By Caroline White - Boat InternationalSometimes the
brokerage market seems like a once-carefree ingénue who had a rather nasty
accident in late 2008 (probably on a glamorous mountain road, with an
unscrupulous trader at the wheel). Since then, yacht brokers have administered
health-boosting sales, monitored her condition and occasionally turned to us
journalists to whisper sober judgements or report that she’s perking up.
Because the numbers of superyachts sold or ordered are so small, figures often
fluctuate significantly from month to month, making it difficult to form a
coherent picture of the state of the market – but taking the first six months
of this year, as we do here, will give us a clearer view. At first glance the
prognosis isn’t good.
‘This is the
toughest six months we’ve had since the original crisis in 2009,’ says Toby
Maclaurin, commercial manager of Ocean Independence. Frank Grzeszczak, a broker
at IYC meanwhile says, ‘This time last year I was way ahead of today and
generally from what I see, sales are way down this year.’
Our statistics
back up a negative general outlook, with 119 superyachts sold in the first half
of 2012, a 24 per cent drop on the 156 in same period of 2011. But the first
half of 2010 was worse, with 108 sold, and the 74 sold in the first half 2009
is still unmatched in grimness.
The timing of
this year’s sales is vital to understanding why they are disappointing. There
is usually a sales spike in the second quarter of the year, but this year it
was more of a thumb tack – a jump from 55 to 64, compared with 2011’s 56 to 97.
33 of the 92 superyachts
sold in the first half of 2012 were from Italian yards
‘The first half
of last year was slow, the second half was great, the first quarter of this
year was great, and now the second part is slower,’ says Wes Sanford, a broker
at Northrop & Johnson. ‘There was a 12 month run where the market seemed to
have picked up. In the middle of the second quarter it slowed down a bit, we
didn’t have that same uptick that we did last year. Boats are still selling,
but it’s not super strong.’
Hein Velema, CEO
of Fraser Yachts, has had a similar experience. ‘I was happy January, February,
March and April, that was all positive and comparable with last year,’ says
Hein Velema. ‘May and June were disappointing. And May and June are normally
the peak months.’ This is the crux of the concern – if the peak months are
subdued, the year’s sales as a whole are likely to suffer.
Uncertainty
So what factors
are responsible? The resounding reply from brokers is uncertainty. ‘There’s
even more uncertainty about the future economic stability of just about
everywhere than there was even in 2009,’ says Maclaurin. ‘In 2009 people were
talking about the crisis. Now when people talk about the crisis you almost feel
like saying, “Well, which crisis?” because there are now so many of them.’
The largest
superyacht to be delivered in the first half of 2012 measures 96m
Sanford
believes it is a psychological issue rather than a material one: ‘a year from
now the clients will probably still have the money to buy a boat, that they
have today, but the uncertainty is enough to make them pause.’
Velema agrees:
‘there’s not a lack of money. But it’s really their opinion about what the
economy is doing, the worry about where we are heading is what makes people
hesitant.’
Given that the
most acute economic uncertainty currently hangs over the Euro, it seems likely
that Americans would feel more confident about buying. Indeed, Velema has found
the US section of market is a little healthier than the European this year. ‘We
are doing a little but better in the US, that is more positive I’d say than
Europe. And what I’m really happy about is the West Coast that was almost
completely dead for years, is now getting better. That’s more smaller boats I
have to say, but still, they’re getting out of a very deep hole. We had a much
stronger recovery in Europe in 2010/11 than in the US, but that is now falling
back, and at the same time the US has finally come up a little bit.’
Sanford, who is
based in Fort Lauderdale, agrees that, ‘right now it seems the strongest part
of the market is American’. But while the problems surrounding the Euro don’t
worry his American clients as much as his European clients, ‘most of these guys
have exposure around the world so they’re paying attention to it.’ And
Americans have an extra factor to contend with. ‘We have an election here in
the US, which will affect some clients,’ says Sanford.
Sales trends
‘The thing that
seems to have changed for 2012 is that middle bracket, 30-50,’ says Maclaurin.
‘It’s where in our market you normally see the bulk of the sales and it’s
really suffered.’
‘We were quite
relieved 12, 18 months ago when it seemed some of the banks were returning to
yacht financing again – they exited in a hurry. So yes they have come back, but
their terms are quite difficult to swallow. Some banks are saying “yes we will
finance your yacht purchase, however we want your entire wealth portfolio with
our bank”.’
Our figures
certainly show a drop in this bracket from the same period in 2011: 67 30-50
metre yachts were sold in the first half of 2011, but 40 in the first half of
2012; 25 40-50 metre boats were sold in the first half of 2011, and 22 in the
first half of 2012. But even given its year-on-year slip, the 30-40 metre
bracket is still among the top sellers – with only two boats fewer than the top
24-30 metre bracket.
‘This [30-40
metre] bracket is easier to afford for a larger group of people, also in
operating costs,’ says Velema. ‘People that used to have a sporty type of boat
[which he says still aren’t selling] now want to go to a displacement. They go
from a big Mangusta into a Benetti classic or something like that.’
In terms of
smaller superyachts, while the sail market in general isn’t fantastic,
Maclaurin has found that sailing yachts of 30 metres and under are moving. ‘It
could be to do with the profile of the buyer, maybe slightly more conservative
people, who would probably buy out of cash rather than borrow,’ he says. ‘If
you’ve got a well priced sailing yacht of good pedigree, in good condition, I
think you’re better placed than just about anybody at the moment to achieve the
sale – unless you’ve got a 60-70 metre recently built motor yacht, which you’re
prepared to let go at a price buyers are willing to pay today,’ he says.
