Astrange rustling murmur fluttered around Sotheby’s auction room as the bids
for Francis Bacon’s self-portrait rose ever higher: part-sigh, part-gasp,
part-whistle. This is the sound of money – serious, new, ready money –being
spent on art at a rate that the world has never seen before.
The buyers had begun arriving hours earlier: hedge-fund managers in suits
without ties, New York dealers, a smattering of Russian oligarchs, women
with expensive, understated jewellery and expensive, overstated lips. There
was much air-kissing and rubber-necking. It was like an exclusive cocktail
party with no cocktails, a Hollywood premiere with no film.
Andy Warhol’s vast canvas of a dollar sign (estimate: up to £2.5 million)
loomed over the salesroom, setting the tone precisely.
Bidding for the Bacon – painted because the great British artist had run out
of other sitters – started at £6.5 million, and then rocketed, climbing
every half-second by a quarter of a million pounds, rather more than the
value of the average British house.
At £16 million, only two contenders remained, both in the bank of telephone
bidders, a thickset man and a woman in white. Cradling a phone in one hand
and a bidding paddle in the other, they duelled with the nonchalance of
people who knew precisely how many millions of someone else’s money they
could spend. They never once made eye contact. Finally, the woman shook her
head and turned away, and Bacon’s crouched image of himself sold for £21.58
million – another staggering price, another record smashed. There was a
burst of applause.
This was the week that the London art market went stratospheric. On Tuesday,
one of Monet’s finest water lily paintings sold for £18.5 million. On
Wednesday, Lucian Freud’s painting of Bruce Bernard fetched £7.86 million,
making Freud Europe’s most expensive living artist – but only for 24 hours
because on Thursday Damien Hirst’s medicine chest Lullaby Spring sold for
£9.65 million.
The frenzy of art-buying offered more evidence of the widening gulf between
London’s super-rich and the rest of the country. This week it was revealed
that only a fraction of the 400 people earning £10 million or more in
Britain pay income tax, while the number of individuals earning more than
£500,000 has swelled by nearly 60 per cent in the past four years. At the
same time as wealthy buyers were filling the auctioneers’ salerooms, private
equity chiefs were being questioned by MPs over their refusal to say how
much they were paying in tax.
Such is the power of the super-rich that in the space of just four days,
Sotheby’s and Christie’s sold artworks for a mind-bending £414 million,
breaking all previous records for London sales.
The art market has experienced gold rushes before but most experts say that
nothing has been seen on this scale. Of the world’s 946 billionaires, 178
are recently minted, and many of these are investing in art, bringing a new
kind of buyer to the market. Sotheby’s and Christie’s sales went from $5.8
billion in 2005 to $8.2 billion in 2006, and overall global sales of fine
art reached an estimated $25 billion last year.
Where once the British art market was dwarfed by New York’s, it has boomed
over the past few years, with London developing as the centre of global
capitalism.
Alongside the Russian oil magnates, the Chinese businessmen, the Indian
digital billionaires and the Middle Eastern oil barons are the hedge-fund
managers and private-equity managers, with money to burn and large walls to
decorate. The buying power of London’s richest citizens is now greater,
compared with the average earner, than at any time since the 1930s,
according to the Financial Times. As in the 1930s, the new class of
billionaire is funding a new art boom, most notably in contemporary and
postwar art. Ken Griffin, founder of the Chicago-based Citadel Investment
Group, recently bought the Jasper Johns painting False Start for $80
million, and Steve Cohen, of SAC Capital, has spent more than $600 million
on artworks, including one of Hirst’s sharks for $12 million.
For some buyers art represents pure investment; for others a form of luxury.
There is simply so much money out there concentrated in the hands of a
few,that art is the next must-have asset. In the words of The Economist, the
über-rich “have run out of houses to buy and yachts to launch, and would
like to display their wealth on their walls”.
The hedge-fund tycoon who has brought home the bacon now wants to bring home
the Bacon. The US collector who bought Bacon’s self-portrait on Thursday was
even allowed – before deciding to bid – to hang the painting in his
apartment to see whether it would suit its surrounding.
Andy Warhol put it best: “I like money on the wall. Say you were going to buy
a $200,000 painting. I think you should take that money, tie it up, and hang
it on the wall. Then when someone visited you, the first thing they would
see is the money on the wall.” But Warhol might have been staggered by quite
how much money he has put on walls in recent months: his Green Car Crash
sold for $71 million last month, four times his previous record.
