, some impacting buyers. “All other things equal, you are probably better off to consign to New York than you are to consign to London,” said Thompson, who also notes London’s share of high end sales has been declining steadily for years.
Some argue that UK provisions that guarantee some percentage of a sale go to the artist—known as the Artist Resale Right (ARR)—are also partially responsible for the disparity between New York and London’s sales. The ARR is certainly a factor in the minds of some consignors of works by living artists, when deciding between putting up a piece in a London or New York sale. But, given that all but eight of the records that make up the top 100 artists with the auction market were achieved by individuals who are now dead, the controversial (and possibly short lived, following Brexit) ARR provision isn’t a defining factor in “most cases” when consigning a work by artists on this list, said Levin.
London and New York both have advantages over a number of other cities where buyers can buy and sell art, in that they’re both long-tested and well-regulated ground. Each city enjoys a tried-and-true legal apparatus with applicable precedents for most art disputes. This means sales can generally occur without obfuscation or corruption. And, in the event a dispute arises, ample specialized service providers are poised to step into play. There are a number of “lawyers in New York who spend a majority of time on art world related disputes—ownership, authenticity, change of ownership, whether art was seized by a government at some point, and so on,” said Thompson. “Those lawyers bill more money a year than the size of the Canadian art market—which is about $65 million,” estimates the economist. “There is a trustworthy legal system.”
Such is not necessarily yet the case in China. Hong Kong offers much more by way of legal certainty than the mainland, but trouble abounds beneath the amounts works ostensibly fetch in the country. “The physical numbers are big but the question is, how many of those totals were actually paid and how much of that is just pure market manipulation to get the numbers up?” said Levin, adding that such inflation and nonpayment are “a very significant problem.” Such a lack of confidence “in any sort of market causes people to pull back or at the very least think carefully about how involved financially they’re going to be in that market,” Levin added. Thompson noted that predicting the economic climate in China going forward is incredibly difficult, since the economy is impacted by the policies of a non-transparent government, and thus demand can fluctuate in a way unfriendly to choosy consignors of top lots.