June 29, 2017
Berthon publishes an annual Market Report which reviews the yachting market over the previous year, and examines what we think will be the important trends and changes in the year ahead. A digital copy is available at https://www.berthon.co.uk/yacht-sales-brokerage/yacht-market-report/ and you can also request a hard copy at email@example.com.
Over the course of the next few month’s we’ll be broadcasting other articles from the Market Report via the Berthon blog and social media. If the articles and ideas are interesting and you would like to know more, or have questions, please do get in touch……
James Carville famously coined this phrase as one of 3 points to be pushed home for the campaign team running Bill Clinton’s election bid in 1992 against George Bush. Since then it has become the favourite phrase for politicians of all hues to use to articulate the simple fact that when the economy is doing well, people feel comfortable and have confidence. This benign environment gets the politician in question more votes.
Of course we wouldn’t dream of putting ourselves in the same category as our illustrious and international ruling class, but for us too, yachts trade in the greatest numbers when the economic landscape is set fair. Yachtsmen feel comfortable with their lot and with this comes the impetus to purchase a different yacht for a different project or indeed to upgrade or buy a newer, shinier edition of what they already have.
Of course we attempt to analyse and to second guess the market, and as we work there every day we have a good idea of trends as they emerge and we can see the market changing. The trick is to recognise a trend for what it is and to react and allow for it. Sometimes a happening can lead to a number of differing outcomes – an example of this is Brexit. Here we saw a drop in confidence for new yachts in the UK. However, because of currency shift and the fall of the £Sterling at the same time we became an attractive area for Europeans, Americans and all those holding strong currency and as a result we were massively busy from Brexit forward.
However, what was particularly interesting about this was that after a short lull, UK brokerage sales to UK buyers also became brisk as the economy continued to grow despite immediate concerns. So far the UK continues to grow and the Bank of England has recently had to reassess growth figures upwards. Of course the snap election for June 8th will ruffle some feathers and we will have to see what the fall out is from his surprise move from the Prime Minister.
Of course we are only a bunch of yacht brokers without the skills to understand the macro economic situation, but our UK clients are clearly voting with their feet – and the result is that our figures are up. When yachtsmen feel wealthy and secure – they buy and that is what they are doing now.
There is not an element of lack of choice in as so much as £sterling is weak, so US$ and €uro priced yachts are not looking as attractive as those in their home markets now. However, because of the international nature of the brokerage market, serious sellers understand and react to currency shift and as a result prices have fallen in many segments to take account of sterling’s fall in value. Therefore we do not think that the home market bias is seriously affecting the numbers.
There are also other reasons for making a purchase, and because buying a yacht is a lifestyle choice we are now seeing that the seasonality of our market is becoming less significant every year. In the old days, people would sail in the summer, put their yachts away in September and then start looking for a new yacht over the winter. They would normally leave their final offer until the snow was on the ground in our hemisphere, guessing that the current owner would want to be shot of the yacht and the winter storage and maintenance and would therefore discount the price accordingly. Of course there is a little of this still, but increasingly we are finding that yachtsmen are buying yachts because of circumstances that are nothing to do with the sailing season or the yacht herself.
What I mean by this is that either children are at an age where they can take a year out from school so the time is right to buy a cruising yacht and have that never to be repeated family adventure. Or maybe a business has been sold and a new yacht (or first yacht) is the reward for a job well done. Alternatively, it might be that a house in the sun has been sold in favour of something more mobile for holidays – the list of reasons for a purchase is very long and legacies also feature.
These reasons do not respect seasons, and the yacht search will start when the funds, and the band width to mount the search are available.
For this reason we find that our business is no longer seasonal, but for sure, if the economy is on the up, we know that we will be busier.
Of course some purchases happen when the economy is quite the reverse of sunny. There are those who buy for a long distance adventure, be it sail or power, on the basis that the economic weather is rather inclement and it is better to have the adventure of a lifetime and come back when it’s all over, than to struggle in a difficult market environment when there is relatively little scope to make money.
And of course there are also those who always buy in a poor economic environment, knowing that if they go to the yacht market with cash when things are looking bleak, that they are likely to buy massively well. A word of caution with this approach. Whilst in these circumstances there are super buys to be had, the larger and more complex the yacht, the more likely that there will be deferred maintenance and therefore significant investment required to get her into good shape which can easily add 20% or more to the bill. Unless this work is done, the yacht will not give a particularly high level of reliability and if it is decided to move her on, her history will be well known and she will be hard to sell and will probably have to be significantly discounted to find her new owner.
The wider or personal economic cycle is only part of the answer to why people buy. The other key factor is the time that they have to devote to yachting. Our clients are working harder at the office than ever before and also have more demands on them for the other things in their life – family commitments, other interests. This also affects the investment that they are prepared to make in their yachting. We have a number of clients who probably use their yachts around 20 days a year. Not a huge amount of time, but it fits with their lifestyle. However what they have to ask themselves is whether it is a good use of the cash to buy a semi-custom yacht or whether a simple production yacht will do the job given the time that they have allocated to her use.
In the past we saw a lot of clients moving up the ladder of the same type of yacht, being it sailing, semi displacement motor, performance sailing or indeed planing motor. Starting modestly they would move up the scale, until family had flown and then a smaller more manageable yacht would be on the menu. For sure this still happens, however we are seeing a change in yachtsmens buying habits.
Increasingly, people will buy a yacht for a project – a planing yacht to support their house in the Med, a cruising yacht for an ARC, a semi displacement motor yacht to circumnavigate the UK or Europe or a performance yacht for a specific set of regattas. They are use orientated, rather than yacht type. In this case, of course economics plays a big role, as an ARC can only be accomplished when the time is there to be aboard for the adventure, whereas a regatta campaign takes much less time.
We are seeing clients move right through a range a differing types of yacht to fit the particular adventure that they have in mind or a yacht that will fit with the time that we have available for yachting. It is not unusual for clients to move from sail, to power to race, and back again.
Generally in 2017, yacht owners are wealthier, busier and open to all sorts of different sorts of yachting.
One of the things that we are massively aware of is that irrespective of the economic cycle, that ownership must deliver value for money in terms of the amount of fun that the modern yachtsman receives from his yacht. Poor service is not cool and we are very aware that when the investment is not delivering the required quotient of fun that there is a lot of competition for these clients outside yachting and that once lost, it is hard to tempt them back. So whilst a good economic environment may tempt clients into yachting, as an industry we need to be sure that we are making the process fun – for once lost, people rarely re-enter the yachting arena.
So what of the future? The crystal ball at Berthon is somewhat dusty and the readings tend to lack clarity. However, because the yacht market is truly international there will always be an opportunity in some part of the market where the demand is enhanced or where there is a line of supply because of currency shift or other reasons which makes it attractive. Our job is to be nimble and to ensure that we communicate the opportunities to those who are purchasing and also to our yacht owners to ensure that we make the most of the market place. In making sure that we provide this assistance, we always have in mind that – it’s the economy, stupid…