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Hungary’s art market after 2008: Playing safe

Art has always been, and always will be, a form of investment that preserves its value. Although the generally worse economic conditions have left their marks on the art market in Hungary, collectors and investors still show undiminished interest in auctions. However, auction houses have needed to adjust what they put under the hammer accordingly. Where, before the crisis, they could count on impulse buyers, now collections are put together more carefully, avoiding “risky” artworks.

“When putting together a certain collection for an auction, there are two main factors we need to consider: one is quality, and the other is marketability of the pieces,” Gábor Einspach from the Kieselbach Gallery and Auctions House tells the Budapest Business Journal. “Lately, the latter factor has come to the focus of attention as houses want to attract potential buyers and run fewer risks.”

The arts market is adjusting according to the economic climate. In order to be successful, auction houses need to adjust their offerings to future needs, agrees István Törő, managing director of the Virág Judit Gallery.

Törő says the art market in general hasn’t been affected by the crisis to the extent that some other areas have.

“After all, this is a segment with high-value products, and with a still relatively strong purchasing power,” he says. “I think gallery owners and auction organizers can do a lot to help recovery, with, for example, correct and transparent pricing.”

Passion or moneymaking?

Art has always been worth keeping in storage; like some currencies (such as the Swiss franc most recently), it can be looked at as a safe-haven currency.

“Art still has this role today, although there is not enough cash in people’s hands these days,” Einspach says.

There are two types of people turning up at auctions: collectors and investors.

The border between them, however, is blurred, according to Einspach. In his opinion, even those buying artworks as an investment are likely to develop artistic interests. 
“I believe that everyone involved in this segment gets ‘infected’ sooner or later,” he claims.

The circle of those attending auctions has changed in the past few years. “Massive amounts of people have stopped visiting auctions because of financial difficulties. But we have seen new a new circle of buyers appearing on the market, and our winter auctions were rather successful,” Törő says.

While artworks have a certain market price, they are more than just a simple investment.

“Even those buying for investment purposes don’t buy them solely for making money. Artworks carry additional values, they are more personal than any other investment forms,” he notes.

Although the market has weathered the crisis of 2008, if another recession is coming, galleries and auctions houses will face a difficult period.

“But if things start to get better in the economy, the art scene will see a further upswing,” Törő claims.

What sells these days?

Art, being more liquid these days than, say, properties, is still a good form of investment. It keeps its value in the long run, in spite of the fact that the art market has also been exposed to the generally depressed economic environment.

“In the last 20 years, artwork prices have kept increasing. The crisis in 2008 somewhat slowed this process, but hasn’t reverse it,” Einspach notes.

But others say that liquidity is not common across all segments of the art market.

“As I see it, only top category artworks have certain liquidity these days,” says Péter Pintér, co-owner of Pintér Auction House. “They definitely keep their prices, but on the other hand, collectors who own such pieces are reluctant to sell them under today’s market conditions. Only a few of these top artworks make it to the market, usually from collectors who are struggling with financial difficulties.”

Einspach agrees, explaining that, “People are more willing to get rid of their badly performing shares or sell their properties than part with their artworks.”

Given generally negative market sentiment, the art market naturally performs less successfully, but experts are optimistic: if the economy gets on the path to recovery, it will boost this particular segment as well.

Themed up

“When we started organizing auctions, we didn’t have a clear concept. But as time went by and the auctions market was oversupplied, we soon realized that we need a strategy,” Pintér recalls. “That’s when we started to organize thematic auctions, and we found that this model worked despite the crisis.”

Although traditional auctions in May and December are still held, the future lies in these thematic auctions, he claims. Hungarians mainly visit traditional auctions, whereas themed auctions attract a great number of foreign collectors and investors.

“Our Zsolnay auctions, for example, usually see an international crowd with mainly Russians and Austrians buying,” Pintér says. “At another auction, where social realistic artworks went under the hammer, a large number of American buyers showed up.”

Contemporary concerns

As for the various sub-segments of the art market, older paintings have weathered the crisis well, while contemporary art is the biggest loser of the crisis, experts say.

“People buy antique paintings because these artworks are still looked at as safe investments. In many cases, buyers will go for a medium-quality antique painting rather than a high-quality contemporary artwork,” Pintér explains.

The contemporary art scene saw better days before 2008, but such positive tendencies have been nipped in the bud with the crisis hitting Hungary. “Many collectors just don’t want to risk it now,” he says.

In his opinion, such top-category contemporary artworks are now good value. “If I can give one piece of advice to collectors and investors, it would be this:  now is the time to buy contemporary art.”

The illustration for this article is Károly Patkó's artwork "Italian town"; photo was provided by Judit Virág Gallery