How The Art Market Works THE ART GUIDE SERIES EDITION TWO. How The Art Market Works

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1 How The Art Market Works THE ART GUIDE SERIES EDITION TWO 1

GRIA SHEAD La Belle Inconnue 2016 Oil on canvas 92 122cm Contents 3 Introduction 4 The primary art market 5 The secondary art market 6

2 GRIA SHEAD La Belle Inconnue 2016 Oil on canvas cm Contents 3 Introduction 4 The primary art market 5 The secondary art market 6 Buying at auction 8 Role of the gallery 10 Galleries online 11 Artwork pricing - the primary market 12 Artwork pricing - the secondary market

3 Introduction Understanding how the art market works is essential for making the right collecting decisions. Between the artist creating the work and the collector buying it, there are a number of key players. In this guide we explain the two sides of the art market and the role of the main protagonists dealers, galleries, art consultants and auction houses. We give tips on how to buy at auction and identify key elements to look for, before raising your hand. We explain the criteria by which artworks are priced and introduce you to the world of online art buying. JONATHAN DALTON The Remnants of a Migrant s Tale 2016 Oil on canvas 91 x 121cm 3

4 The art market is essentially divided into two the primary and secondary market. The Primary Art Market LAURA MATTHEWS Hiraeth Oil and spray on canvas cm The first sale of new works by an artist is broadly known as the primary art market. This is where the price of an artwork is first established. Most primary market sales are made through an art gallery or dealer from solo or group exhibitions, the gallery s stock room or art fairs like Sydney Contemporary or Hong Kong Central where the gallery or dealer exhibits their key artists to a larger, international audience. Some artists operate more directly with the market, via their websites and instagram. Whilst this can work very well for artists in the short term, the reality is that it is difficult for the artist to develop their profile without the collaboration of a gallery. Art galleries invest many resources in building the artist s brand and this partnership allows artists to concentrate on creating their best art. Art consultants don t generally have an exhibition space or exhibition programme but may curate exhibitions. They work closely with galleries and usually work with their clients on a retainer or fee basis. 4

The Secondary Art Market The secondary art market generally refers to second and subsequent sales of an artwork. The auction house is the major seller in the secondary market.

5 The Secondary Art Market The secondary art market generally refers to second and subsequent sales of an artwork. The auction house is the major seller in the secondary market. It s essentially an open market and very competitive, both in the sourcing and selling of the works. Anyone who registers can buy the work at auction. The auctions tend to grab the headlines in the press and operate as a barometer for the art market in general. Auction houses can participate at the ultra high end of the market to the low end where they act as an artwork clearing facilitator. Auction results are public and prices realised are published online through websites such as Artprice (artprice.com) and Australian Art Sales Digest (aasd.com.au). These are worth subscribing to, for tracking individual artist s sales and price histories for individual works. Many collectors opt for the more discrete nature of private treaty sales through art galleries and dealers. In this way works are not publically exposed and the sale price is not published for general reference. The artwork remains fresh giving clients the opportunity to approach an auction house at a later date. Generally speaking, successful secondary market sales tend to be mid-career or established blue chip artists. Auction headline results are very often by artists who are no longer alive as there is a finite supply of work. 5

JOHN OLSEN The Barrage 2006 Oil on linen 106.

6 JOHN OLSEN The Barrage 2006 Oil on linen x 122cm Buying at Auction There are a number of auction houses operating throughout Australia, the most prominent being Sotheby s, Deutscher and Hackett, Menzies, Moss Green, Bonhams, Shapiro and Leonard Joel. They often run a tiered system of auctions from headline grabbing blue chip sales through to weekly estate auctions that are unreserved. Auction Checklist In recent years there have been a number of Sunday auctions in Australia. They tend to buy wholesale and look to sell under the established gallery market. It is the view of the art world that if an artist is selling though this model, the longer term Check sustainability the provenance of their pricing - is the doomed. history of ownership Auctions Review can the present authentication great buying opportunities - exhibition catalogues, certificates of authenticity but can also be a minefield if you don t do your due diligence. Using your head ahead of your heart is a wise approach to this method of art buying. Request a condition report on the artwork Attend the preview to see the work in the flesh It s essential to know what you re buying do your research and get sound advice from professionals. An artwork by a big name may seem cheap but there is always a reason for this. The checklist on the next page will help you avoid the pitfalls... Check prices achieved for works by the artist from similar series and periods 6 Starting an Art Collection

7 Make sure you understand the way the auction process works and know the bidding increments. Remember too, auction houses charge fees. The buyer s premium (BP) is generally 20-25% on on the hammer price. So if you successfully bid $6,000 on a work, expect to pay around $7,500 plus gst. You may be subject to gst on both the hammer price and premium. Be aware that resale royalties may also apply to artworks you are interested in you should familiarise yourself as to where and how this applies. Information on the Resale Royalty Act can be found here: org.au/about-resale-royalty.aspx ROBERT DOBLE Titanium 2016 Gloss enamel on aluminium composite board cm Auction Checklist Check the provenance - the history of ownership Review the authentication - exhibition catalogues, certificates of authenticity Attend the preview to see the work in the flesh Check prices achieved for works by the artist from similar series and periods Request a condition report on the artwork 7

Role of the Art Gallery ADNATE Exhibition Opening Into the Sun Galleries are commercial enterprises but walk a delicate line between culture and commerce.

