The art market miracle

At the European Art Fair in Maastricht business is good. On the opening day Simon Dickinson of Jermyn Street sold Degas's 1886 pastel of a girl braiding her hair, Toilette Matinale, for £8.5 million while Colnaghi's of Bond Street took £4.5 million for an early Rubens Portrait of A Gentleman.

Ben Janssens, the St James's dealer in Chinese Art was overrun by a rush hour in which 30 pieces sold, headed by an 18th century lacquered panel for £100,000, while the Mayfair Antiquities dealer Charles Ede parted with 11 items, notably a 1st century AD bronze of Hercules.

These tales are typical, with similar stories being told around the Fair. Johnny van Haeften Old Master Pictures in Duke Street, St James's, had its best ever start at Maastricht, selling 12 pictures on day one and holding six more on reserve.

The gathering will attract 60,000 visitors including an unusually large group of curators and directors from 150 museums around the world. Virtually the entire London art trade has descended on Holland for the world's largest selling fair, which is a barometer of the market and a giant art world party. But the real story is that, for the finest art, prices are rising even higher than a year ago, in defiance of the credit crunch.

"The seller of my Rubens bought the picture about a year ago," revealed Konrad Bernheimer, chairman of Colnaghi's, 19th century specialists. "Quite recently he came to me in embarrassment and said that things were not as good for him as they had been. I stopped him immediately and said I was happy to take his picture back. I have been glad to tell him that not only did I sell it on day one but that I have won him a very nice profit."

Maastricht is awash with money, personified in the majestic presence of the big-spending Sheikh Saud bin Mohammed al-Thani from Doha, Qatar. As we head into what economists are now calling a "Great Recession", the art market would appear to be the only part of the world economy that is functioning close to normal.

The market has form. It shrugged off Black Monday in October 1987 within a week and went on to stage the Art Boom of the 20th century. Wall Street slumped for 15 months before recovering its Black Monday level. While Wall Street collapsed over dotcom in 2000, art grew mightily and simply ignored the bombings on 11 September 2001. In the past four years most art market sectors have risen by 200-450 per cent in price while Wall Street's Dow Jones Industrial Average managed only a 30 per cent rise in eight years.

Last November there were fears that the art bubble had burst. Over several glittering evening auctions in New York, key works failed to meet their reserve and the market saw a slide of 10 to 20 per cent in prices in Impressionist and Modern pictures and contemporary art.

That result is now looking like an American aberration. Two recent armory fairs in New York have also been dull, report dealers, while auction results in London, Geneva, Paris and Hong Kong at all price levels have been stronger. Whatever the truth, New York's autumn fall sent prices no further down than to the levels of last summer, or 4.6 per cent down from the market peak.

On the Contemporary Art 100 Index of the world's leading art statistician, Robin Duthy, February 2009 shows the same figure as August 2008. The top five per cent of contemporary art prices have, however, fallen back to the level of last June as owners prove more reluctant to sell.

June 2008 on the Duthy Index is still three times the level of May 2007 and reflects the steepest rise in contemporary art values since the mid-19th century.

On the face of it, the art market appears to be defying gravity. But not everyone agrees with this simplistic interpretation. "It cannot be as brilliant as that," responds Wendy Goldsmith, London art advisor in 19th and 20th century pictures. "The Duthy Index measures the prices of artworks that have sold at auction. It does not take account of those that failed to sell at all.

"Quite a few pictures did not find buyers at auction this winter because sellers refused to moderate their asking price. Others were edited out of the big sales by Sotheby's and Christie's because they saw problems. What Duthy's finding means is that artworks that are selling are doing so at very good prices indeed. Those that aren't selling are down by an unknown amount."

Goldsmith believes that only certain works are holding their value, or rising. "This is a market where there's a relentless demand for masterpieces, a flight into quality. It's a case of the best and the rest."

Piccadilly dealer Daniella Luxembourg concurs. "There's an ever greater shortage of supreme works to buy. But once you've got one, a great picture is always a great picture."

