2011 ended with 29% more sales than 2010, it generated over 2.6 billion euros, had more price reductions than any year since the Lehman brothers collapse and saw a marginal fall in the number of new build orders. But what does that mean for owners today? Join us for our look back at a year where ‘crisis’ became ‘normality’.
Paolo Vitelli was recently quoted as saying that “crisis is becoming the way of life.” Interesting to note, then, that Paolo Vitelli is President of Azimut-Benetti - a constructor that not only increased its orders on last year but ended 2011 as the world’s N°1 yacht builder.
2011 was a busy year when quality yachts were ordered, bought and sold; pricing was aggressive without being desperate, some smaller yards and brokers finally left the game and the BRIC countries stepped in to pick up some of the lucrative remains.
According to the latest statistics compiled by YPI and one of the industry’s leading publications, Boat International, 264 superyachts over the size of 24-metres were sold at a cumulative Asking Price of just over EUR 2.6 billion. “That’s up 29% on 2010,’ explains industry statistician and Boat International blogger, Malcolm Maclean, “and an impressive 34% on 2009. 2011 was an active year for luxury yachting.”
And it’s not just the number of sales that were up – average yacht prices seem, at last, to have stabilised as well. “Whilst we recorded three times more price drops in 2011 than 2009, a massive 650 changes,” continues Malcolm, “the average drop was only around 13%...a far cry from the 30% and 40% reductions we have been seeing previously.”
In addition, the average Asking Price for yachts sold in 2011 was up almost 6% on 2010 at EUR 9.85 million per yacht. Yachts sold reasonably well in 2011 and though prices continued to fall, it was at a much slower rate than before, signalling for many the beginning of the new ‘normality’ in yacht pricing.
“Many price reductions are the result of over-pricing by brokers and owners,” explains YPI CEO, Bertrand Vogèle. “Often it’s a tactic adopted to attract more interest in the yacht rather than the actions of a panicked seller. The market has, as indeed we said it would, stabilised considerably in terms of pricing.”
What size of yacht sold best in 2011?
Sales for yachts above 60m changed little in 2011 with 15 sales recorded, one more than the previous year and it’s a similar story for the 40-50m range where 45 sales were recorded, two more than 2010. The other ranges witnessed more notable developments. The 50-60m range took the biggest hit with sales falling to a three-year low of just 11 units whilst at the other end of the scale, sales increased by 30% on 2010 in the 24-30m range with 85 yachts sold compared to 66 in 2010 and there was an astounding 70% increase recorded in the 30-40m range – a group that accounts for no less than 40% of all 2011 sales.
However these results are perhaps not as surprising as they might at first appear. The deluge of smaller yachts coming to the market rages on, accompanied by the inevitable - often significant - price drops. But what of the huge increase in the 30-40m range?
Bertrand has an explanation. “Market saturation and price drops have resulted in many first-time buyers with ‘entry level’ budgets realising that far from having to stick with yachts within the 24-30m range, their budgets now allow them to go for quality vessels in the 30-40m range. Today’s buyers’ market is actually starting to entice some new blood into the industry thanks to prices that are allowing them much more for the money they want to spend.”
And when it comes to the brands buyers are spending their money on, it’s a wide spread of quality and ‘series’ yacht-builders that are coming out top.
“The top five are Heesen, Sunseeker, Benetti, Westport and Palmer Johnson,” says Malcolm, “with Feadship and Ferretti in the Top 10.”
Again for Bertrand there are few real surprises here. “They are safe, comfortable and performant vessels from reliable and solid builders,” he says. “That’s what buyers are searching for today – quality and performance with minimal risk and maximum back-up.”
Yacht sales by age: are we building, buying new or enjoying the more seasoned vessels?
The number of orders for new-builds continues to fall, albeit slowly. 2011 saw 108 new orders at an average length of 42.13m compared to 112 in 2010. The growing interest in sailing yachts is reflected with no less than 93 sailing yachts under construction today and 27 new orders recorded including the largest overall yacht order of the year – an anonymous order for a sailing yacht of 100m.
