October 2010 Market Report

October 2010 was another month dominated by price changes and new yachts coming on the market, but it also saw a year-on-year increase in the overall values of brokerage sales following two consecutive months of negative comparisons, as well as an encouraging number of orders for new yachts.

Chart 1: October 2010 in numbers

Brokerage Sales

We counted 15 brokerage sales in October 2010, the same number as in October 2009. However, the total asking prices were up by 107% at €166.7 million as against €80.7 million last year. The explanation lies in the number of large, pedigree superyachts sold last month, including the 52m Tigre d’Or, 44.85m Sunrise Y and 53.2m Vinydrea.

Chart 2: October 2010 comparison with October 2009

Meanwhile there’s good news in the overall sales figures from January 2010 to date compared with last year, with 162 yachts sold as against 156 from January to end-October 2009, an uplift of 5%. Much more significant, however, is the fact that we’re fast approaching the €2 billion mark as €1.92 billion worth of yachts have been sold to date compared to €1.5 billion this time last year, an increase of 28%.

Chart 3: 2010 YTD comparison with equivalent period in 2009

Click here for full details of the sales in October 2010

		More analysis, including a variety of sales trackers, is available in the Brokerage Sales section of Market Intelligence.

New on the Market and Price Reductions

25 superyachts came onto the brokerage market last month – including the 68m Triple Seven – with the inevitable result of 48 price reductions totalling €52.3 million; the average reduction was 14% of asking price.

New Orders, Launches and Completions

We counted seven new orders in October 2010, well below the 10 signed in September 2010, but still significant in that they bring the total number of orders signed so far this year to 53, eight more than we recorded in the whole of 2009.

There were six new launches last month and eight yachts delivered to their owners, the most notable being Derecktor’s 85.6m Cakewalk, the largest yacht by volume ever built in the USA.

Full details of new orders, launches and completions are available in Market Intelligence.

A Broker’s Perspective

We asked Hein Velema, CEO Of Fraser Yachts, for his views on the market:

“The Monaco and Fort Lauderdale boat shows leave us with a positive feeling. Monaco in particular was exciting and we are currently closing several deals as a result of it. What I personally found remarkable is the increase of interest in new build projects, especially the very large ones. The Russians are back, but with a different attitude. They pay much more attention to the price and know how to negotiate.

“The atmosphere in Fort Lauderdale was much better than in the last few years, however we see that the American market is still not at the same level as the European one. The attendance was not as high as we hoped for, especially over the weekend. Nevertheless there was good activity and some boats are being sold. In order for the world market to recover we need the American clients to be back and active again. With the change of power in Washington we hope that the wealthy will feel more comfortable spending. We already see that the first signs are there in the charter market.”

A Builder’s Perspective

With two superyachts due for delivery this winter and an impressive programme of investment in facilities over the last two years, we spoke to Toby Allies, Sales & Marketing Director of Pendennis Shipyard:

“Following the 2010 regatta season and autumn superyacht shows there are green shoots appearing amongst the design community which we were all hoping for, certainly as far as new builds are concerned. This is reassuring especially considering the continued economic uncertainty, fluctuation of currency markets and increasing legislation in our industry.

“Clients are more than ever examining every detail and are exploring multiple building options to optimise quality/value for money. The pressure of missing a build slot in the decision making process has all but disappeared.

“On the refit side, there is still a strong market with a large amount of brokerage yachts attracting offers and refit quotations. The opportunity to secure a quality pedigree project and shop around for a good deal for refit work has never been better. Value for money and quality is going to continue to be high on the agenda of existing and new clients to the market.”

An Owner’s Perspective

We asked a seasoned owner with several Benetti superyachts already under his belt, for his comments, “Let’s take a helicopter view,” he says. “We all witnessed the tremendous growth from the year 2000 when roughly 500 yachts sold, split between 100 new and 400 brokerage boats. By 2007 the market had doubled to 1,000 sales, a mix of 300 new and 700 second-hand boats. When the subprime crisis hit the yacht sector in autumn 2008 there was a sudden drop in sales to perhaps 250 units per year, meaning we’re a long way from the good old days. So what does this mean for all of us who want to buy or sell a yacht?

“If we take a look at the brokerage market first and, if statistics can be trusted, the worldwide fleet stood at 5,000 boats selling at a rate of 700 a year, meaning that a used yacht was sold on in every seventh year. That figure has now changed dramatically. Moreover, these yachts are not getting any younger and some owners are desperate to leave the industry. However, as we all know, it’s the best yachts with a pedigree that have a chance to sell today, albeit at much reduced prices. My take is that we have all lost 30-40% of perceived value compared to the 2007 pricing levels.

“Regarding the new yacht market, as I mentioned earlier, roughly 300 new builds sold per year in the good times, dropping back after 2007 to the year 2000 level of 100 units. When you take two-thirds of sales potential out of an industry the effects can certainly be felt across the board. One of the fascinating things I found when walking around this year’s Monaco Yacht Show is that you can split the shipyards into A, B and C brands.

“The A brands are at the top of the market and we all know them well. Many of them were already full to capacity when the crisis hit and most had contracts with two to four year horizons. They’re still taking orders, with the only difference being that Jack from the USA or Peter from the UK have been swapped with Oleg from Russia, Ding in China or Satjiv from India as customers.

“The B brands have mostly survived but have had to cut back on volume and are now living with the view that ‘less is more’, focusing on customer needs and calling clients. Personally, I’ve never before received so many follow-up calls as after this year’s MYS, to make sure I was happy and if they could do something for me. Happy days are back for clients!

“The C brands which were lucky to sell the odd boat here and there during the boom are another story. If they are not already in liquidation they are desperate to sell something, but with a second hand market so full of good yachts, I see dark clouds ahead for most of them.

“In conclusion, we are in a period of a ‘new normal’ and I’ll be bold enough to predict that when we return to better times it won’t be to the 2007 level of 1,000 sales per year but more like 400 to 500 a year from 2014/2015 onwards. And even if we could run to the volumes of the ‘new normal’, it will still take 10-plus years to clear the current second-hand inventory meaning it won’t be before 2020 before we start to achieve a balance of supply and demand of used yachts.

“Therefore, if you want to sell, take the hit today. The first offer is usually the right one.”