News-Antique.com - Jul 31,2011 - Exposing the Chinese Art Market With 6 Questions Pt. 1 – artmarketblog.com
Q1. The records from the recent Christie’s fine modern paintings sale (31 May), along with records from China Guardian Auctions Co. from the 2009 Autumn sale onwards, show that auction house estimates have become little more than conventional additions rather than indicative price guides. Your thoughts? Are price estimates for works being suppressed and, if so, why do you think this is the case?
Nic’s Answer: Estimates are a tricky affair. An estimate that is too high will put buyers off and an estimate that is too low will cause buyers to wonder why the estimate is so low. Even though an estimate is nothing more than an educated guess as to what the object might be likely to fetch, the psychology is similar to that of retail pricing. If a customer goes into a shop and the price appears too high for a product they will likely look for a different product that offers better value for money or look elsewhere for a better price for that product. If the price is too low the customer will likely become suspicious as to why the price is so low and will either question the quality and condition of the object to ensure it is worth buying before they make the purchase, or will avoid the product all together.
Although the estimate will often have very little or no bearing on the price that people can bid and subsequently purchase the work for (ie. bidding much lower than estimate and purchasing the object for much lower than the estimate), the psychology of the art auction is such that the estimate is often viewed as much more of an indicator of value than it really is. The problem this creates is that auction houses are therefore able to use the estimate as a powerful and influential marketing tool that has the potential to seriously affect the perception that potential bidders have of a particular work of art and influence the way they bid.
One of the main problems with the explosion in demand for the work of many contemporary, modern and historical Chinese artists is that interest (or the level of interest) in their work from a market perspective is relatively new and without precedent. What this means is that there is very little or no past data (ie. gallery prices, auction prices) to use as a basis for the creation of estimates for many of the artists whose work is appearing at auction. Looking at the work of ZHANG DAQIAN, for example, artprice.com shows that 3578 of his watercolour paintings have been auctioned since 1991 with almost half of those works appearing at auction since the beginning of 2009. That means that the same number of works by ZHANG DAQIAN were auctioned in the last two and half years as were auctioned in the 18 years prior to 2009. Such an unprecedented level of demand generated in such a
