Crafting Sales

A Lean Spring

  • Why it matters

    Why it matters

    Art dealers are shifting to Brussels as they wrestle with the bureaucracy and costs associated with the German Cultural Heritage Law.

  • Facts

    Facts

    • The German art market makes up 2 percent of the world market.
    • Most major German auction houses have experienced weaker sales at this year’s spring auctions compared to last year.
    • One of the problems is that collectors have become reluctant to sell their works, creating a shortage.
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    Audio

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77476391 art auctioneers dpa
Art auction houses like Grisebach must navigate ways to work with – or around – tough conditions for art dealers. Source: dpa

The German art market is suffering. Judging by the supply at German spring auctions, the spring season will be a lean one marked with a lack of important works and a significant decline in supply and sales. The numbers indicate a season of curbed growth as art collectors look elsewhere and the German art market, which makes up 2 percent of the world market, comes to term with new laws that put the onus on the sellers to ensure a piece of art didn’t illegally pass through the hands of Nazis.

The latest numbers don’t paint a rosy picture. The Grisebach auction house sold about €19 million ($21 million) worth of works in last year’s June auctions. This year, they estimate total sales in the coming auctions at €16 million. Sales in last fall’s anniversary auction, which included many top lots, totaled €34 million. Meanwhile, June auctions will account for an estimated €5 million of total sales, compared to €7.9 million last spring. Lempertz sold works of modern and contemporary art for €16.5 million last June. In comparison, this year’s projected sales for the same time period is about €7.6 million.

Robert Ketterer Auctions brought in €17 million at auctions of modern and postwar art in June 2016. In this case, the contrast to 2017 projected sales of €15 million in June is relatively small. At Van Ham, the spring 2016 auction of contemporary and modern art was one of the strongest to date, with total sales of €8.1 million. According to the current limits, the auction house’s May 31 auction will bring in an estimated €6 million.

“(These laws are) the best way to ensure that these art treasures will not make it to Germany in the first place.”

Robert Ketterer, Auction house owner

Art houses are being challenged by new cultural heritage legislation. The laws mean that artworks older than 50 years and valued more than €150,000 require state approval before they can be exported beyond the European Union. Artworks that stay within the EU require permission for their sale and transfer if they are older than 75 years and valued at more than €300,000. The laws also require proof of provenance and some works still require export licenses in order to be sold to foreign buyers.

The laws have left art dealers scrambling with bureaucracy. Ketterer, for example, created a new position solely to satisfy the due diligence and provenance records requirements now in place.

The export permits that are now required for deliveries from countries like Italy, France and England, which are also new for the authorities there, took so long that works were withdrawn and sold at auction in other countries. “This is the best way to ensure that these art treasures will not make it to Germany in the first place,” says auction house owner Robert Ketterer. As a result, Ketterer and Grisebach are also currently displaying their auction material in Zurich. It is possible that this will offer a”tremendously stable marketplace,” as Florian Illies, managing director of Grisebach in Berlin put it, for a solid alternative to the German market in the future, in light of bureaucratic problems.

But that still leaves many problems now. Cologne-based Lempertz, which acquired a historic auction house in Brussels focusing on sales of African tribal art, is in an auspicious position. It is moving its China auctions to Brussels for the first time this June, because the new law would have deterred international suppliers from delivering their treasures to Cologne.

For the same reasons, a first auction of selected paintings by old masters will be held in Brussels next year. Brussels is an ideal, easily accessible hub between France, England and Germany.

By law, a work of art can now be confiscated if proof is not furnished, with the owner responsible for legal costs.

But there are also other reasons for the current crisis. The acquisition of top material is more problematic than selling it. The current European low interest rate policy has encouraged top-level collectors to hold onto their works instead of selling. And when they do choose to sell, their price expectations are often so high that auctioneers are unwilling to play along or end up in a fiasco if they do.

The small amount of top material currently entering the market is not pulling the market up. Every reduction in the price of a top work hits. “There is demand, but there is little willingness to sell. We keep hearing sellers ask the same question over and over again: What would I do with the money?” said Markus Eisenbeis, head of Van Ham Auctions.

Buyers and sellers are being blocked by proof of origin requirements. “How can I prove to a buyer that cultural assets were imported legally if he wants evidence?” Mr. Eisenbeis asked with annoyance. By law, a work of art can now be confiscated if proof is not furnished, with the owner responsible for legal costs.

A mood of crisis has descended on galleries. In light of Germany imposing a 19-percent sales tax, there is “no alternative,” said Michael Haas, who has been running a gallery in Berlin with a branch in Zurich for the last 40 years. He broke even in Maastricht and emerged from Art Cologne without making a single sale. Private customers are not giving anything up, and buyers are going abroad, where all they pay is a 7-percent import sales tax. “People get up and go when we bill them 19 percent VAT on top of the purchase price.”

Galleries and auction houses that have branches in other countries and can divert their sales stand to benefit. But those that benefit the most are foreign galleries with a presence at German exhibitions. Swiss exhibition company MCH, which acquired shares in an art show planned for Düsseldorf in the fall and reportedly plans to attend 17 shows, will bring foreign dealers to Germany who can attract buyers with their countries’ lower taxes. The Düsseldorf show is still expected to expand, in a market that has enough mediocre regional shows already.

In light of this overall situation, the moderate content of German spring auctions is not surprising. But one shouldn’t forget, either, that the market has been trending upward for years and that a certain sense of disillusionment is now setting in, as Rupert Keim, auctioneer with Munich auction house Karl & Faber, points out. He also believes that generational change is a factor.
Christian Herchenröder is the arts & culture editor at Handelsblatt. To contact the author: herchenroeder@handelsblatt.com.

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