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Thursday, November 19, 1998 Published at 16:07 GMT

Business: Your Money

Art back in fashion

More art is going under the hammer than ever before

The recent sale of a Van Gogh painting for $71m shows that the art world is booming again. In this special report BBC News Online looks at the economics of the art market.

Christie's and Sotheby's, the two leading auction houses reported that business in their most recent financial year increased by 26% and 15% respectively.

Christie's auction sales were $2bn, its second highest ever.

[ image:  ]
Impressionist sales were up by 89%, contemporary art by 36%, and Old Masters by 17%.

This month two important collections come onto the market which will test the depth of the recovery - the Morton G. Neumann collection and the Readers Digest collection.

They contain some of the most important works of late 19th Century and early 20th century masterpieces to appear at auction in many years.

Higher prices have been paid for paintings by Picasso, Van Gogh, Cezanne, Monet and Renoir than any other artists.

But auction houses feared that the worldwide financial slowdown might put buyers off.

So reserve prices have been kept low to encourage sales.

Now they are more confident.

"I am much more optimistic than I was a few weeks ago when Wall Street took a dive," said Alex Apsis of Sotheby's.

Boom and bust

[ image: Sotheby's business has gone up by 15%]
Sotheby's business has gone up by 15%
The fine art market has been in the doldrums for a decade following the extraordinary boom of the late l980s.

Japanese institutions bid up prices to unsustainable levels during the years of their "bubble economy," spending $7bn and enriching the art houses of London and New York.

The trend was started when Yasuda Fire Insurance bought Van Gogh's Sunflowers for $40m in 1987 to use as its corporate logo.

Japanese businessmen Ryoei Saito and Tomonori Tsurumaki still hold the record for their l989 and l990 purchases of a Renoir, Van Gogh, and a Picasso.

Ryoei Saito, who bought the world's two most expensive paintings, said he spent the $160m as revenge on Sumitomo Bank, who had refused him a loan for his paper company.

But after his death the Renoir was reported sold for $50m - nearly half price - to US businessman Ronald Lauder, heir to a perfume fortune.

Prices are still some 25%-40% below their 1990 levels for most categories of fine art.

Rich collectors return

It is the rich personal collector who has always been the mainstay of the fine art market.

Only one museum has the clout to participate in the top end of art auctions - and that museum, the Getty Museum of Los Angeles, was founded by an oil tycoon.

And some of the rich individuals are feeling more confident about their wealth after six years of a stock market boom.

Greek shipping magnate Stavros Niarchos and US media moguls Si Newhouse and Walter Annenberg have been among the biggest collectors.

Now the new rich from the boom in hi-tech industries in California are also coming into the market.

Forced sales

But the volume of paintings coming to the market is also a sign of some distress sales.

Christie's is selling 500 works of art acquired by the Lake Credit Company in Osaka, Japan, that were acquired as collateral for property loans that went wrong, including Tsurumaki's costly Picasso.

And Reader's Digest, the US magazine, is selling off part of its collection of Impressionist Art to boost its ailing corporate profits.

Even Charles Saatchi, the advertising millionaire who collects modern art, is selling 130 works of art to fund his scholarship fund.

It was noticeable in the most recent sales that some works of modern art did not even reach their reserve prices. This time, the boom in fine art is likely to be more selective.

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