Art Business
Sotheby’s and Christie’s have increased the buyer’s premium twice in the past decade – but what do buyers get for the money?
Ben Wright, Sunday, 22nd June 2008
For two such staunch rivals, the auction houses Sotheby’s and Christie’s are often very quick to copy each other. In May, Sotheby’s announced that, from the beginning of June, it will be raising its buyer’s premium – the amount successful bidders are charged on top of the hammer price. Just a few weeks later, Christie’s announced that it would be doing the same.
Under the new rates, buyers must pay 25% on the first $50,000 (the hurdle was previously $20,000), followed by 20% of the value up to $1m (where before it had been $500,000) and 12% thereafter.
The practice says a lot about the supply and demand dynamics of the recent boom in the art market. Auction houses have been doing everything that they can to win the competition for the best lots while assuming that buyers will flock to their sales regardless of any hikes in premiums. Given that Sotheby’s (and one assumes Christie’s) has recently reduced its guaranteed risk exposure – the amount of money it is prepared to use to guarantee the prices of works sold at auction (see last month’s Art Business) – this sends very mixed messages to the market.
On the one hand, the reduction in guarantees suggests that the auctioneers are worried about a downturn in the market; on the other, a hike in buyer’s premiums suggests that they expect the strong demand from collectors to continue. The key to this apparent contradiction is in the bands over which the new rates apply. Some auction houses have been focusing on higher-value works of art; where they do sell lower-value items, they want to charge higher rates of commission to make it worth their while.
Sotheby’s calculates that for the majority of the works that it sells, the new premiums will increase commissions by only 2%. Those that will be hardest hit are those that buy mid-range art (valued at less than $1m) from the auction houses and will have to pay the highest commissions proportionally.
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