After a wild fourth quarter in 2008, in which auction prices for fine wine plummeted and percent-sold rates plunged as low as 31 percent in the wake of the global economic crisis, a leaner—yet more stable—auction market has emerged so far in 2009.
Prices continued to slip slightly in the first quarter. The average price for wines tracked in the Wine Spectator Auction Index declined by 6 percent from the fourth quarter of 2008, with more than 70 percent of those listings falling below their fourth-quarter averages. And since the beginning of last year, the overall size of the market has declined as well: In total, 11 auctions in the first quarter of 2009 brought in $22,791,490, compared with $42,628,275 over 15 auctions during the same time period last year, a decrease of 47 percent.
Despite this ongoing decline, other indicators of consumer confidence, such as auction attendance and percent-sold rates, were up from the fourth quarter. Auction houses reported packed salesrooms and an increased interest in absentee bidding, spurred by collectors looking for relative bargains in this down market.
Buyers were no doubt attracted by estimates and reserves for lots that had been revised downward 30 percent or more by auction houses attuned to the new realities of the marketplace. After average sell-through rates fell in the fourth quarter to the abnormally low level of 72 percent, the first quarter saw those average rates return to a solid 91 percent, about the same as in the first quarter of last year.
This indicates that prices have settled at levels that are perceived to represent fair value, and consignments are selling accordingly, though estimates may still have been ambitious. Only four of the first quarter's 11 auctions bested their presale low estimates.
Both Jamie Ritchie, Sotheby's auction director, and John Kapon, president of Acker Merrall & Condit's auction division, have observed that while prices may be stabilizing, overall consignments are down. "At this time, there's not that much wine in the pipeline compared with previous years," said Ritchie. Overall, 10,861 lots of wine were available during the first quarter of 2009, 28 percent fewer than the 15,034 lots offered during the first quarter of 2008. Kapon believes that a more consistent market will bring back potential sellers who had been spooked by the seeming freefall of the fourth quarter.
Yet it's debatable whether elevated percent-sold rates signal that the correction has been completed. Paul Hart, president of Chicago's Hart Davis Hart, notes that hammer prices have been strengthening on an incremental basis since January. Ritchie, however, thinks that for the next few months prices should remain fairly consistent. "Going forward," he said, "everything will depend on the economy. For now, collectors demonstrated they still have a significant appetite for fine wine."
ASK THE EXPERTS
I have used a medium-sized passive cellar for the past two years. It has had a reasonably stable temperature range. However, the humidity during the winter months has been approximately 30 percent to 35 percent. I have also noticed that the wine levels (ullage) have decreased by approximately one-quarter of an inch. Should I be concerned with these ullage levels? Some of the literature I have read suggests that low humidity is only a problem if the cork is defective. Also, if I correct the humidity problem going forward, will there be any impact to long-term cellaring?
—Matt Closs, Ottawa
The answer here depends on your wine collection. If it consists primarily of wines that you plan to drink in the short term, you should not really worry. For the purposes of resale, however, almost all wine auction houses now demand that consignments come from a temperature- and humidity-controlled wine-storage facility as opposed to a passive one. If you are storing wines to be consumed in the next five to 15 years, you should think about remedying the situation. For starters, you could place a bucket filled with water in the cellar, or install a humidifier. There are convincing arguments that low humidity is not as much of a contributing factor to deterioration in wine as was once thought. If you're interested in experimentation, you could mark the present wine levels on the bottles and see how much they continue to deteriorate once you have installed humidity controls.