Next Wednesday in South Kensington, Christie’s is offering some bondage trousers designed in the 1970s by Vivienne Westwood for SEX, her King’s Road punk shop, for about £300; a few weeks later, on April 4 in New York, Christie’s is selling a Turner view of Venice, which is expected to make a record $20m. Such is the eclectic world of fine art salerooms.

These days anything goes – and goes well. The auction houses are experiencing their best days since the late 1980s. Last year Christie’s boosted turnover by 30 per cent to a record $3.2bn, with 340 lots selling for more than $1m. Arch-rival Sotheby’s, which maintains it is putting profit before sales, registered a marginally increased turnover of $2.8bn and 324 lots topping $1m.

The basis of this prosperity is post-1870 art. In February in London both auction houses brought in around £130m in a week from disposing of Impressionist, modern and contemporary art, with dozens of new artist records established, from Munch to Soutine, Auerbach to Rachel Whiteread. But with the wealthy from Russia, China and India starting to diversify outside their national heritage and to compete with wealthy Americans and Europeans, the current boom is much more broadly based than that of the 1980s, which was mainly dependent on speculative Japanese investment.

“There is now an understanding that works of art can be part of an investment portfolio” says Ed Dolman, chief executive of Christie’s. Robin Woodhead, Sotheby’s European chief executive, agrees. “There has been a growing interest in art as an asset class in recent years. There are now hedge fund managers in the market.”

Undoubtedly, rivalry among the mega-rich who like their own way is providing the momentum, and while the global economy ticks over satisfactorily, the art market will prosper. But the business has always been cyclical and if economic confidence falters, or second rank properties suddenly become less attractive, the crash could be as sudden as in 1990. 

What makes the immediate prospect so rosy is that the market for once is in balance, with buyers keen to bid and sellers equally willing to assign. The record prices have drawn out increasingly rare masterpieces that command ever- higher values. On May 2 in New York, for example, Christie’s expects to make more than $50m from a Van Gogh portrait of the owner of the café in Arles that he frequented with Gauguin, the recipient of the painting. A day later, at its Impressionist and modern auction, Sotheby’s offers a Picasso portrait of his mistress Dora Maar, which could also make $50m.

In the same week in New York, a set of 19 drawings by William Blake, discovered in a Glasgow bookshop in 2001 and subject to a long wrangle over ownership, plus an attempt by the Tate to keep them in the UK, finally comes under the hammer at Sotheby’s with the expectation that they will make up to $17.5m. Later, on May 24, Sotheby’s expects to set a new record of around $7m for a Frida Kahlo painting, a 1943 portrait symbolising her rediscovered love for her husband and fellow artist Diego Rivera.

Such eye-catching objects boost the reputation of Christie’s and Sotheby’s but they are often secured at a price: in this very competitive world an auction house sometimes hands back its entire profit to the vendor. Sellers enjoy no such flexibility when consigning cheaper lots, which is why Christie’s is happy to auction items such as film posters, toys and fossils with estimates as low as £200 at its South Kensington rooms. The aim is to appeal to a new and younger generation of clients, keen to furnish their homes through auctions, rather than budding connoisseurs. Each month there are two Sunday auctions to make things easier for private bidders and, twice a month, “Interiors” sales.

The dominance of the salerooms is bad news for dealers who cannot compete with the glamour, or the prices, generated by the highly publicised big auctions. But dealers have become increasingly dependent on the auction houses, not least for the disposal of their surplus antiques. On Thursday, the stock of yet another leading London furniture dealer, the late Dick Turpin, goes under the hammer at Christie’s and, on May 17, $10m worth of top quality furniture, silver, ceramics and pictures owned by the Bond Street firm of Partridge will be sold off by Christie’s in New York, including a pair of George II tables probably designed by William Kent and valued at up to $1m. Christie’s has every interest in this sale doing well – in January it lent ceramics dealer Mark Law £4m towards the purchase of Partridge and the proceeds from this auction, plus commission, should repay the debt.

The success of the two dominant auction houses seems to be trickling down. Bonhams, which straddles the middle market with annual sales in excess of $400m, was once best-known for selling off the estates of the deceased. Now its auctions are much more interesting. On March 13 in Chester it is expecting more than £1,000 for two letters written by a 16-year-old David Beckham telling of his excitement at joining Manchester United. On March 28 in London it is offering, for up to £1m, a very different manuscript, the long lost proceedings of the Royal Society in the late 17th century as recorded by its secretary, Robert Hooke. On March 21 in London, Bonhams is also selling dealer’s stock – portraits of pigs, sheep and cattle from Iona Antiques, which specialised in this sector.

At the moment dealers need the auction houses but when the wheel turns and new collectors lose their enthusiasm for buying such illiquid assets at auction, the salerooms may rue the weakening of the retail trade. A balance between the two leads to a healthy market.