First half 2014 market report
‘We’re over the hump.’ ‘We’ve turned a corner.’ ‘We’re back in business.’ The numbers from the first half of this year back-up the words of so many brokers – the superyacht market has returned to health. A tally of 221 yachts over 24 metres have been sold in the first half (H1) of 2014, 51 more than the same period last year, and the highest half-year figure for five years. The April-May-June run of 45-50-46 was the best since our records began in 2009 and numbers have grown in all size brackets – although the biggest increase was in 30-40 metres, up 23.
‘We’re probably a month or two ahead of last year’s pace as far as yachts sold year-to-date,’ says Bob Cury, of Fort Lauderdale-based brokerage house Robert J Cury Yachts. ‘There definitely used to be a seasonal effect – summertime would be slow – but it seems it’s more of a year-round market now.’
Not asking the earth
Price has been a key feature of H1’s sales tally – although the part it has played is complex. The average size of yacht sold over the four years has stayed around 35 to 36 metres, but the average asking price has dropped by about a million euros every year – until this year, when it has stabilised at about the same level as 2013.
What does this mean? ‘Sellers are more realistic about asking prices, and that’s why we are seeing yachts sell,’ says Russell Crump, sales director of YPI. It’s difficult to see why that matters – surely a boat will sell for what someone is willing to pay, the asking price is irrelevant. And why shouldn’t an owner put his boat on at a high price? If he can get someone to pay that then good for him, and if he can’t he’s lost nothing. The problem, Crump asserts, is that he has.
You will always push for the highest possible price unless someone can give you a logical argument why you shouldn’t
So essentially everyone is better off if sellers start with a realistic price. Toby Maclaurin, commercial director of Ocean Independence, says that sellers have come around to this conclusion partly because we’ve reached a critical mass of evidence about what doesn’t work. ‘You want to go to an owner with market examples, a pricing strategy and statistics that make logical sense – and there’s now enough data that we can do that. Initially there was very little data to convince anybody of anything. As an owner you will always push for the highest possible price – that’s natural, unless someone can give you a good logical argument as to why you shouldn’t.’
One of the largest superyachts to be sold in the first half of 2014, Pegasus V, measures 79m.
From a buyer’s point of view, many brokers have told us that the all-you-can-grab atmosphere of 2010 and 2011 has dissipated, with buyers being more reasonable and more deals going through as a result. But Maclaurin believes that buyers are only likely to go so far towards the kinds of prices we saw pre-GFC. ‘One of the biggest reasons for that is the only buyers we’re seeing are cash buyers,’ he says. ‘Despite banks making attractive noises, when most people read the small print, the deals for financing are just not that attractive and banks are being ultra cautious about who they will lend to.
‘This means there’s very little being bought with finance. Those who did buy with finance in the past maybe thought, “What’s another half a million over 10 years’ funding? Doesn’t make a huge difference.” Whereas when you are paying with your own cash, you fight for every cent. And on the deals we have going through, people are fighting for every cent.’
Superyacht supply has not kept up with increased demand this year. In fact, 13 fewer yachts came to the brokerage market in H1 than in the first half of last year. ‘All the low-hanging fruit has been picked,’ says Cury, ‘and the inventory, as far as larger late-model pedigree yachts, has definitely gone down.’
If you’re trading out and you are under no pressure to sell, why not continue enjoying it?
Maclaurin says: ‘If you do own a quality yacht and you’re not interested in trading up, you might choose not to sell at the moment because you may not get great value for it. If you’re interested in trading up that’s different, because you’re looking at cost to change – but if you’re trading out and you are under no pressure to sell, why not continue enjoying it? A number of owners have chosen to do that.’
Crump agrees that there is ‘no new tonnage coming to the market of any significance’ but believes that in the largest superyacht categories, looking beyond lists of yachts for sale can yield results. ‘A lot of the bigger tonnage isn’t actively marketed by the brokerage community but is on the market and you’ve got to be in the know to put a deal together.’
A shrinking pool of yachts on the market is likely to have pushed some owners towards new builds. ‘If you have a particular brief from a client and you’re searching for a yacht, it is amazing how at the end of the day it runs down to a choice of one, two or three. That can be a little bit frustrating,’ says Maclaurin. ‘That’s why the shipyards have continued to do quite well. If you’ve got quite specific requirements, you don’t want something too old, you want modern design, above average quality, you might find your choices are relatively limited so building new is a good option.’
221 superyachts have been sold in the first half of 2014
Fitting with both this boat profile and comments from brokers, custom superyacht orders have been positive in H1. We know of 54 orders of this sort made in the first six months of 2014, seven fewer than in the same period last year. To qualify that, we learn of many new orders some months after signature, so for example, at the same point last year we had only recorded 39 orders, compared to the 61 now known. That makes 54 a good indicating figure.
In terms of the style of custom yacht sitting on drawing boards in yards, Russell Crump’s experience suggests a confidence in new build clients. ‘They’re more avant-garde, “How different can I make my yacht?” Custom design has changed a little bit.’
Maclaurin has noticed an increased awareness of running costs in brokerage and new build yacht deals. ‘It’s full displacement and economy,’ he says. ‘A lot of the conversations we have now feature operating costs, how much it is going to cost for the yacht to do what they want it to do. We are not talking about fast yachts as frequently as we did – a lot of the faster yachts were financed purchases, so there’s an element of that as well.’
The picture brokers paint suggests buyers in the first half of 2014 are acting with confidence tempered with good sense. It’s a good omen for the long-term health of the market, as well as for the cooler months of 2014.