High demand in Turkey’s small art market

As developing markets rapidly commodify art, the Turkish art market has won amazing returns for investors over the past few years, reaching its peak with the recent sale of “Blue Symphony” for 2.7 million Turkish Liras.

The annual volume of Turkey’s art market stood at only $7 million during the 1970s, but with free-market reforms in the 1980s, wealthy people were able to become wealthier and buy more art, said Arzu Erdoğan in a report in Fortune Turkey’s February edition.

The piece argues that the Turkish art market is rapidly becoming a formidable force in the country’s economy.

“When I opened my art gallery, one purchased art through a common relationship,” the magazine quoted Yahşi Baraz, who founded Galeri Baraz in 1975. “For 25 years, the value of Turkish paintings appreciated so slowly. But the change began in the 2000s, especially through 2003-2004. In those years, traders educated in the West started turning art into an investment tool.”

Today’s big names in painting, such as Mehmet Güleryüz and Ömür Uluç barely earned any money then, Baraz said. “[Burhan Doğançay] painted ‘Blue Symphony’ in a room upstairs from my gallery. I put it on display for $3,000, but nobody bought it.”

According to Doğan Peksoy, a painter and the owner of the Teşvikiye Art Gallery in Istanbul: “The flow of accumulated money from private capital into art was perceived as a form of prestige and advertisement. It became a necessity for the Turkish bourgeoisie to reach social prestige and recognition when richness was not enough to do that.”

Nonetheless, the development of the Turkish market is nothing in comparison with the rest of the world, whose volume is around $50 billion. Turkey currently commands a market of roughly $200 million.

An alternative investment

“The decline in inflation and interest rates, a stable currency and various investment instruments not yielding quickly have all helped art investment rise,” said Erhan Ersöz, owner of Art Depo and a former deputy general manager for Körfezbank. “The appreciation of art in value is related to personal wealth, plus the elevation of the cultural level,” he told Fortune Turkey.

Peksoy said the opening of Istanbul Modern in 2004 had helped the rise of the art market. “With the opening, art work prices were multiplied by four or five times.”

Art investors abroad purchase art with 10 to 20 percent of their incomes, research shows. In Turkey, the figure is around 5 percent. “The reason is that art investment is long term and risky,” Ersöz said. “One has to wait for a decade. The Turkish investor is not that patient.”

According to Baraz, “95 percent of paintings currently being sold for huge sums today will not gain in value – only 5 percent will gain. That is because Turkish painting is very weak. When the West began the Renaissance, we did not even have fine arts. We were too late. Turkish painting could not be integrated into Western painting and the Western influence is so huge.”

Baraz said no global museum would accept Turkish painters. “You cannot find a customer for a painting by Osman Hamdi Bey for $1 million abroad. But a Turk may give $10 million. [Turkish paintings] are being bought and sold between Turks – it has a very limited customer base.”

Turkish painters, however, found good value when Christie’s launched an auction in October 2008 in Dubai. The International Modern and Contemporary Art auction witnessed figures ranging from $17,500 to $122,500 for works by Abidin Dino, Erol Akyavaş, Burhan Doğançay and Mübin Orhon.

Later, a Sotheby’s auction on modern Turkish art in March 2009 netted 1.3 million pounds. A Mübin Orhon painting was purchased for 193,250 pounds, a work by Fahrelnisa Zeid sold for 85,250 pounds, while Bedri Baykam’s “The Ultimate Dejeuner” received 28,000 pounds.

Only 22 percent of the works, which included art from 53 Turkish artists, were purchased by foreigners, according to Oya Delahaye, Sotheby’s Turkey representative.

Shift to the east

According to Baraz, art follows capital. The economic turmoil in the West has dethroned New York, Berlin and Paris as world art centers to be replaced by the growing importance of China, Russia, Japan, South Korea and Dubai. “Many renowned galleries have opened branches in China. Paintings are being sold for millions of dollars in Shanghai or Beijing. The same may have become true for Istanbul,” he said.

“There are many paintings that bring 500-600 percent profit in three or four years,” said Turgay Artam, owner of Antik AŞ. He told Fortune that big buyers include collectors, private museums, investment funds and some individual buyers.

Most leading Turkish businesspeople are collectors, including Cengiz Çetindoğan, chairman of the board at DemSA Group. With more than 1,500 pieces of art, Çetindoğan is unaware of the exact value of his collection because he buys for pleasure, not investment. Art circles, however, believe his collection may be worth $150 million.

Çakmak Turgay, partner at Beşiktaş Denizcilik, has brought down the number of works he owns to roughly 300 in an effort to orient toward modern painting. “An Ömer Uluç painting sold for 130,000 liras at a recent Antik AŞ auction was sold for 13,000 liras three years ago,” Turgay said. “There is overwhelming demand. Our painters are still cheap.”

According to experts, the Turkish art market was not greatly hurt by the crisis, instead fetching record prices due to a small market with high demand.