It is contemporary art that has seen the most inflation. According to Matthew Slotover, co-director of Frieze art fair, the taste shift has deep cultural roots: "In the 1980s and '90s, if you made a lot of money you probably wanted to buy a country house and have the sort of things your ancestors, or other people's ancestors, had. That's changed.
IT IS A boom that has been driven by the "wallpaper generation" — people with money who prefer to spend their millions on art than a stately pile in the country. And there are no signs of a bust. Yet.
The British market reached boiling point last week, with records smashed, jaw-dropping amounts of money changing hands and frantic auctions taking place at rival London sale rooms.
On Monday, Sotheby's sale of impressionist and modern art raised £88.7 million ($A220.5 million), more than any auction ever held in London. The star lot was a Modigliani that went for £16.3 million — the buyer had raised the price by a cool £500,000 per bid. Tuesday saw the £86.9 million sale of impressionists and modernists at Christie's, where a Schiele — Nazi loot that had hung unrecognised in a French apartment since the war — sold for £11.8 million.
The titans clashed again in rival contemporary sales on Wednesday. Bridget Riley joined the handful of women artists to break the £1million mark with her Untitled (Diagonal Curve). The next night, Francis Bacon's Three Studies for a Self-portrait, 1980, sold for £3.8 million at Christie's. All this in the week when the most expensive painting ever was sold — Klimt's Adele Bloch-Bauer I (£73 million).
The last time the market hit such heights was at the end of the 1980s, followed by a crash that saw New York's SoHo, then the city's gallery district, end up a ghost town. Now a new boom has hit London and, according to Christie's European president Jussi Pylkkanen, "everybody's talking about the Russians". At its root is "the state of the global economy, and buyers from places such as Asia, the Middle East and Russia entering the market for contemporary and impressionist", he said.
It was a neophyte Russian bidder, for instance, who took Picasso's Dora Maar au Chat for $US95 million ($A130 million) at Sotheby's New York in May, the second-highest sum paid for an artwork at auction. In Russia, dollar millionaires grew by 17.4 per cent in 2005, according to Merrill Lynch and Capgemini's World Wealth Report, published last week. It also identified super-rich mushrooming in China, North America, Britain and the Middle East — all key growth areas for the art market.
Britain's slow adoption, compared with the rest of Europe, of the droit de suite (a levy payable to artists on works bought on the secondary market) has helped establish London as the world's second art city after New York. But it is its role as a global financial centre that is the main factor. Significantly, London is also the world's second city for hedge-fund activity, creating a superbreed of new rich.
It is contemporary art that has seen the most inflation. According to Matthew Slotover, co-director of Frieze art fair, the taste shift has deep cultural roots: "In the 1980s and '90s, if you made a lot of money you probably wanted to buy a country house and have the sort of things your ancestors, or other people's ancestors, had. That's changed. Blair has meant a huge temperature shift in Britain. The people making large sums of money are the wallpaper generation — they want new things."
It helps that the art world is a circuit, a ready-made social scene. At the same time, spending money on art is thought sophisticated. "Art distinguishes you," said Mr Slotover.
The kind of work being made at the moment also helps, he says. Only limited connoisseurship is required: anyone can tell what's going on in a Damien Hirst. The real question is: will the boom continue? Insiders will not mention the dread word "crash", though they admit the market could be in for some "correction". According to current wisdom, this boom is safer than others because the new globalised market means more stability. The last boom was all about one economy, Japan's, so it was snuffed out when that economy collapsed. But the new markets could be as yet too new and shallow to rely on.
"If the European or American art market softened now, China, Japan, Russia and the others could never take up the slack," said art market analyst Anders Petterson.