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While there is no doubt that collectibles are often acquired for non-economic reasons, the fact that money is tight should tend to increase supply as collectors look to liquidate their antiques to increase cash flow and decrease demand as the consumers' budget for non-essential items declines. In past recessions such as the one in the United States in the early 1990s, that was no doubt the case. Let's take a look at a few examples to see whether this is true in the current economic environment.
Last December, at a time when retail stores were slashing prices to move inventory ahead of Christmas and many consumers were concerned about the safety of their bank account, an auction of antique and contemporary glass paperweights in California yielded many world record prices as some rare paperweights went for two or three times their top estimates.
The auctioneer of a New England auction house recently described his successful April 2009 auction as a demonstration of the "recession proof" nature of high quality antiques and collectibles. Even in a time when money is tight, individuals are still willing to spend money on unique, one of a kind pieces.
The Mercury of Pottstown, Pennsylvania published an article about the skyrocketing value of Lladro figurines. There was no discussion of a hit to prices because of the recession. So I decided to take a look at the prices of figurines for sale online to see how the recession is affecting buyers bids. Since there is a thriving market with multiple bids, it appears that buyers are still willing to bid on both inexpensive pieces to round out their collection as well as unique, rare, and high dollar figurines that can become the centerpiece of a figurine collection.
Why are the results counter to our hypothesis about the growing supply and lessening demand for antiques and collectibles in a recession? The Financial Times reported this weekend that those who expected that sales would be down at the contemporary art fair Art Basel were surprised to find demand for artwork. Some speculated that the demand was created by investors with cash in the bank and a desire for hard assets to counter the risk of inflation in the future. Another reason might be that individuals were looking to diversify their holdings away from real estate and the stock market, and the value of artwork has held up comparatively well.
However, the article also notes that there were fewer visitors from the United States, some items for sale brought less than they were purchased for a few years ago, and that some other sales have been a flop. A further search on the internet for news articles yielded both those discussing the strong demand for art, antiques, and collectibles, as well as those giving witness to the tough times and lower sales. How can these contradictory opinions be reconciled?
It is possible that there is a flight to quality happening, as buyers with money acquire unique pieces at prices which they could not obtain during robust economic growth. At the same time, others cut back on their spending and less popular or more common items remain flat or decline in value. It is also possible that supply has been artificially lowered to maintain prices because sellers are holding items back from the market concerned that they will fetch lower prices.
Our final theory is that the market is at a crossroads, just like the world economy. It could continue to recover from the terrible economic conditions of September with increasing prices and strengthening demand, or it could remain weak as local economies struggle. For collectors who can looking to make long term purchases and search for great deals, they may have the opportunity to get great deals in the near future.
Just a few minutes into our search for figurines, it was evident that there are definitely some great deals out there and some buyers taking advantage of them.
Posted June 14th, 2009 by Anonymous