8 Role of the Art Gallery ADNATE Exhibition Opening Into the Sun Galleries are commercial enterprises but walk a delicate line between culture and commerce. Galleries need to sell artwork to survive and provide an income for artists to continue working. At the same time, they are providing a vehicle for culturally significant artwork to be exhibited and collected by institutions. The commercial art gallery is the major conduit between the artist and art buyer. They are the market makers. Their role is multi-faceted a good gallery will be skilled in art direction, artist mentoring, client relationship-building, educating, sales and marketing. Their job is to curate the work and encourage artists when they are struggling for inspiration. Often galleries will support the artists they believe in when sales are slow to keep their career moving forward. Fundamentally, great galleries are much more than retail outlets for the artist s work. Indeed, the legacy and reputation of the gallery can increase the value of a work by an artist. 8

LOUIS PRATT Rat Trap 2016 Steel, wood, coal and gold leaf 240 100 45cm Galleries generally specialise by art period such as contemporary, modern, 20th century or by geography; Chinese art for

9 LOUIS PRATT Rat Trap 2016 Steel, wood, coal and gold leaf cm Galleries generally specialise by art period such as contemporary, modern, 20th century or by geography; Chinese art for example, ethnography such as Indigenous or by medium like photography or work on paper. Galleries select artists that they identify as talent with something to say that is important. Specific artist career groups such as emerging, mid-career or bluechip are also a method of focus for galleries. point for emerging artists looking to exhibit bodies of work. Run and self-funded by artists, they can take the form of galleries, art spaces or temporary events and can be a great source of cutting-edge talent. The majority of Australian galleries specialise in late 20th century, contemporary and/or Indigenous art. There are also a number of galleries that are known as Artist Run Initiatives (or ARIs) often the starting 9

10 The digital era has seen the rise of online galleries. Galleries Online ANTHONY WHITE Triumvirate 2016 Oil on linen 90 62cm Some galleries sell art only via an online portal but most use their website as a window to their stockroom and services. The website is just one component of the art buying experience but usually a touchpoint in every transaction. Initial interest by clients at NandaHobbs Contemporary is usually initiated by digital image. Ongoing communication by phone, or in-person follows this first enquiry. Obviously trust and reputation are fundamental to this scenario. talent that fits with the profile of the gallery and its collectors. Diversity of style, genre and technique is important within the gallery s portfolio of artists no two artists should be offering the same work. A good gallery will collaborate with the artist, communicating the needs of the market without jeopardising the artist s integrity. The role of the gallery starts with identifying 10

ANDREW MCILROY Exhibition South Wind Like all markets, artwork prices are ultimately determined by supply and demand. We explain how pricing is established in both the primary and secondary market.

11 ANDREW MCILROY Exhibition South Wind Like all markets, artwork prices are ultimately determined by supply and demand. We explain how pricing is established in both the primary and secondary market. Artwork Pricing The Primary Market Pricing in the primary gallery market is set by the gallery and the artist. In Australia, there are generally accepted price points for the various stages of an artist s career. As exhibitions sell well and artists profiles build, galleries will increase the prices. It is not in a gallery s interest to over-price a work as it s difficult to adjust the price once set. Artists tend to price work by size and medium. Although this is not always the case, it allows for comparison of similar scaled works and their trading history over time. Throughout an artist s career, some work or a series of work will be more coveted and keenly collected. It can be an aesthetic image rationale or an important cultural moment in the artist s career. The secondary market value for these works over time, will reflect this. Obviously art sales are not immune to economic forces. An under-performing exhibition may have more to do with general economic confidence than the quality of the artwork

LUKE CORNISH (ELK) Kowloon 2015 Aerosol on dibond Edition o f 3 / 160 110cm JIM THALASOUDIS Skipping the Night Away 2016 Oil on linen 137 137cm Artwork Pricing The Secondary Market In the secondary

This can partly be due to the amount of work available to the auction and/or how the work is received by a broader audience.

12 LUKE CORNISH (ELK) Kowloon 2015 Aerosol on dibond Edition o f 3 / cm JIM THALASOUDIS Skipping the Night Away 2016 Oil on linen cm Artwork Pricing The Secondary Market In the secondary market, auction houses determine the formal trading market price point. This is usually based on precedent. Some artists can do extremely well in the primary market but not perform as well at auction. This can partly be due to the amount of work available to the auction and/or how the work is received by a broader audience. An estimate is given to indicate the expected lowest and highest value that a work could be expected to sell for in the current market. Remember this is a guide only and the final price might be higher, lower or the work may not sell ( passed in ). Generally speaking it takes time for an artist to build a secondary market presence and pricing. Don t expect to buy a work in the primary market by an emerging or mid-career artist then sell at auction within a short timeframe. Pricing of artwork on the secondary market can also be impacted by condition and provenance (where it came from) as the work may have passed through several owners. 12

Art Guide Series Next Issue: Buying art for investment Art investment strategies Earning income from your art Risks and opportunities of art investing Diane Gall (Cover) Life Among the Strelitzias

13 Art Guide Series Next Issue: Buying art for investment Art investment strategies Earning income from your art Risks and opportunities of art investing Diane Gall (Cover) Life Among the Strelitzias 2013 Oil on linen cm Katy Woodroffe Memory Pool (Back Cover) 2016 Acrylic and ground pigment on paper 137 x 134cm nandahobbs.com info@nandahobbs.com Level 1, 66 King Street Sydney

Contemporary ART RENTAL. Starting an Art Collection

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