Price updates
All the brokers
we spoke to agreed that across the world, far above type or size, the most
important factor in sales was value. Sanford describes buyers as ‘value
driven’, Grzeszczak says they are ‘deal orientated’.
The biggest
reduction in the first half of 2012 was the $12.8m taken off 58m Bakara
in January
‘There was a
massive spike in the spring with the number of price reductions,’ says
Maclaurin. ‘Some of them have really been very big, into millions – our central
agency Reverie was reduced by $10 million dollars in one go. It’s only
now that brokers have been able to provide some solid stats, where we’ve been
able to turn round to an owner and say “this is what’s been happening over the
last two-plus years, so we’re not making it up, this really is fact.”
He believes
that the spike occurred in May because brokers advised clients that ‘it looks
like we’re not going to sell this year. If we’re going to do something about
it, now is the time.’
Velema has
found the difference between original sales prices and actual selling prices –
‘you don’t know that, but I do’ – are very revealing about the new pricing
landscape. ‘Boats are sold for just under 25 per cent less than the last asking
price, or 36 per cent less than the original asking price. It was about 45 per
cent lower than the original asking price last year. My conclusion is that now
when people put a boat now on the market, they price it a little bit lower at
the beginning.’
New orders
There were 48
new orders in the first half of 2012 – the same figure as in the first half of
2011. At 16, the 40-50 metres has been the most popular bracket and there have
been eight new orders of 70 metres or more this year (including a 147 metre) –
there were ten 70 metre-plus orders in the whole of 2011.
‘Even when the
market was good if someone wanted 75, 80 metres-plus the number you had to
choose from was really quite small,’ says Maclaurin. ‘They seem to build their
own and they seem to keep them for a very long time.’
Grzeszczak has
found US yards quiet this year and only six of this year’s new orders are with
American builders. ‘With the Euro coming down from where it was, to build in
the US now is going to be less attractive for Europeans,’ he says. ‘As the Euro
goes down it’s going to be more attractive for Americans to go to the European
market and buy.
This only seems
likely to exaggerate an existing trend – Americans are much more likely to buy
European boats than vice versa, largely because the classic styling popular in
the US doesn’t sit so well with European clients.
But Sanford
believes this is changing: ‘The American market follows the European market and
is coming around more towards the modern look. You’ll see a lot more boats now
that are a little bit more modern in style from an interior perspective. It
does make it more interesting if, in an attempt to open that market, builders
are trying to appeal to that.’
There were only
5 orders for
yachts between 24m and 30m in the first half of 2012
Grzeszczak
agrees: ‘We’ve got younger blood coming into the industry and a lot of very
young billionaires have come along who seem to like the minimalistic European
look.’
New markets
Brazil’s
economy is still ‘booming’ in Grzeszczak’s words, and sales continue. He
believes that China ‘is not there yet and it’s going to take a few years to
happen,’ although there is some activity in the 50 plus market now. ‘From the
50 metre boat I sold there last year, I found that they don’t grasp ordinary
expenditures needed to maintain a yacht.’
Velema agrees
that the vast cultural differences are a stumbling block. ‘A Brazilian client
understands the concept of Saint-Tropez much more quickly than the average guy
form Beijing,’ he says. ‘They want corporate entertainment and that’s much more
the goal of having the yacht.’ But he adds: ‘I was always sceptical about
China, but I’m slowly changing my mind. We are now developing quite a good
network there.’
Charter
‘While charter
was not all-guns-blazing we are fortunately experiencing something of a last
minute rush, which has come even later than in previous years,’ says Maclaurin,
who is also president of the Mediterranean Yacht Brokers Association (MYBA).
He points again
to uncertainty, this time caused by tax issues. ‘A large part of summer charter
happens in Italian waters and our Italian friends scared the living daylights
out of people with the berthing tax, which fortunately they made much lower and
more local,’ he says. But there are also on-going tax problems for charter.
‘The second one has been VAT on charter hire. It’s not that some tax is due on
charter hire, it’s that the interpretation of the law is so unclear as to what
rate actually applies and the confusion and the bureaucracy of actually being
able to pay the tax. Everyone’s been screaming out for MYBA to offer some
advice, and the answer is “Look, as soon as we can find two lawyers or tax
experts to agree on an interpretation of the law, we’ll publish some advice.”
It’s that bad.’
42 yachts between
24m and 30m were sold in the first half of 2012
Velema has
found that while charter has seemed positive this year, owners may not be
feeling the benefits as much. ‘The number of charters booked is good. But with
every boat delivered by a yard now there’s another boat on the charter market.
So the charter fleet is still growing, while the charter market I’d say was at
the level of 2007. If you ask a yacht owner how charter’s doing, he will
complain. He doesn’t get the number of weeks sold that he could get in good
years.’
Indeed, Sanford
notes that in general the sales market is similarly over-stuffed. ‘The one
scary thing is that we probably have seven to eight years of inventory in
certain segments of the market now and there are more boats being listed than
are being sold on average in recent months.’
But Sanford
also notes that conversely, ‘since so many sellers are not desperate to sell,
that is a sign of strength for the market in itself.’ And given the economic
and political headwinds the market is facing this year, she is showing
resilience. It looks like there’s life in the old girl yet.
