Why buyers and sellers are flooding the Hong Kong auction market.

Hong Kong’s auction market turnover trebled between 2009 and 2010. The Mei Moses Global Art Index – one of the most closely watched worldwide benchmarks of art prices – jumped by 10.2% in 2011 (while some of the leading global stock markets hardly moved, or declined a little). That upward trend has extended into 2012.

The index was created by Jianping Mei and Michael Moses: it tracks the sale and resale prices of around 20,000 works of art worldwide. (The average gap between buying and selling an item is 22 years.) The data goes back to 1810 and is dominated by sales in the United States, but in the past few years Mei and Moses have added European and Chinese sales too.

The competition in Hong Kong is likely to hot up, which can only be good for buyers and sellers alike. The Hong Kong auction scene is still dominated by the likes of Western companies such as Sothebys, Bonhams and Christies. Many of their customers are mainland Chinese – Beijing keeps out foreign auctioneers, who are restricted to opening representative offices and offering sale previews.

That’s something that mainland Chinese auction houses have noticed, and as a result have been eyeing the territory as a place to expand. According to the auction industry’s trade body, the two biggest mainland houses, Beijing Poly and China Guardian, are moving up the rankings: they have already overtaken Bonhams and are closing quickly on Christie’s and Sotheby’s as mainland collectors splash their cash.

Hong Kong’s reputation is good: regulation and the rule of law tend to keep both buyers and sellers honest. Fakes are rare, and buyers find it difficult to renege on paying their auction bills. Plus, there are no import taxes on items for sale here.

The result is a big increase in the number – and scope – of sales. In October, for example, Bonhams plans to offer the Paul Braga Collection of Snuff Bottles for sale.

Sotheby’s big Autumn sale is also scheduled for October but details won’t be available until late July. Last year’s event spanned six days and raised US$411m – with Sotheby’s total Hong Kong turnover last year topping US$1bn (HK$7.8bn). Three thousand items sold in the autumn auctions, including pieces from one of the world’s biggest private collections of Imperial porcelain, many fine Chinese paintings and 20th-century Chinese oils from English, European and American collections.

Smart people do their research. Visit the sale preview. Buy the catalogue and look for the prices that similar items reached at previous sales – Google, and even eBay, can help

Luxeford is one of the newer auction houses in Hong Kong. It specialises in jewellery, but also deals in carving and objets d’art. Edmond Chan, its head of jewellery is currently preparing for Luxeford’s debut public auction here, slated for November.

Business is good and the economic downturn in Europe and North America has not affected auction sales in East Asia. “People have the money,” Chan says. “They’re looking for higher quality than before. The more expensive items are selling better than ordinary items.”

Chan and his team are finding items from around the world – a process that will continue until about a month before the sale, when the catalogue will be published.

Some of his favourite items already confirmed for the November sale include a Van Kleef & Arpel cultured pearl necklace, and a pink sapphire and diamond ring made by Chanel. He believes they will sell for around US$30,000 each.

Chan advises that if you want to bid at an auction – for any items including wine and antiques – you should be prepared in much the same way as you should for any investment or big purchase.

“Smart people do their research,” he says. Visit the sale preview. Buy the catalogue and look for the prices that similar items reached at previous sales – Google, and even eBay, can help.

Also, set yourself a price limit and stick to it. Don’t fall victim to what economists call the “winner’s curse” – people with limited information about the value of an object, or who are driven by the need to win at all costs.

Unlike shares, which can be sold in a matter of hours, paintings and other auction items can take a long time to sell; years even. Auctioneers may charge high fees for their services.

Fashions change too. Art critics have their darlings, which history may cruelly forget. The investment guru John Train points out in his book The Craft of Investing that the art establishment can be a poor judge of what has lasting value.

Take the artists who won the prestigious Prix de Rome in Paris in the late nineteenth century. He notes they were all highly respected, but nowadays they are not household names. In fact, the judges felt no painter was worthy of the award in 1888 or 1897 “although Degas, Cezanne, Matisse, Monet, Renoir, and Toulouse-Lautrec were all available.”

So buy what you like – that way you will always make a return on your investment. And impressing your friends can be priceless, too.






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