Sotheby’s Asian Art Auction Falls Short of Expectations Amid Rising Interest Rates

Edited by: TJVNews.com

Sotheby’s, a renowned auction house, recently held its largest-ever auction of a single owner’s art collection in Asia, but the results were below expectations, possibly signaling the impact of rising global interest rates on the fine art market, as was reported in the New York Times on Thursday. The auction took place in Hong Kong and was streamed online for bidders worldwide, featuring artwork from the collection of Liu Yiqian and Wang Wei, prominent figures in the art investment world, the NYT report said.  However, some key pieces sold for less than anticipated, and a significant number of artworks failed to meet their reserve prices.

Liu Yiqian, a former Shanghai taxi driver, and his wife, Wang Wei, have gained international recognition for their substantial art collection. The NYT report indicated that Liu’s wealth was primarily amassed through investments in Chinese real estate and pharmaceutical stocks. Notably, he made headlines in 2014 and 2015 by acquiring Chinese antiquities and Western paintings at record prices. Among his acquisitions were a $36.3 million ancient Chinese porcelain cup, a $45 million 600-year-old silk wall hanging, and a $170.4 million Amedeo Modigliani painting titled “Nu Couché,” according to the NYT report.

Despite these extraordinary purchases, the recent auction did not include these specific artworks. Instead, it featured a different Modigliani painting, “Paulette Jourdain,” which had previously sold for $42.8 million in 2015, as was mentioned in the NYT report. Sotheby’s anticipated that it would sell for “in excess of $45 million” in this auction. However, the final sale price, including fees, amounted to $34.9 million, making it still the highest price paid in Asia for a modern Western work.

The disappointing results of the auction raise questions about the influence of rising global interest rates on the art market. As was said the NYT report, higher interest rates have made traditional financial assets such as bonds and bank accounts more attractive, as they offer returns that art investments do not. While fine art provides aesthetic and cultural value, the associated security and insurance costs can be substantial, according to the report.

According to Amy Whitaker, an associate professor of art and economics at New York University, the surge in interest rates alters the incentives for individuals to allocate their assets into art investments. This shift may be contributing to the challenges faced by art investors in the current global economic environment.

Art investors do not just follow interest rates but “are often championing the economic sustainability of artists,” Dr. Whitaker told the New York Times.

Out of the 40 artworks presented at the auction, 10 failed to sell due to the final bids falling short of the reserve prices, which serve as minimums for a transaction to occur, according to the NYT report.  Notable among the unsold artworks were Léonard Tsuguharu Foujita’s “Nu au chat” and David Hockney’s “A Picture of a Lion,” with estimated prices ranging from $5.1 million to $7.7 million and $5.4 million to $7 million, respectively, the report added.

Despite the mixed results, the auction did witness strong bidding for more affordable artworks, particularly those by younger artists who are still active today. For example, “Room With Venus” by Ji Xin, a contemporary Chinese painter, initially estimated at $38,000 to $64,000, sold for $243,000, including the auction house commission, as was noted in the NYT report. This suggests that some bidders were seeking bargains among the less expensive pieces.

Art investors not only take into account interest rates but also advocate for the economic sustainability of artists. The art market is multifaceted, and the value of artworks can fluctuate based on various factors, including the artist’s reputation, the provenance of the artwork, and market sentiment, the NYT report said. Therefore, while economic conditions such as interest rates play a role, they are not the sole determinant of an artwork’s success at auction.

As the auction continued into the evening, there was a hint that market weakness might extend beyond fine art. Separate from Liu Yiqian and Wang Wei’s collection, Sotheby’s also auctioned an 11.28-carat blue diamond set in a gold ring, which sold for $25.3 million, slightly below the estimated range of $26.6 million to $36.8 million, according to the NYT report. This suggests that market conditions are impacting luxury assets beyond the art world.