An advertisement in The Times last Wednesday reflected the mood of auctioneers
who know that vast City profits have created a new sort of collector with an
impulse to splurge, limited expertise and perhaps a sense of humour.
The advert pictures a Modigliani nude, going on sale next week with a top
target price of £450,000. Beneath the headline “Naked ambition?” Bonhams,
the auctioneers, observed: “If you’re a collector with serious ambitions you
might well pursue this Modigliani watercolour. . .” The implication was
clear: the ambitious millionaire needs art, but may not be able to identify
a Modigliani without prompting.
For new-made City moguls familiar with juggling percentages, the art market
looks like easy pickings: according to Robin Duthy’s Art Market Research,
contemporary art has risen 700 per cent in value since 1985.
“Commerce and culture have always gone hand in hand,” Jussi Pylkkänen,
president of Christie’s Europe, says. “This week has been incredible for the
number of collectors and clients coming into London: Russian, Middle
Eastern, Asian, American. Buyers and international customers are comfortable
here. But there is also very significant British interest, with the huge
wealth that is being generated here.”
Auction houses reject talk of a bubble, and dismiss fears of an imminent art
crash similar to that of 1990-91. “That boom was a very thin crust,” says Mr
Pylkkänen of a period when Japanese collectors bought up Impressionist
masterpieces for huge sums, but often with borrowed money. “This time around
the interest is very wide and very deep, and it is fuelled by real money.”
Such is the hunger for art that buyers have reported a surge in “gazumping”,
where agreeing a price for a work no longer guarantees that it will travel
home with you. Desperate collectors have allegedly offered tens of thousands
of pounds on top of the accepted price as bribes to secure works that may
have been sold already. The practice may be viewed as selling sacrilege, but
sources suggest that it is becoming increasingly widespread. The new breed
of art buyer has brought a new style to the salesroom. Hedge-fund managers
are described by sales experts as particularly decisive, whereas the new
Russian collector can be more raucous. In a duel over one painting in last
week’s Russian art auction, one private Russian buyer threatened to thump
his rival; in another incident, a large turquoise parrot escaped from its
owner’s shoulder and flew squawking around the salesroom.
At the annual Art Basel fair in Switzerland, where 300 galleries from 30
countries were selling the work of about 2,000 artists, the VIP guests
invited for the first day’s viewing started queuing long before the show
opened.
Peter Vetsch, Art Basel’s communications manager, said: “At 11 o’clock when it
opened, this crowd rushed in, racing to get to the booths and buy the art
there. Five or ten years ago people would have taken time to contemplate it
before buying but now we are seeing such a big interest in art that there
isn’t time for that.”
A record 60,000 people attended the event, where prices range from just around
£200 to £30 million. More than 200 private jets landed at Basel-Mulhouse
airport during the show.
From kings to railroad millionaires, the super-rich have always looked on art
as a way to demonstrate sophistication and taste, but also as a form of
legacy. When asked recently about his attitude towards the art-loving
millionaires who bankrolled him, Damien Hirst was adamant: “I don’t see what
else you can spend your money on. If you want to own things, art is a pretty
good bet. Buy art, build a museum, put your name on it, let people in for
free. That’s as close as you can get to immortality.”
The super-rich
“Entrepreneurial economies which have high rates of growth and high rates of
job creation do lead to great divergences of wealth. When economic
situations get bad, it takes a spark to ignite a violent reaction” Sir
Ronald Cohen, founder of the private equity firm Apax
“They are not in for the long-haul, they are in for making money fast and they
do not care who they hurt in the process” Paul Kenny, general
secretary of the GMB Trade Union, to the Treasury Select Committee about the
behaviour of private equity firms
“You guys are the really bright guys. You are the masters of the universe. I
ask you how much you pay in capital gains tax and you can’t tell me? I find
that amazing” John McFall, Treasury Select Committee chairman, to
heads of private equity groups
“It’s quite wrong that the cleaners we represent in Canary Wharf and the City
of London are paying tax like any other citizen but the people that they
clean for are getting away paying minimal tax earning fabulous wealth” Jack
Dromey, deputy general secretary of the Unite union
