Art for investment's sake

The recession is over, let us count the ways. The country's current account deficit has dramatically reduced, gross domestic product (GDP) has increased and consumer confidence is soaring.

These are not the only measures. Before last week's cancellation of the auction of Ralph Hotere works (because of disputed ownership), eager buyers were expected to shell out about $500,000 for the privilege of owning a piece of New Zealand history. That's a lot of money.

The fine arts have always been considered a reliable barometer of an economy, particularly at the top end, which attracts the discretionary spend of high net worth individuals.

Perhaps the art market knew something that the financial markets did not? But, as economists have warned, the fractional GDP growth in the June quarter and the improved external debt situation mask underlying symptoms that still threaten to bury the ailing patient known as the New Zealand economy.

Similarly, the aborted Hotere auction obscured the deeper malaise afflicting the New Zealand art market.

As businessday.co.nz reader Tim noted in July in an online posting, the arts are the first to be hit and the last to emerge from recession.

We noticed in the spring of 2007 a distinct slowdown but we couldn't put a finger on what was going on, says Gow Langsford Gallery director John Gow. In 2008 sales were sluggish. Then at the beginning of 2009, everything just stopped. Really good clients just put away their wallets. It was scary.

Both he and Andrew Jensen, director at Jensen Gallery, say trading conditions for the past 18 months are far worse than those following the 1987 sharemarket crash and recession of 1991. Some galleries operate overheads in the region of $120,000 a month and with no business, the red ink begins to quickly blot gallery balance sheets.

Scores have closed, Gow reports, and not just the smaller ones. In Christchurch alone, he says, major players such as Fisher, Campbell Grant and 64 Zero Three have shut up shop. "That's 50 per cent of their galleries gone  poof.'' In Auckland, Ferners is no more, Fisher has closed its Parnell office and Compendium has disappeared.

It has been a tough year, Gow says. Art prices globally have dropped by as much as 30 per cent. The situation is perhaps worse in New Zealand.

Some are blaming the auction houses, which are still doing reasonable business, for driving down prices. Buyers who once would have used galleries are now turning to auctions, confident in the knowledge that they'll achieve knock-down prices. It is an argument similar to that by farmers about Fonterra's online milk powder auction.

Artists' gossip is thick with tales of auctioneers promising a higher price to painters and a bargain-basement figure to buyers. Sellers are being urged to lower the reserve in order to ensure volumes are maintained, they say.

Costs of artist materials have soared, compounding the sector's woes. One problem is that many artists source materials from other hard-hit industries, such as the boat sector, where suppliers have gone out of business. These people now have to import their own materials.

Cost-cutting is essential. "We've taken a good look at our overheads and given them a thrashing,'' says Gow.

Last weekend, Auckland galleries launched the Auckland Art Precinct, in an unparalleled co-operative venture to boost custom.

The aim is to make the galleries in the block of Wellesley St, Kitchener St, Victoria Lane and Lorne St the premier art destination. Advertising and promotional costs are being shared, as are customer bases and opening nights.

It is, in short, the arts equivalent of the farming co-operative.

While Hotere hogs headlines, a better indicator of art market health will be the annual catalogue exhibition put on by John Leech and Gow Langsford galleries and opening on October 13.

Gow's hopeful of a good result: ''It's a good time to buy art, it's a buyer's market.''

 But he warns the sector is going to take a long time to recover. And he worries another financial market aftershock will knock off any nascent recovery.

Jensen, who is also spokesman for the Contemporary Art Dealers Association, is a little more optimistic. ''We're hopefully approaching the end of a remarkably complex period of fiscal instability and the art market has gone through a major correction, like many areas of investment.''

Oscar Wilde's dictum seems increasingly appropriate: "We prefer to know the price of everything and the value of nothing''.

 Nick Smith is a freelance journalist.