The word at Maastricht is that art is serving as a parking place for people who don't want their money to go anywhere near the FTSE or Wall Street and who disdain 0.5 per cent interest on gilts. "A lot of money going on pictures is actually terrified of going into a bank," said David Nahmad, the London and New York dealer with a huge stock of Picasso, Matisse and Kandinsky. "Investment banks are in deep trouble. There is a call out there for tangible goods.

"If the world collapses but you own a Picasso, then even amid the ruins you still own a Picasso. But if the world collapses and your money is in a bank or a company that no longer exists, then all you are holding is a worthless scrap of paper."

Picasso or not, it pays to choose carefully. Picasso made plenty of second rate, slapdash pictures. The mood at Maastricht 2009 is risk averse.

Avoiding risk means, among much else, being wary of art that may have risen too far or too fast. Damien Hirst, whose £111 million double-estimate blockbuster at Sotheby's New Bond Street last September was the most spectacular auction success by any living artist in memory, is conspicuous by his absence at this fair, although as if to imply that all is normal, Haunch of Venison, Britain's new No 1 dealer by sales, displays a 99-inch high Hirst bronze statue of St Bartholomew in Exquisite Pain. Damien asks "about £1 million". At Sotheby's, he would have got more.

"Buyers still have money and they are liquid," declares Harry Blain, chairman of Haunch, from his desk. "This fair is going very well. There is strong demand for masterpieces. Since sellers have in many cases adjusted their expectations, the result is a lot of business".

Masterpiece availability is down on Maastricht 2007 and 2008, years when the steepling price rise of art tempted out more top works for sale than since the late 1980s.

Nonetheless, first rank art is there to be had. Mayfair dealer Hugh Gibson is selling a magnificent Giacometti drawing of the Japanese wartime pacifist Yanaihara for £8.5million, almost twice its sterling cost at Christie's last June (in dollars, the price is far closer). The Canadian Robert Landau offers Giacometti's sculpture Trois Hommes Qui Marchent for even more. Clovis Whitfield, Dering Street Old Master dealer, shows a Van Dyck Study of a Bearded Man at £900,000, an early work recently come to light which may reveal the royal cipher of King Charles I when the canvas is lifted from an ageing panel next month. Keeping it company at Whitfield is an Andrea del Sarto Holy Family at £7.5 million.

Sarti Gallery of London and Paris has the Fair's earliest painting in a 1300-10 tiny panel of The Crucifixion, painted with much blood and trembling feeling by an unknown artist from the Italian Romagna. A no less bloody El Greco of Christ Embracing the Cross asks £4.3 million at Caylus of Madrid.

A Van Gogh at $25 million may not be a masterpiece by his standards -- think $80 million plus - but his 1889 view of the park of his asylum at St Remy in Provence (with Dickinson) is outstanding by anyone else's. It is not necessary to pay millions to find the finest art, however. H P Kraus offers a superb array of photographs from mid-Victorian England by Julia Margaret Cameron and the 1844 image The Ladder by the pioneering William Henry Fox Talbot. Agnew's has prime drawings by Graham Sutherland and David Hockney at around £100,000 and £60,000.

Large or small, "I don't think prices are slipping," says Cork Street dealer Ben Brown. "Less is selling, that's all."

But at the Yves St Laurent sale in Paris last month, almost everything sold amid a flurry of artist records while the highest ever art auction total, £333 million, was recorded. Early indications are that Maastricht 2009 may turn out to be a vintage year. There was no failure of confidence when Lawrence Graff, the Bond Street jeweller and world leader in the business, paid £3.2 million at Christophe Van de Weghe of New York for Jean-Michel Basquiat's full-length of a fighting boxer, Untitled (The Black Athlete) or when an American buyer gave £3.3 million to Noortman Fine Art for a rare Gabriel Metsu character picture on the market, An Old Woman Eating. Graff, who is also exhibiting at Maastricht, has one of the world's largest blue diamonds for a modest £22 million.

"Where else do you put your money at the moment?" asked Wendy Goldsmith. "People are scared of cash, scared of investments, scared of hedge funds that blow up. Art is a flight back to quality.

"It's also fun. 90 per cent of it is not going to go down if you're advised correctly and in the medium term it's going to go up. Art costs less when the weak pound makes everything in London look as if it's on sale, Best of all, life is more interesting when your investment is sitting on your wall."