Strangled at berth
A yacht crisis has hit Hong Kong: marinas are packed to capacity - there is a waiting list of at least two years for a berth at any of the territory's eight marinas; and costs are shooting through the exosphere.
The berthing cost for a 60-foot yacht - once club entry fees, fixed monthly costs and berth costs have been added together - can reach over HK$15,000 per month. The grey market fees for swing buoys (essentially, the right to tie up your boat to a rubber float in the middle of the harbour) are trading at many multiples of the official rate.
Cry us a river, you might think. Rich people don't have space to tie up their expensive boats. How sad.
But there are implications for those without memberships at a local yacht club. The city is seeing the beginnings of a dynamic mini industry in yachting services, thanks in part to strong mainland demand. But as usual, when it sees keen interest in its services from across the border, Hong Kong ambles on ambivalently, with locals complaining about shortages and the government failing to free up the land and resources that would let the city profit from a booming new business. (See Sidebar)
Hong Kong boat brokers and boat builders are complaining that they cannot sell any new boats because prospective owners have no berths in which to park them. Overwhelming demand is meeting virtually no supply, and people are frustrated that the government will not provide more marina space.
'It's a great business that is being ruined by a lack of government support,' says Garry Smith, owner of Saffron Marina, which sells second-hand boats and moorings.
'Everyone is losing money - the shipyards, the brokers,' says Edward Coebergh, the managing director of Boats and Yachts, a boat broker. 'It's a complete disaster. The brokers hope that China will open its doors, otherwise business will fade away, because the government is not doing anything.'
As with most shortages in Hong Kong for desirable, expensive items, wealthy mainlanders are behind the scenes, soaking up supply.
Hong Kong is the only Chinese port with modern marinas and an active racing scene, and is a key destination for the mainland's high spenders due to the absence of import and value-added taxes on imported yachts.
There is a 43 per cent sales tax in the mainland on new boats, says Coebergh. There is no tax in Hong Kong. A new annual tax levied on mainland vessels based on length, to be introduced this year, will give aspiring yacht owners one more reason to come to Hong Kong.
Coebergh says mainland buyers are heavily represented at the local boat shows and, if a vessel comes up paired with a mooring slot, 'It will be bought immediately, usually with cash in a suitcase.'
Owning a large, white, luxury yacht, or a 'gin palace' as they are known colloquially, to entertain friends and show off one's wealth has become de rigueur among wealthy mainlanders - even if they do not know their heads (marine toilets) from their 'tales' (ribbons that indicate sail trim).
According to the Hurun Rich List of 2011, China has more self-made billionaires than anywhere else in the world and their number has doubled since 2009. For such moneyed mainlanders dropping HK$10 million to HK$60 million on a luxury European vessel is utterly affordable.
As seen with luxury cars and expensive watches, mainlanders' yacht-buying habits are having a global effect, driving up the prices of European and US luxury boats. They have also increased manufacturing costs in Asian boat yards.
Many Asian marine brokers will tell you that Asian-based leisure craft can command a premium of 20 per cent or more on US and European boats of the same age and model, thanks to mainland buyers.
The mainland mini-boom is putting pressure on Hong Kong's boating resources. To get some perspective on the scale of this problem, the Hong Kong Marine Industry Association says only 1,500 of the 6,700 registered leisure craft in the territory are moored to walk-on berths. The rest have to use swing buoys (mooring buoys in open water), which involves using a small boat to access one's vessel.
The Marine Department technically leases the swing buoys to private boat owners for a monthly fee of up to HK$2,000 per month. But such is the keen demand for berthing slots that a lucrative sub-leasing trade has emerged, with people often finding themselves at the mercy of sub-leasers.
'It's ridiculous. My berth has gone from HK$3,500 [a month] to HK$6,000 with no warning,' says Smith of Saffron Marina, of his own moorage.
Hong Kong's capacity has been affected by the construction of the new bypass road in Causeway Bay, which has required the removal of about 200 boats from the marina next to the yacht club at Kellett Island, says Smith.
They argue that yachting centres from Jersey to Monaco and the Bahamas are testament to the affinity of luxury boats and offshore wealth - a club that Hong Kong could easily join.
