A brief look at Hong Kong’s Boating History and its current market in 2014
Hong Kong is known as Asia’s boating capital. The city has a long history of luxury yachting and good infrastructure for boating. There are totally 263 islands in Hong Kong waters and the city also has professional facilities for boat maintenance such as shipyards, engine service dealers, etc.
Thousands of full-time boat boys and captains are employed and their yearly salaries are touching hundreds of millions of Hong Kong dollars. There is an enormous industry around leisure boating which consist of shipyards, brokers, designers, engineers, decorators, magazines, etc. Basically, this industry creates sizable employment and is definitely a contributor to the well-being of Hong Kong’s economy.
This article attempts to explain the recent history of the boating market and how it arrived at its current state. This industry had an unusual turn during the 1997 recession. Before 1997 the industry was doing well along with the financial markets. There was a lot of affluence and an attitude that the stock market was unsinkable. People borrowed a lot of money for investment and speculation. Investors thought of themselves as invincible and everyday media reports used to confirm those beliefs. Many people thought that the markets were never to go down. Some called themselves kings and princes of the stock market and lived in utmost luxury. Ordinary folks saw this affluence of the newly wealthy and got carried away into taking unnecessary risks on borrowed money.
Eventually the unthinkable happened, in 1997 the Asian market crashed. Investors now, were deep in debt, there were countless bankruptcies and job losses. Worst of all, many investors found themselves cornered and committed suicide. Quite a few took the lives of their families and children along with their own. It was unfortunately common news during those days. Property markets sunk, people were in trouble and getting rid of their assets. The second hand boat market, however, became interesting for those who understood the opportunity. The boats that were taken over by finance companies were now in the market for less than a fraction of their value. Boats in which the owners had committed suicide were even cheaper. Some companies understood this opportunity and raised money in any way they could to purchase those motor yachts. These companies used the Internet to market and export their stock boats to the USA, Australia and Europe.
Economies like the USA, Australia, New Zealand and Europe were strong at that time. They bought almost all well priced boats from Hong Kong. This great influx lasted until 2001, the 9.11 attacks. The terrorist attacks on the USA put a stop on boat exports. Hong Kong was to face another blow to its economy by the outbreak of a flu virus known as “S.A.R.S” virus, the property market was almost at an all time low and boat market was also very sluggish at this point. But few markets cropped up at that time for exporting boats such as Russia, Korea and Philippines.
After some volatility and the Internet boom and bust, in 2004 and 2005 the economy started recovering worldwide. Hong Kong quickly experienced the hike in the stock market and property market. Surprisingly the so-called intelligent financial media started saying the same things which they said a decade ago before the Asian crisis. There were reports saying that the financial markets had reached a new level and were never to go down. Hong Kong buyers were now buying new boats and the industry was again on its way up. This time around lot more brands entered the boat market and the market was rather saturated. Competition was tough and there was little difference between the brands. Hong Kong buyers being price sensitive, always bought boats from the agents who gave the most discount. But surely the existing known brands performed very well at that time.
The next economic downturn in 2008 did shake the industry, but the sales did not suffer as much as people thought it would, at least not in Hong Kong. Because now the European exchange rate was favorable for importing boats, and there were new buyers from Mainland China. These buyers preferred famous brand names and flashy designs. Due to lack of professional shipyards for yacht maintenance in China and China’s tax systems, they preferred to keep their boats in Hong Kong.
Hong Kong soon was to face a new problem, since the export of used boats was very low for years and imports increased, there was a shortage of space for mooring or berthing boats. Very soon the yacht clubs in Hong Kong ran out of space. Mooring rentals and memberships came to a ridiculous point. Berth owners in marina clubs were asking for 8,000 USD per month and for swing mooring spaces owners were asking for up to 3000 USD per month for a 50 foot boat. So the number of buyers became limited to either existing members or the very rich, mainly CEOs of public companies who can spend the public money into buying expensive memberships and rentals. For those hard earners, they had to say good-bye to the hobby of boating.
In 2013 the people of the boating industry, even went on a protest to show their dissatisfaction with the government for not creating more private mooring areas for boats. Unfortunately the government did not take any solid action, perhaps due to political pressure the government did not want to appear as spending tax money to accommodate the rich.
At this moment in 2014, due to the lack of mooring spaces the industry is in a difficult position. The skyrocketing prices for maintenance of boats are also creating a potential bubble for this industry. If such situation continues without any action from the government to make reasonable space available. Then boating will mainly be for the ultra rich and the boating market will be hypersensitive to the financial markets. The minute financial markets come down, the boat owners who are mainly affiliated with public companies, will cut down expenses. According to our past experience the owners first start by letting their boat boys and captains go, then they cut their maintenance expenses and the boat sits on the market for sale indefinitely. If this scenario happens, it will create a losing situation for all. We will end up with too much supply of over priced boats and we will have no reasonable demand from any economy in the world to absorb this surplus from Hong Kong. Especially after China has banned imports of all used boats which were older than 12 months.
The boating market can only sustain itself in tough economic situations if boating becomes more affordable for people of various classes. The first step to do this would be by creating more private mooring spaces for low prices so owners can still keep the employment of their crew. We also need to increase the number of people who can own small boats and cheaper large yachts, to create ownerships of boats by people who are not likely to go in panic mode when financial markets have turbulence.
The future of the industry surely depends on the actions of the government today.
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