NEWS

ART MARKET INSIDER GUIDE / jULY 2016


This quarter’s Art Market Insider Guide will focus solely on the current state of the Australian Indigenous Art Market. As well as being my main area of expertise, it’s a field that has been severely affected by global markets as well as ill-timed (and ill-considered) government policies over the last decade. However, several shifts I have observed in recent years indicate a clear and positive renewed interest for Australian Indigenous Art. I will examine these shifts and provide reasons for my optimism in this post.

Australian Indigenous Art is a market in its infancy when compared to Australian Art and especially more so in comparison to the art markets internationally.  The meteoric rise in prices reached its peak in the mid-2000s and, in my view, at an unsustainable rate. The correction that occurred in 2008-2009 was in line with what was happening with all Australian art. However, Indigenous art is affected by the international markets more directly than Australian art tends to be, and in 2010 it took a further legislative blow.

There were two significant changes in government legislation introduced at that most critical time that helped bring about the abrupt halt in the market: changes made to SMSFs and the introduction of the Resale Royalty.

The Impact of Self-Managed Super Funds (SMSFs)

Whether it was good or bad policy for art and collectables to be included in SMSFs in the first place is debatable, but what is tragically clear is that SMSFs made up 30% of the entire Indigenous art market at the time the government announced changes to legislation that essentially made it too difficult for art to be held in super. And so, without providing any alternative incentives for alternate buyers, the market predictably fell.

The deadline for artworks to be taken out of the super funds was 1 July 2016. It was thought by many that there would be a flood of Indigenous works onto the market and an inevitable decrease in value across the board. It didn’t quite happen this way. While Indigenous artwork prices have fallen considerably, rather than being due to a glut of artworks hitting the market, we’ve seen more owners of the SMSFs discretely purchasing back the works (at a depreciated value) and holding onto them.

This obviously has a negative impact on the market because, as well as losing the buyers for SMSFs, many SMSFs owners were taken out of the market for artworks offered by dealers, galleries and auction houses, because they’d felt compelled to purchase the artworks back from their SMSFs. The results published by the auction houses are in many ways a clear reflection of this - with results falling in 2008-09 and then collapsing in 2010.

It is prudent to understand that the government is highly unlikely (in my opinion never) going to reverse the changes to Self-Managed Super Funds – the Government and particularly the Treasury simply do not want art held in Super.  Period.

The Impact of the Resale Royalty

This is a policy that has been widely derided by the major players in the industry as highly ineffective, and has actually served to damage the contemporary artists market by further putting off buyers already lumped with Buyer’s Premiums of up to 25% by the auction houses. 

I believe that there is a good chance this policy will be reversed at some stage. It has to be the case simply due to the lack of revenue generated and the high costs associated with collecting the royalty. It’s not doing what it was designed to do and it’s just not viable, it’s not even budget neutral.  Any government looking to pull the Federal Budget back in line (the position we find ourselves in today) only needs to take one look at this policy - it simply doesn’t stack up.

Changes to the Protection for Moveable Cultural Heritage Act (PMCH Act)

Another reason for optimism is the pending changes to the PMCH Act 1986, for which the industry is waiting with baited breath. The antiquated export restrictions placed on items of cultural significance thresholds were further tightened in 1998, changing the age of the work applicable under the act to 20 years old and the value of the work to $10,000. These restrictions have well and truly past their used by date and are now capturing contemporary works that should be allowed to leave the country. 

This has been a massive blow for the international market for Indigenous art – with many buyers simply choosing to spend their money elsewhere. However, new recommendations are in place and the pending changes, which will remove barriers of the current export restrictions on contemporary works, will be of benefit to all – but most importantly to the artists and their communities.  Now that Indigenous art is making a long-overdue come-back, Indigenous communities can become self-supportive at a most critical time. The government needs to incentivize international buyers in this expanding market now. The results will not only increase incoming revenue for the government, but most importantly take the weight of support from the Government and give it back to the artists and their communities through being self-supportive. This is critical for the health and well-being of our most important cultural existence.

What this all means for Australian Indigenous art…

Broadly speaking, the effects of the above, coupled with the knock on effect of the GFC on all markets,  had a huge negative impact on the Indigenous art market - with what many observers now agree was an ‘overcorrection’. The frothy action at the top of the market has been well and truly cleared off and we are seeing more stable levels in an overdue recovery.

We are also seeing an increasing lack of faith in the stock market and, internationally, investors are flooding into the art market. In addition to the significant decrease in the value of the Australian dollar, this will work to strengthen the secondary international market for Indigenous art.

Indeed I see clear signs of a resurrection and believe we are now in a period of realignment.  With local auction houses showing clear signs of growth in this market, I predict that the primary market will not see a major pick up for another year or two. There is particularly good opportunity for the discerning buyer right now.