Globally, the number of yachts under construction falls to 728 projects now underway - a far cry from the dizzy annual highs of over 900 in 2008 and 2009. Italy leads the charge, courtesy of Benetti, Ferretti and San Lorenzo, with 317 projects, more than five times the number of its nearest competitor, the Netherlands; whilst the world’s top custom builders are Benetti (once again!), Lürssen, Feadship, CRN and the superb success story of Heesen. “We have bought and sold a number of Heesen yachts for clients,” says Bertrand. “They are a great example of the type of yacht we see buyers in this range wanting more of.”
With so much choice on the brokerage market today, it pays more than ever for buyers to look around before deciding to build. “Many buyers are finding the ‘perfect’ yacht for them on the brokerage market,” comments Bertrand. “They can buy it and refit it according to their own tastes for less than the cost of building new and without the wait. For many buyers, though, if they are going to spend the money on a yacht, having something built and designed exactly to their own requirements and tastes is as much a part of the reward as just having the yacht itself. Only too aware of that, the best shipyards and designers are today coming up with exceptionally competitive and complete packages with lots of added extras.
In the brokerage market, the age spread is surprisingly even. The majority of yachts sold (54%) were aged between 4-15 years - 6% were new with 18% less than three years old. On the flip side, 18% were aged between 16-30 years and more than half yachts sold from 24-50m were at least 8 years old. In the case of yachts in the 40-50m bracket, more than one-third of those sold were over 16 years old. “Age seems to be a lot less important than we might think when it comes to the purchase of a yacht,” says Malcolm. “It seems that if the style, build, condition and price of the yacht are suitable, then age need not be that off putting.”
Bertrand sees this as a proof that buyers are snapping up the older bargains. “We have always said that owners with well-maintained, quality yachts will be able to sell irrespective of age…within reason…this is the proof.”
What of the new markets to yachting?
For the moment the promise that South America, India and China held at the start of 2011 remains. YPI Asia, just about to celebrate its 1st birthday, has handled a number of serious enquiries from Chinese clients interested in building, buying and chartering. “We have conducted a number of yacht visits with our Chinese clients,” explains Olivier Besson, MD of YPI Asia, “bringing them over to the Cannes and Monaco Yacht Shows so they can see exactly what is available...and they like what they see...particularly the 40 – 60m range. Now it is a question of how best to purchase. Importing yachts into China can be a particularly expensive affair in terms of duties and taxes.”
Brazil suffers from a similar situation however with the strategic acquisitions and mergers of famous European brands by BRIC country shipbuilders, exemplified in the recent acquisition of Ferretti by Shandong Heavy Industries, it would seem that for Chinese and Brazilian clients at least, acquiring European design and know-how without the penalties of having to import is now a very real proposition.
Whilst the promise of a new wave of luxury yacht buyer from the BRIC countries remains, the overall activity is still relatively low. However for Bertrand it is just a question of time and getting everything into place. “The statistics from all these countries show the number of billionaires increasing at an impressive rate,” he says. “Even allowing for exaggeration or mis-reporting, there are plenty of potential buyers that need the help and guidance of companies such as ours. We have seen it in Shenzhen as much as we have in Venezuela – there is a very real demand but there are some obstacles that we need to overcome to help these people get the yachts they want...and we are working on that as I speak.”
2012 - what lies ahead?
Of course nobody can be certain, but the sheer volume of product on the market today and the on-going uncertainties surrounding the world’s economies should result in 2012 being another year for buyers. “The difference this time however,” notes Bertrand, “is that with the exception of any far-reaching unforeseen events cropping up, we believe yacht prices have now stabilised. That is good for everyone. Buyers can still enjoy prices well below the levels of a few years back, whilst sellers of quality and well-maintained yachts can now expect, if not an ideal return, at least a reasonable one.”
As governments around the world search frantically for new ways to recover costs and pay debts, attempts will continue throughout the year to tax yacht owners and charterers still further. However strong legal counsel and an industry determined to protect its clients and their yachting interests will ensure any such initiatives do not go unchallenged.
“Yachting as an industry generates considerable revenue and provides significant employment around the world,” concludes Bertrand. “With more competition for destinations and construction coming from countries like China, Brazil and India, European and American governments are slowly realising that this is an industry and a pastime worth promoting and keeping within our shores..it is not one to push away.”
In short, therefore, we say there has never been a better time to buy or build...and frankly, it is not such a bad time to sell either. ‘Crisis’ may not be such a bad ‘normal’.