Depending on your perspective, the verdict delivered by art services and technology company Winston Artory Group was either very good or very bad. A print that had recently been appraised for $1 million was, the company determined earlier this month, now worth just $300,000—a 70 percent decline in possible value. These were happy tidings for the insurance company that requested the appraisal, and potentially devastating for the print’s owner. “The insurance company loved it,” says Winston Artory’s Co-Executive Chairman Elizabeth von Habsburg. “The client, maybe not so much.”
Art is not easy to value. Unlike soybeans or gold, whose prices might shift but whose inherent qualities are immutable (one soybean is functionally the same as any other soybean), every artwork is different, and therefore must be considered on its own merits. Making valuation even harder is the fact that a huge chunk of the art market’s transactions are conducted privately, meaning that variations in price are often impossible to discern unless the world is explicitly told a sale has taken place. (Even then, the exact price is often suspect.)
During a boom market, when auction results set records and art fair reports include hundreds of sales, information about price fluctuations is relatively accessible. But in recent years, as the market has deflated, publicly reported sales have thinned out and value—good or bad—has become increasingly difficult to determine.
To find out more about the valuation process and the state of the art market today, I sat down recently with Habsburg and and her co-executive chairman, Nanne Dekking, founder of Artory, the art market data and technology company that recently merged with art appraiser and adviser Winston Art Group. We were joined by Winston Artory President Peter Loukas at the firm’s Midtown headquarters in New York City.
Everyone says the market’s down. Based on all of your internal data, how bad is it really?
Habsburg: The market’s tough, there’s no question about it. You see it with the dealers that are going out of business or deciding not to continue. I’m seeing things that would’ve sold three years ago just not selling—even with a more reasonable reserve at auction. It’s hard.
Can you break down your client base?
Loukas: We’ll probably end up doing about $15 billion of valuations this year. Three-and-a-half billion dollars of that will be from banks that are financing art collection for their clients, and about $5 billion will be for art and collectibles insurance. The remainder is a mix. It’s a lot of estate planning and settlement, and a lot of one-offs, where collectors are coming to us directly for valuations. And we’re seeing a growth in family office CIOs saying, “OK, this family is worth X, and 20 percent of that, I think, is in their art collection, but we don’t really know.” In a generational wealth transfer, it’s a critical component.
Are rich people really that clueless about what they have?
Habsburg: We were called a couple of years ago to look at a schedule review for a pretty major collector, but there was only $3 million worth of value in it. We looked it over, we did our calculations, we did some comparables, and it was really $20 million. The $3 million that was on there for insurance turned into $20 million for fair market value. So you’ve completely changed the dynamic there. Now they have $20 million [of art] and can get a loan from any of the banks or asset-based lenders.
How has your business changed in the current market environment?
Habsburg: One major change is the move to private sales. And we’re also seeing a lot more divorce appraisals, just to throw that in.
And how many appraisals do you do a year?
Loukas: I think last year it was somewhere around 46,000 objects appraised, and this year will probably be over 50,000. When value shifts in the market, up or down, people want to know the value of their art.
Presumably that’s particularly true when they’re trying to monetise it.
Loukas: We are called in when values are drastically changing. Obviously there’s a regular business for people needing to transact, but from a volume standpoint the market has been down the last couple years, and people are now thinking, “All right, if I can’t sell, or don’t want to sell, I still have to get this insured. I have to figure out what the value is.” You have natural disasters that are causing that too. I just spent a week in California and the entire topic was “What do we own? What is it worth? We know we’re underinsured.”
How often is too often to get something appraised?
It’s not as if the price of a Mondrian actually fluctuates from day to day.
Dekking: I don’t necessarily believe in real-time valuations, because how real is time in the art market? Quarterly evaluations is already enough. But at least we have the data and the backups and the team involved to give the banks a much more secure idea: This is the value of my client’s collection.
Where exactly do you get your information?
Habsburg: Public data has always been out there—we’ve been capturing it for the past 15, 20 years. We’ve been capturing every public, every private data source that we can. We have almost a million dealer data points. Clients have never been able to get that, so they’ve always come to us.
How do you get sales information from dealers?
Habsburg: Before every single art fair, we get all the price lists from all the dealers, and we go to the art fairs and we see what’s sold, and we keep all the data.
Dekking: We advise 30 percent of the biggest art collectors in this country. So every dealer sends information to us because they want us to share that with our clients.
Habsburg: And over half the transactional market is dealer, and private, and that is being completely overlooked by the public if they’re just looking at auction market data.
Do you think as the art market picks back up, your business will go down?
Habsburg: That overused phrase “death debt, divorce disaster”? That’s never going to stop. So transactions are not going to stop. They’re not going to slow down. The value of the objects may go down in certain areas, but other areas are so vibrant. We’ve seen new collectors in American paintings, which was dead after 2010. And we see new collectors in 18th century sculpture, which is kind of amazing. So we’re seeing certain areas really grow.
By James Tarmy
Learn more:
While sales at this year’s fair were uneven, newer players, platforms and art forms offered cause for optimism in a stagnant sector, writes Marc Spiegler.