Many new marinas in Thailand, Malaysia and the mainland are developed around residential, shopping and leisure complexes to capture the spending the rich inevitably bring with them. In Hong Kong, strict licensing requirements to operate leisure craft, probably due to commercial harbour traffic, also mean boat owners must recruit locally licensed skippers to operate their yachts.
Marine brokers are lobbying the government for more marina space. Their boat sales are suffering due to the shortage of berths, not least because they typically need to find parking spots for new boats to close a sale.
'I could sell four to five boats tomorrow if I could match them with a mooring,' Coebergh says.
The Hong Kong government keeps saying there is space at typhoon shelters and that swing buoys are available. Brokers say in private the government thinks the recent surge in interest in yachting is a short-lived fad. They also think the government does not want to be seen favouring the rich people who partake in this sport, by allocating scarce harbour space for their use.
While many yachters criticise the Marine Department for lack of berthing space, the department replies that it is not their job to develop marinas.
'During any consideration by the government of proposals on development of new marinas, the Marine Department's involvement is limited to providing professional views on the marine operational/traffic safety impacts at the marinas and in the vicinity,' says Heidi Cheng of the Marine Department.
In December town planners rejected a luxury residential and marine project, Baroque on Lamma, that would have created a yachting base with 500 berths. The project would have covered more than 85 hectares of green and marine areas in Tung O Wan and encroached on conservation areas and would have needed a vast, 78-hectare slice of government land.
A spokeswoman said it was incompatible with the area's conservation status and would ruin the site's rural character and threaten ecology in the area.
Brokers also suspect the government prefers to turn harbour space into reclaimed land, for sale to property developers, rather than creating more marina space, as this creates more revenue. 'Hong Kong likes enormous buildings which can make more money. A marina is the last thing [the government] thinks about,' Coebergh says.
The squeeze extends to boat building. Smith of Saffron Marina adds that property developers have been shutting shipyards in front of their developments because they look ugly. 'Now there are only five or six shipyards in Hong Kong and they have a two-year backlog on orders,' Smith says.
This is in contrast to the mainland's official bias towards wealth, where half the yachts at the Qingdao Olympic Marina are also government (or government entity) owned according to a China Daily report quoting a marina official.
Many brokers threaten to shift their business to other parts of Asia where new marinas are sprouting - notably Thailand and Malaysia's island resorts, which mix competitive membership and berthing rates with stunning locales.
Meanwhile, Hong Kong cannot take its boating market for granted. That is not because of any concerns that the mainland yacht-buying craze will fade - there is every indication it will grow - but because the mainland is rapidly developing its own yachting marinas.
While the mainland still lacks marina infrastructure, it has caught up impressively after hosting the Olympic Sailing Regatta in Qingdao in 2008. The China Cruise & Yacht Industry Association says China now has 100 yacht clubs with their own berths. In 2011, two 350-berth marinas opened near Hong Kong: one in Nansha, Guangzhou, and the other in Sanya, Hainan Island.
The Wuyuan Bay Marina in Xiamen has also joined the fray, vying to be China's largest marina, with a second phase expansion of 276 yacht berths. Such relatively large-scale marina complexes are key for hosting the international boat shows that bring luxury European yachts to mainland buyers, drawing publicity and press as well as potential marina clients.
One reason the mainland government is keen on this is because it offers relatively clean and healthy development, and because a marina can be regenerative for areas that otherwise offer very little.
Indeed, the mainland is moving from building marina capacity to buying the luxury yacht makers.
In January, China's biggest bulldozer maker, Shandong Heavy Industry Group, acquired a 75 per cent stake in ailing Italian luxury yacht maker Ferretti for Euro374 million (HK$3.8 billion).
Shandong province, which controls Shandong Heavy, has recognised that Ferretti's famous Riva brand yachts, favoured by Hollywood actors, may bring the province's billionaires thronging to the jetties of the Qingdao Olympic Marina, where berths go for two to three million yuan per year.
China is embracing yachting. Hong Kong just may not be part of the scene.
Carl Berrisford is a keen boating enthusiast based in Hong Kong