Antiques, Auction Houses and Your Portfolio

Sep 26, 2013    |    My Money MD     |   Shirley M. Mueller, MD

“It takes just as much effort to sell an object for $10,000 as for $100,000” — Anonymous

An example of an art piece that meets the new criteria for the increased buyer’s premium. Before the enhanced pricing, the buyer’s premium was 20% — now it is 25%. From  Christies.com : A FABERGE-STYLE SILVER GILT AND ENAMEL KOVSH, AND A PILL BOX,20TH CENTURY, sold for $52,500 at Sale 2721 Interiors 23-24 July 2013 New York, Rockefeller Plaza

An example of an art piece that meets the new criteria for the increased buyer’s premium. Before the enhanced pricing, the buyer’s premium was 20% — now it is 25%. From Christies.com: A FABERGE-STYLE SILVER GILT AND ENAMEL KOVSH, AND A PILL BOX,20TH CENTURY, sold for $52,500 at Sale 2721 Interiors 23-24 July 2013 New York, Rockefeller Plaza

Antiques and art are recommended for a limited part of an investment portfolio, at least for high-net-worth individuals. Recently, Christie’s and Sotheby’s whittled away at any benefit this might have for buyers of more modest artwork by increasing the threshold for their buyer’s premium in their lower two tiers (Effective 11 March 2013 for Christie’s).

                              Before                                          Now

Tier 1 (25%)          <$50,000                                   <$75,000

Tier 2 (20%)        $50,000-$1,000,000                  $75,000-1,500,000

Tier 3 (12%)          >$1,500,000                                >$1,500,000

Percentage of U.S. buyer’s premium depending on item value for Christie’s. Note the figures for the lower two tiers increased. Sotheby’s increased similarity. 
 
Whether this was to squeeze an additional premium from clients or to discourage lower and medium-end sellers and buyers from consigning to them is the $64,000 question. Javier Lumbreras from Artemundi Global Fund tackled this puzzle with data in his article entitled, “What is the True Reason Behind Christie’s and Sotheby’s Increase in Buyer’s Premiums?” It was published in ArtBanc Intelligence, in June 2013 (issue 4).
 
Lumbreras performed a statistical analysis on more than 9,000 lots sold at Christie's and Sotheby’s during 2012. To do this, he grouped the lots sold using the before period and then the after increase in pricing structure at both Christie’s and Sotheby’s. He used the lots in each tier and their share in value to calculate the percent of premiums the auction houses gained from the sales.

Read more at: http://www.hcplive.com/physicians-money-digest/columns/my-money-md/09-2013/Antiques-Auction-Houses-Your-Portfolio#sthash.UGOGWBdd.dpuf