Understanding these fundamentals in the market can help you in making an informed and focused decision when acquiring Indigenous Art in the primary and secondary market.  By breaking down our analysis into the various segments of Indigenous art, we can identify what has held up during the recent tough times and what has not:

Artefacts have been one of the strongest performing areas of Indigenous art over the last 3-5 years and we will continue to see sustained but more gradual growth for the rare and beautiful pieces. If you’re interested in learning more about the market for Indigenous artefacts, check out my recent blog post ‘Get Back to Basics: Collecting Australian Indigenous Artefacts’.

Bark paintings If you read another of my recent posts ‘BARKS: Beautiful, Raw, Challenging…& Undervalued’ you’ll know I’m a big fan of barks. They are one of the most affordable mediums in the Indigenous art market as well as being one of the most important in terms of the cultural and historical significance – they are a uniquely Australian art form.  I have observed the market for barks gaining some strength in recent years. In particular the highly successful auction at Sotheby’s in 2015 should help garner more attention for barks in the secondary market.

Carvings and sculpture should also see some added attention at auction - particularly Larrakitj (hollow log carvings). I see a number of major collectors focused in this area presently. Early sculpture (60s and earlier) are much like artefacts – there is strong demand especially for figurative carvings.

Hermannsburg watercolours are due for some extra attention at auction I believe.  These works are an important component of the whole indigenous art movement and there are traditional support levels in market history. With the exception of Albert Namatjira, whose works of high quality have been particularly strong throughout the downturn, this area took a big blow during that critical period. Works by Otto Pareroultja in particular should see positive growth.  Otto is an important artist shown through his strong resolve and resistance to conformity. Prices for works by Otto and others have fallen too far and are due for a positive correction.

Major Contemporary works by some of the more acclaimed and significant artists should see very strong growth over the next 3-5 years. In particular works by Emily, Rover, Paddy, Wimmitji, Kitty, Namarari and Mawurndjul should all see very strong growth. Check out my blog post ‘Top 10 Most Collectable Indigenous Artists’ for why I think this group are a pretty safe bet. You only have to go through the market records and you will find that these artists have traditional support levels.

Contemporary Indigenous paintings in the middle-range (not by the more acclaimed artists mentioned above) will continue to see cautious attention, but with very little growth - until the international market is opened back up for business by removing the current antiquated export restrictions. Watch this space.

Urban Indigenous Art has huge collecting potential in my opinion and should also see strong growth – particularly with works by Gordon Bennett, Trevor Nicholls and to a lesser extent Lin Onus (due to the fact his works have seen such meteoric rises over the past several years). The reason I am strong advocate for this segment is that there is such a strong narrative here. Undeniable.

Probably the strongest area for growth will be the Early Boards. 1971-72 Papunya boards have already started hitting their strap at auction and I can’t see this area slowing down too soon.

For each of the above segments, contemporary or not, rarity remains the key driving factor in whether or not a work will strengthen in value. This is the reason early artefacts particularly have fared so well at auction – you simply can’t sit on your hands and get another one tomorrow. This applies to major paintings as well.

It’s a great time to be active in this industry and I can’t give a better example of the truth in this than my own story – there is a reason I’ve branched out with my own business this year. This was not a snap decision, but one made with careful consideration to take full advantage of an expanding market.

For those also wanting to take advantage, my best advice is to get an understanding for the market by knowing what’s going on in the background:

– Speak to the insiders
– Keep in the loop of the significant private, exhibition or auction sales (the Australian Art Sales Digest is a must: www.aasd.com.au
– Most importantly, get clear advice with a trusted consultant before any major purchase

Feeling comfortable with the above builds confidence and awareness and will in turn drive your collecting passion. 

Not only does this information help me to form clear buying strategies but it also shapes the way I do business. In light of recent activity and the movements of the market I see happening in the future, I am looking to reshape and expand my business so that more of the benefits from these changes will be passed on to my clients. More to come on that later in the year.

I love the position that I find the Australian Indigenous art market in now. The international market is poised with renewed vigour and there is optimism and opportunity in the air…what a good feeling!

Have any questions about the Australian Indigenous art market? I’d love to hear from you: dlan@dlandavidson.com.au or +61 421 122 023

 

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WILLIAM BARAK, circa 1824-1903
Ceremony, 1897

Sold at Bonhams, Important Aboriginal Art, Sydney, 7 June 2016, for $512,400

An Important Sword Club, eighteenth century
Sydney Region, New South Wales

Sold at D’lan Davidson, Important Australian Indigenous Art, Melbourne, 2 June 2016 for $33,000

From Important Australian Indigenous Art, collaboration with William Mora and D'lan Davidson, June 2016.

ALEC MINGELMANGANU, circa 1905-1981
Wanjina

Sold at Sotheby's, Aboriginal Art - Thomas Vroom Collection, London, 10 June 2015, for $187,069

ALBERT NAMATJIRA, 1902–1959
QUARTA-TOOMA (ORMISTON GORGE), 1939 

Sold at Deutscher + Hackett, Important Aboriginal Works of Art, Melbourne, 25 May 2016,  for $85,400

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