Art market bubble bursting – is the vintage car market next?

Well, there is one market bubble that is already beginning  to burst in front of our eyes: the art market.

Bloomberg News reported that Russian billionaire Dmitry Rybolovlev spent $85 million in 2008 to purchase “Te Faire (La Maison)”, a painting by legendary artist Paul Gauguin. This week, he put that same artwork on the auction block and was only able to get $25 million, a 74 percent loss – after commission he will receive $22 million.

The fertilizer mogul has invested approximately $2 billion on 38 pieces of art (Gauguin, Picasso, da Vinci, etc.) over the last few years. As of late, he has sold three paintings for a loss of roughly $100 million. He is expected to sell five more works at Christie’s that are likely to be below their purchase price.

Here is what the news outlet writes:

A life-size bronze of a kissing couple by Auguste Rodin, “Le baiser, grand modele,” cast in 2010, found no takers. Christie’s had estimated it at $4.9 million to $7.5 million. Rybolovlev purchased the work for 7.5 million euros (then $10.4 million) in 2011.

Picasso’s 1970 “Joueur de flute et femme nue” sold for $5.8 million with commission, falling short of the low estimate of $8.1 million. Rybolovlev purchased it for 25 million euros (then $35 million) in 2010.

Rene Magritte’s 1938 “Le domaine d’Arnheim” fetched $12.7 million, with fees, surpassing the high estimate of $10.6 million. Rybolovlev paid $43.5 million for it.

Christie’s is targeting as much as 287.2 million pounds in its series of 20th century art that runs through March 10.

It isn’t just Rybolovlev that is seeing his investment erode. In 2016, there was a massive correction in the global art market. Last year, Christie’s saw its sales tumble 17 percent to $5.4 billion, while Sotheby’s suffered a 27 percent drop in sales to $4.9 billion. The two largest victims were Impressionist and modern art, and postwar and contemporary art.

Perhaps the next victim will be the vintage automobile market as there are already signs the bubble is gradually bursting.

Here is what Reuters reports:

After years of double digit growth, the price of vintage cars has stopped soaring and they may no longer be seen as the smart choice for wealthy investors, some of whom will attend an auction of valuable autos in Zurich this weekend.

With global interest rates at ultra-low levels and stock markets in the doldrums, classic cars had joined property, paintings, and wine as attractive alternative investments.

As a result, prices of cars like classic Porsches and Jaguars surged around 16 percent in both 2014 and 2015 following a near 47 percent rise in 2013, according to data from Historic Automobile Group International (HAGI), a consultancy.

But the brakes have been applied this year, with average prices rising by around 1 percent, according to HAGI.

With money supply growth moderating, you’re likely going to see more of this across the marketplace.

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  1. Silverado says:

    How about a little more on the classic car market angle with say an interview from a real vintage automobile authority like Craig Jackson of Barrett-Jackson fame or someone of similar stature in the industry instead of this click-bait of an article that barely mentions classic cars???

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