In recent years, the meteoric growth of jewellery sales at auctions in Hong Kong has pushed the city to rank second after Geneva as a hub for the jewellery auction trade. Many auctioneers have been doing a roaring trade, with fine-gem auctions setting records in Hong Kong.
Sotheby's, for example, achieved the highest total sales for a jewellery auction in Asia with its Magnificent Jewels and Jadeite Autumn Sale 2013, totalling US$95.7 million. But that record was surpassed just a month later by Christie's, which raked in a whopping US$110 million with its Hong Kong Magnificent Jewels Autumn Auction 2013 in November.
The results, says Vickie Sek, Director of the Jewellery and Jadeite Department, Christie's Asia, “shows that Hong Kong is now firmly established as an international jewellery saleroom with New York and Geneva."
Strong Growth
Newcomer Poly Auction, a leading Chinese mainland auction house, which established a presence in Hong Kong in 2012, has also grabbed a slice of the glittering pie. Its two jewellery and watch auctions, held last October, fetched more than US$14.26 million, which the auctioneer said represented "considerable growth" compared with the spring sales.
While contemporary art is still the top category in Hong Kong's auction scene, jewellery is exploding, fuelled by demand from mainland bidders. "China is one of the most exciting markets in the world, both in terms of creative output from Chinese jewellery designers, and the growing global influence of Chinese collectors," Ms Sek says.
That’s why Poly Auction set up an office in Hong Kong in August 2012. "The rise of the Chinese economy has fortified Chinese people's demand for higher quality of life, which goes hand-in-hand with jewellery,” says Yu Wenhao, Head of the company's Jewels and Watches Department. Because of the global economy, he adds, people are diversifying into jewellery as an investment option to safeguard their wealth. “By establishing a base in Hong Kong, we can have a great platform to showcase our collections."
Where East Meets West
The appeal of Hong Kong as a jewellery auction centre in Asia, according to Mr Yu, lies in part to its long-held status as an international jewellery hub. "It is a place where East meets West, and so it's easier to draw the attention of potential buyers, jewellery designers and industry players from different parts of the world. Our clients, for example, come not only from the mainland and Hong Kong, but also Taiwan, the United Kingdom, Switzerland and more," Mr Yu says.
Hong Kong's tax system also works in the favour of auctioneers and bidders. "Hong Kong is a free port, and there is no sales tax. You bid a jewellery piece at an auction, and the final bidding price is all you have to pay,” says Adam Lau, Chairman of the Hong Kong Jewellery Manufacturers' Association. “But things are not the same on the mainland. Even for the Shanghai Free Trade Zone, which imposes no tax on buyers and sellers, once a jewellery piece is taken outside the zone, you have different taxes to pay. Altogether, the effective tax rate can be up to 40 per cent. This drives a considerable number of bidders to Hong Kong," Mr Lau adds.
Competition Heats Up
Running a successful jewellery auction business in Hong Kong, however, is not easy, given the intensifying competition among auctioneers today. Decades ago, the market was dominated by Sotheby's, which ventured into Hong Kong in 1973, and Christie's, which held its first auction in the city in 1986. But several new players have entered the market in recent years.
In 2008, Taiwan’s Ravenel held its first sale in Hong Kong, followed by the British auction house Bonhams a year later. In 2011, Tiancheng International Auctioneer was launched in Hong Kong by a Shanghai art collector. In 2012, China Guardian and Poly, both from the mainland, set up in the city to expand their international clientele.
As market competition continues to expand, young auction houses such as Poly are focusing on business and marketing strategies to woo potential buyers. "For high-end clients such as private bankers, we host introductory events for them, whereby they are given a briefing on jewellery items, including antique gems, showcased at upcoming auctions,” Mr Yu says. “But we also put much effort to target first-time buyers. Many people in this group tend to go for the mid-to-low range. So items priced at HK$70,000 to HK$80,000 are also the category we focus on. This is one way of growing our clientele and luring people to return to our auctions, which take place four to five times a year in Hong Kong."
Design Adds Value
With jewellery auctions now held regularly in Hong Kong, mainland buyer preference is also evolving. "All these auctions have enabled bidders to glean a better understanding of different types of jewellery,” Mr Yu says. “Whereas Chinese customers in general used to go for diamonds or jade exclusively, more of them are now open to a variety of colourful gems and antique gems. Indeed, auctions offer a good opportunity for people to learn about jewellery."
Yet certain qualities remain important to bidders. "Rarity, quality and provenance to the market are the key qualities that collectors look for in nearly every object sold at auction, including all sorts of jewels," Ms Sek says. "Furthermore, design can add to the value significantly.” Collectors, she says, are willing to pay top dollar for unique and rare pieces. “In fact, an important jewellery piece will always fetch market price. But that, plus a noteworthy provenance, could change the value of a jewel ten-fold or more."
Maintaining the Edge
With demand for such high-end jewellery continuing unabated, the future of the local jewellery auction market looks rosy, according to Ms Sek. Nevertheless, Mr Yu believes Hong Kong should improve its auction infrastructure to maintain its regional standing in the sector.
"Obviously you need spacious venues to hold auctions, so that people can view auction items properly and get a good grasp of the product quality,” he says. “But a lack of space is a concern in Hong Kong. Hopefully, more can be done on this front to bring into full play Hong Kong's geographical advantages."