Hong Kong Property Sales To Give Sotheby’s, Christie’s Edge Over Art Auction Rivals

International Auction Houses Can Leverage Real Estate Sales To Increase Art Sales To Rich Mainland Chinese

Wealthy mainland Chinese are drawn to Hong Kong because of its proximity and strong economic prominence

Wealthy mainland Chinese property buyers are drawn to Hong Kong because of its proximity and strong economic prominence

It’s no secret that Hong Kong is now one of the most lucrative single markets for major auction houses like Christie’s and Sotheby’s, as well as smaller, but fast-growing, auction houses from East and Southeast Asia. In Hong Kong last year, Christie’s saw its sales double over 2009, and rival Sotheby’s saw its revenue in the city increase by 160 percent year-over-year to US$684 million. All this translates to hundreds of gallons of Chateau Lafite, a raft of Chinese contemporary art from blue-chip artists popular with mainland Chinese and Hong Kong collectors, a mountain of glittering Swiss luxury watches and a museum worth of Chinese antiquities. But as Sotheby’s and Christie’s and their mainland Chinese rivals — particularly Poly and China Guardian — try to tap the growing Chinese collector market, Hong Kong is becoming an important battleground not only for auctions but for branding. And one area where Sotheby’s and Christie’s have the upper hand in the Hong Kong art auction market isn’t even related to art, but rather to high-end, astronomically priced real estate.

As the Wall Street Journal recently pointed out, the surge of mainland Chinese money that’s flowed into the Hong Kong property market in recent years “has to do with the rule of buying what you know: Hong Kong is the most popular destination for Chinese tourists – it’s nearby and it’s a city where many speak Mandarin. What’s more, the rising yuan goes a long way in Hong Kong.”

Samson Law, managing director of Sotheby’s real-estate division, adds that China’s recent measures to cool its property market—including limits on multiple-home ownership and higher interest rates—have prompted wealthy Chinese investors look outside the country.

“What’s the next step after China? Hong Kong,” he says. “Then later, they’ll look to buy overseas, in London, New York or in Australia.”

The surging demand from China, especially for luxury properties, has prompted the high-end real-estate divisions of Sotheby’s and Christie’s to set up Hong Kong offices. These buyers aren’t buying just any homes —they’re buying the most expensive in town: In Hong Kong, buyers from China make up 28% of the transactions for properties that are priced at 12 million Hong Kong dollars (US$1.5 million) and higher.

This is the key takeaway here. Opening Hong Kong offices catering to the highest of high-net-worth mainland Chinese buyers is a shrewd move on the part of Sotheby’s and Christie’s, not only because it’s steady business and a business that these companies know well, but because it will provide them with ample opportunity to nurture relationships with these individuals, many of whom will likely be as interested in investing not only in real estate but in things like wine, jewelry and Chinese art. Christie’s has recently made moves in this direction, branding-wise, via its new Chinese Contemporary Art education course, which kicks off this month in Hong Kong, coinciding with the Christie’s spring auction series.

Since Chinese collectors tend to spend in Hong Kong with long-term investment in mind, in coming years it wouldn’t be surprising to see many of the multimillion-dollar apartments sold by Christie’s and Sotheby’s — many of which will remain empty much of the time — filled with investment-grade art and antiques by their mainland Chinese owners.

 

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Art & Design, Market Analysis, Retail