With the big New York Imp/mod and contemporary sales taking place this month, many art market observers are wondering how great an effect, if any, the stock-market downturn will have. What better time to check in with an art market economist? The Dublin-based Clare McAndrew runs the research and consulting firm Arts Economics, recently completed a study of the global art market for the European Fine Art Fair (TEFAF), and authored last year’s The Art Economy: An Investor’s Guide to the Art Market (Liffey Press). She tells Sarah Douglas why investing in art will always be a safe bet.

What was the most striking result of your study for TEFAF?

The rise of the Chinese market. In the past 10 years, the largest art markets have been the U.S., the U.K., France and Germany, in that order. In 2006 China bumped off Germany. Then Artprice, an internet database, came out with figures indicating that in terms of sales at auction, it had bumped off France. That’s big.

You discuss the growing number of high-net-worth individuals in emerging economies. Are they still mainly interested in buying their own nations’ art?

Although these countries are becoming global centers for their national art, I don’t think they will become centers for global sales, as London and New York are. And the wealthy expatriate Chinese, Indians and Russians are buying their own national art.

We have seen Russian and Hong Kong–based collectors bidding in New York sales. Are we likely to see mainland Chinese buyers there soon?

I wouldn’t expect so. In terms of wealth development, China is growing quickly, but it is still in an early phase of development in terms of their collectors. You have to remember that 20 years ago it was against the law for people to own pieces of art in China.

You reported that over the past five years, sales of contemporary art have risen by more than 330 percent worldwide, and prices have doubled on average.

But what was really amazing was that the bulk of works sold were at very low price points, so it is the huge, multimillion-dollar sales that are dragging up the market.

Say someone doesn’t get his or her bonus and there aren’t two bidders driving up a price—wouldn’t we lose that crucial upper segment?

Not necessarily. The number of people who can do that kind of bidding is increasing dramatically. And things are cyclical. Eight years ago when I worked on a study with the art market economist David Kusin, we found that the decorative-art market was three times the size of that for fine art. Now the situation has completely turned on its head, which is amazing. Decorative art is at a low point in its cycle at the moment, but I could see those sales rising and fine art dropping off in years to come.

What effect is the weak U.S. dollar having?

I surveyed dealers about their biggest challenges, and a lot of the Americans remarked on how difficult it was for them to buy inventory internationally. It’s a double-edged sword, as it is with all currency fluctuations. One thing about the art market is that it has a much slower cycle than many other markets, so in some ways it’s more insulated from a lot of these currency changes. The drop in the dollar has been protracted. People can hold art and wait for buying and selling opportunities.

We’ve seen a big downturn in the U.S. economy recently. Will we see effects on the art market?

Art has had a low correlation with other financial sectors and property, so the art market should stay buoyant in coming years, despite what’s happening in other markets. A more important point, given the credit squeeze, is that art is probably the least leveraged of all the asset classes. People don’t generally go out and get a loan to buy art.  

"Conversation with Clare McAndrew" originally appeared in the May 2008 issue of Art+Auction. For a complete list of articles from this issue available on ARTINFO, see Art+Auction's May 2008 Table of Contents.