Art in developing countries profitable business amidst crisis

Turkey’s 2001 economic crisis, for instance, despite its negative impact on the price of art pieces, led to the introduction of art pieces into the market at affordable prices. The crisis had its worst effect on banks, most of which posses important collections comprising Turkish artists’ works, and forced them to liquidate their possessions in order to keep their doors open. Valuable pieces of art owned by banks became available during this time. The crisis’ effects continued in the years to come, too. Osman Hamdi Bey’s “Kaplumbağa Terbiyecisi” (The Tortoise Trainer), for example, was one of the pieces of art put on sale and sold for TL 5 million in 2004, the highest price ever paid for a work by a Turkish painter.

“Economic and financial crises always result in a slowdown in investment in pieces of art. Since September 2008, significant drops have been seen in both sales and prices in the world art market. However, this drop in prices might create important opportunities for collectors. Because art buyers do not solely seek financial profit, buyers and sellers will always exist in this market,” İstanbul Bilgi University’s Aylin Seçkin told Sunday’s Zaman in an interview.

Kerimcan Güleryüz from Gallery x-ist agrees with this opinion. He says the market at all times has its collectors and that a rise in prices does not discourage them from buying pieces of art. “Serious drops in sales were seen in other countries; however, the situation was totally different in Turkey. People seeking high quality works at relatively cheaper prices moved toward Turkey,” he told Sunday’s Zaman, also attributing this demand to an increasing interest in Turkish art due to the country’s political and social dynamics. “People around the world are curious about what artists from a country such as Turkey say as our problems are mostly about issues concerning life and death.”

Gallery x-ist increased its sales figure by about 200 percent last season over the averages of previous years, and the sales made so far in the first four months of this season have already exceeded total sales of last season, Güleryüz stated, attributing this rise to interest of foreign collectors in the gallery’s works.

In line with Güleryüz’s views, international interest in the Turkish art market has been apparent for some time now. Sotheby’s, one of the biggest auction houses in the world, opened an office in İstanbul last year and organized a Contemporary Turkish Art auction for the first time in London on March 4 of this year. Seventy-three works by 53 artists were auctioned, bringing in around 1.35 million pounds. Pleased with the results, Sotheby’s will organize another such event next year, too. Oya Delahaye, head of Sotheby’s Turkish office, explains the reason why Sotheby’s is interested in Turkey, saying: “There is a widespread trend in the West to seek the East in the art market. Instead of paying huge amounts of money for a Picasso painting, people prefer to buy works of young painters at affordable prices. And Turkey has a great potential in this regard.”

Investing in art a safe haven

Addressing the effect of the recent global financial crisis on the art market, Delahaye says that even though sales suffered a decline of 30 percent in September 2008 compared to the same month of the previous year, the situation has gradually improved since then. “People prefer to invest in art instead of investing in banks as they see it as a safer investment instrument,” she says, adding that there is currently no problem in the sale of high quality works.

It appears the Turkish art market will overcome the crisis with far less loss compared to the rest of the world. According to data compiled by lebriz.com, the revenue made by big auction houses in Turkey from the sale of paintings came out to TL 57.96 million in the 2008-2009 season. Even though this figure is some TL 20 million less than the earnings of the previous season, when the market’s turnover was around TL 80 million, the situation is still better considering the closing of important galleries in the US and Europe, the largest art markets in the world. As another sign of overcoming the crisis, Contemporary Istanbul ‘09, which kicked off on Thursday and was set to end today, also revealed its target of making a sale of TL 10 million by selling some 70 percent of the works auctioned in the event.

According to Seçkin, the Turkish contemporary art market has started to attract foreign investors, even though this demand is still lower compared to emerging countries such as Brazil, China and India, where contemporary art markets are deeper. “No Turkish artist has made it into the top 50 places of the ‘Top 500 painters of the world’ list of artprice.com, while you can find several from China and India.” However, she stated that the Turkish art market is closely following world trends and that the market will improve further as people become wealthier. The returns on investment in art in Turkey will also increase with time in line with this development, Seçkin predicts.

A piece of research titled “Art and the Economy: A First Look at the Market for Paintings in Turkey,” conducted by Seçkin and Erdal Atukeren of ETH Zürich’s Swiss Institute for Business Cycle Research (KOF) and aiming to examine the return on investments in paintings and other financial investments in Turkey, shows that investing in the market for paintings is a viable alternative even in an environment of high inflation and large macroeconomic volatility. Considering a portfolio of paintings of Turkish painters, the researchers found that the portfolio yielded a small but positive real return, though still lower than stock market returns; however, the returns were higher than what could have been acquired by investing in traditional investment alternatives such as foreign exchange, gold and bank deposits.

Turkish fine art made headline financial news recently with the sale of Burhan Doğançay’s painting “Mavi Senfoni” (Blue Symphony) for TL 2.2 million last month, the highest price ever paid for a painting by a living Turkish painter and the third-highest price for a work by a Turkish painter after Osman Hamdi Bey’s two paintings “İstanbul Hanımefendisi” (İstanbul Lady), which sold for TL 8 million in 2008, and “Kaplumbağa Terbiyecisi.”

“The sale is in line with world trends. The artist already has a place in the international art market, and the interest in contemporary art throughout the world has been on the rise for a while,” expressing delight over the sale price.

The art market in Turkey started its upward trend in the ‘80s with the adoption of a free market economy and the emergence of a new class of wealthy individuals. The sale of contemporary art pieces, on the other hand, started as late as the 2000s. According to lebriz.com data, the number of artists participating in auctions increased from 526 in 2004 to 942 in 2008. This figure was 754 in 2009. The size of the art market in Turkey increased from $10.2 million in 2000 to $45.6 million in 2008, in line with the growth of the world art market.