The art market has outperformed the stock market since 2001 attracting the attention of many new collectors. In fact art at auction eve had strong gains in 2007 as sub-prime lending began to take its toll on the American economy. 2008 will prove to be a challenging year as collectors and investors wonder if a correction is imminent. It may be, but prices are likely to hold in the short term, though they may not see the strong increases that we enjoyed in 2007.

1. Strong Global Supply - American and European works lead the art market, but collectors are searching more than ever for art from undiscovered regions. As technology and global education improve, artistic talent is being discovered in lesser known areas. China, India, Latin America and Australia have experienced strong sales at auction.
2. Emerging Regional Economies - Russia, China and India have experienced tremendous economic growth in the past seven years and are beginning to shape the world’s economy. Not only can certain people in these regions now afford to collect art, but they are buying many artists from their own region.
3. Diversifying Portfolios - Since 2001, the stock market has had modest gains. During the same time, the art market has more than doubled its volume leading many to invest in art.
4. Protecting Prices - The practise of bidding on works by certain artists in your own collection can keep prices for that artist high, but is extremely risky and marginally moral. The demand is artificial and sets the floor prices for some artists too high for a wide audience. And if a collector with several works by a single artist falls on hard times, the artificially inflated prices will drag down the market.
5. Auction Guarantees - Sotheby’s and Christies have been offering guarantees on sale prices for an increasing amount of collectors. This has helped secure high profile works at auction, but some works missed their minimum, forcing the auction house to buy the pieces.
6. Contemporary Art Moves to the Top - Before 2007 Modern Artists sat atop the secondary art market, but last year contemporary art took the top spot. With some of the top artists still producing work, pieces are beginning to show up at auction within months of their initial purchase from the artists’ studio.
7. Return Sales- Some collectors are beginning to hold works for only a short time, returning them to auction within only a few years and sell for lofty prices. This speeds up the sales cycle similar to flipping houses in real estate.
8. Artists as Businessmen and women- Some contemporary artists are hiring business managers to keep an eye on their works. Living artists can manipulate the supply of their works and they can even drum collectors to purchase high profile works to keep prices high.
9. Celebrity Participation- Celebrity obsession extends to the art world and as artists become hot within celebrity circles, the added press coverage extends into the art community again creating more demand.
10. Donor Museums - Major collectors also develop their personal stake by dedicating museums focused on their large collections increasing the importance and value of those collections.

The market is still strong, but 2008 is shaping up to be shaky. These ten trends will determine when a correction will hit the market. Some suggest the market will sustain its volume but other trends are showing early signs of softening. Careful attention must be paid before raising your paddle.

David J Ward is a writer for ArtPhile.com contributing content on collecting art and managing collections. For more of his work visit his article list.

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