Return to UBS tops private banking poll
Sotheby’s and Christie’s
“It’s a critical forum because it’s where you get information on prices. It’s a public forum where you can see what market comparables are on what you want to buy.”
Citigroup’s Mary Hoeveler isn’t describing a bond-trading platform or a stock exchange. She’s talking about auction houses. James Christie held his first sale in London in 1766 and 12 years later John Sotheby inherited a share of his uncle’s auction business. Today, as the dominant international auction houses, Sotheby’s and Christie’s face issues familiar to the capital markets.
Like banks, auction houses have to follow and predict the waxing and waning of different markets. In the early 1990s, the Impressionist market heated up then fell by around 60% in one year. “The auction houses have to determine what resources to put into a market and how to price it, and identify new sale markets,” says Hoeveler, head of Citigroup Private Bank’s art advisory service.
Auction houses helped democratize art collecting in the 1980s by organizing sales of a wider range of popular collectables, from cars to teddy bears. In 1987, Christie’s annual sales topped $1 billion. Two years later, they had reached $2 billion.
“There’s so much new money and so much liquidity now,” says Hoeveler. “Auction houses are a source of material that you cannot ignore and we work with their specialists to identify upcoming material and on valuations.”
An auction gives new collectors comfort that they are paying a fair price. This doesn’t just mean they avoid getting ripped off by private dealers. For tax purposes in the UK and US, an item’s auction price, plus the buyer’s premium, is its fair market value.
Competition has whittled away the commissions charged to sellers. Auction houses make money by charging buyers a premium of between 12% and 20% of the price they are paying.
Christie’s and Sotheby’s both have networks of real estate brokers selling prestigious properties. Christie’s Great Estates’ combined annual sales exceed $75 billion. Sotheby’s Financial Services lends to art owners who borrow against the value of their collections.
While UBS, Credit Suisse, and Citigroup are voted the top three global providers of non-art luxury investments, Christie’s and Sotheby’s respectively take fourth and fifth place.
