2012 in numbers
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‘At the beginning of the year I was quite positive about the whole development in the market – the first three months were great,’ says Hein Velema, CEO of Fraser Yachts. ‘Then, when we normally would have hoped for a peak, in spring, it absolutely did not happen. And at the very end of the year there was a peak out of nowhere.’
The result was a year that resembles 2010 more than 2011 in terms of shape, 2011 rather than 2010 in terms of volume – but which is much more consistent-looking than either year. Velema believes the explanation is largely geographical. ‘It was frustration in Europe,’ he says, referring to the effect of economic uncertainty in spring. But what of the end of year boost?
‘I think it is to do with the shift towards the American market,’ he says. ‘The demand in 2012 came gradually more from America than from Europe – about 70 per cent of our sales were done in dollars. Americans tend to buy at the end of the year because their season starts then. They want to have a boat in the new season; Europeans do that in May and Americans do that in November.’
Jonathan Beckett, CEO of Burgess, doesn’t think the end of year rise was anything new, as a similar pattern has been seen many times in previous years – at year end. ‘It was definitely strong at the end of the year and that’s historically often been the case,’ he says. ‘People invest a lot in painting, refitting and dry docking their yachts in time for the Mediterranean cruising season. However, with the approach of winter they realise that more maintenance expenditure looms and become more incentivised to sell.’
Toby Walker, managing director of Dubois Yachts, however, believes it makes little sense to analyse seasonal trends in the current market. ‘It’s a buyers’ market and the right deal is not dependent on the seasons,’ he says.
‘Buyers looking for the best opportunity aren’t worried about whether it’s spring, summer or autumn. When they feel comfortable to buy they’ll do it regardless of what time of year it is. They don’t feel they have to rush to close a deal.’
Whatever the explanation for its shape, the apparently steady year revealed more dramatic trends on closer inspection. We recorded a combined asking price of €2.26 billion, on a par with 2011’s €2.5 billion. But the final sales prices are known only to broker, seller and buyer – and Velema believes the devil is in this detail. ‘If you look at the total [actual selling prices] it was not good,’ he says.
It hardly seems surprising – given the price drops that have become an everyday feature of the market – that prices may be dropping even more dramatically behind closed doors. And while one might think a plethora of deals would speed up sales, the bargain-hunting atmosphere they create hindered them.
‘Sometimes you’d get the seller in the right place and you’ve got him understanding where the new market is, and you’re saying to a buyer, “This is a fantastic deal at €40 million and he might even snip it at €35 million, and that would be incredible for you.” And the buyer says, “Offer him €28 million.”’
Such deals failed, but as Velema notes, buyers were not always unduly concerned about it. ‘They saw that the prices were going down, especially in the larger yachts and that makes people nervous: “I have a great deal, but if I wait longer it might be even better.”
This logic has often proved to be flawed, because, as Beckett puts it, having heeded their broker’s advice to set a realistic asking price in tune with the market, a seller may well not be prepared to budge much further. The over-inflated pricing levels seen in the pre credit-crunch era are history, but equally, it is important for buyers to realise that pitching way below the current market is unlikely to succeed. There have been virtually no fire sales.
The yachts that sold well were Beckett says, ‘Very good value boats in the 40 to 45 metre range. Compared to the rest of the market the 60 metre size bracket has been
‘Sixty metres tends not to be an entry level yacht. Clients who buy a 60 metre have probably owned a 25 to 30 metre and then a 40 metre before trading up to a 60 metre. If you purchased your 40 metre for €22 million and your return a few years later is only about half of your investment, there is little incentive to invest yet more in a larger yacht and owners are selling up, witnessed by the large inventory of yachts for sale in this size sector.’
Thus, encouragingly, people are buying entry level superyachts – our stats show that 30 to 40 metres was the highest-selling size bracket in 2012. It is just that they are failing to move up to larger boats.
Velema believes a higher proportion of American buyers might also help explain this. ‘They tend to buy smaller yachts – not many Americans are buying 60 metres and up.’
Another notable feature of the sales data was the ratio of motor to sailing yachts sold. In 2011, 39 of the 223 superyachts sold were sailers; in 2012, despite the overall tally being higher at 270, only 19 of these were sailing yachts. ‘The German market plays quite an important role in sailing yachts, so that might have been an influence,’ says Velema. ‘They were not very optimistic in 2012 and I think that they still are not.’
Beckett believes the more specific needs of sailing yacht clients plays a part in keeping sales of pre-owned sailing yachts down in general. ‘Clients who buy a motor yacht are looking for a floating villa and they might want to know if it has six cabins and a gym,’ he says. ‘Clients who buy sailing yachts want to know if the helm is in the right place and they might not like a particular type of rig.’ This difference, combined with the lower number of sailing yachts that came to the market in 2012 – 53 versus 65 in 2011 – might have played a part. As could a range of other factors, including the quality of what was on offer.
In any case Dubois’ Walker, a sailing yacht specialist, points out that their particular requirements often lead sailers to build rather than buy.
‘Certain clients are still prepared to commit to a new-build because they very much want their own boat and the enjoyment of a two- or three-year build,’ he says. ‘Our new-build business has been very good.’
Another notable factor in 2012’s statistics was the lack of 70 metre-plus second-hand sales – only five, a disappointment after nine in 2011, including 114.5 metre Pelorus.
‘The second-hand market (in this bracket) at the moment was really slow,’ says Velema. ‘But in new construction people are building big yachts, so what you see is at this moment people that can afford it prefer to build new ones.’
Beckett has found that those who are building the largest vessels of all are newcomers to yachting, representing ‘global pockets of extreme wealth’. ‘The 100 metres-plus category is very active and these are clients with an appetite to build and spend up to €350 million,’ he says.
‘Clients at this level are less affected by factors which influence those with a net worth of, say, €100 million.’ As a result, they are less price driven, but this said, ‘Considering these yachts are few and far between, pricing levels are sensible. That market is here to stay for the time being.’
Indeed, Beckett believes that in general, ‘We’ve got a lot to be very positive about in 2013,’ as long as brokers put in the hours and clients navigate the market with intelligence. ‘We completed a good number of deals in 2012 in a very difficult market and getting them over the line was testing,’ he says.
‘The good news for buyers and sellers is that if you are a seller and you are realistic, there are buyers out there. And if you are a buyer there are great opportunities on the market. But listen to the advice of a good broker: it is very important to understand where the market is now. We’re at the coal face every day and it is frustrating when someone asks your opinion, but then doesn’t act on it.’
To finish, a cautionary tale for buyers, to lead us into a more decisive 2013. ‘We’re in the middle of a sale today,’ says Beckett. ‘It’s going to close this afternoon. It’s quite a sizable yacht and I know we will have three or four buyers who will be kicking themselves for not acting on it. A couple have inspected it four or five times and they’re convinced it’s not going to shift and maybe they can buy it for even less.
‘In fact it’s selling for more than we had predicted.’
Abeking & Rasmussen