Friday, 28 November 2014

Traditionally, boating and boat ownership have been viewed as lifestyle choices which, to a certain extent, resist the ups and downs of economic flux. The desire and passion to get afloat and enjoy all that sailing has to offer results in many people owning boats despite, rather than because of, the financial consequences of so doing. Whilst those considerations still apply to areas of the second-hand, brokerage boat market, the long tail of the recent recessions in the UK and mainland Europe and the general global downturn, has had a real impact upon the marketplace, which has continued during 2014.

The overall market for used boats has contracted in the last few years, with less boats available for sale than might otherwise be expected. Of course, this contraction is not unique to used boats. If anything the market for new build boats has shrunk even more, with only the most competitive manufacturers surviving, resulting in a significant drop in the number of new hulls that are being built.

Generally, during the last 12 months, we have seen a slight fall-off in the number of used boats coming onto the market for sale, following this trend. This was expected, as the average period of individual boat ownership has increased to 5 years. More and more owners have been postponing ‘trading up’ to a bigger or newer boat, preferring, instead, to keep the boat they have - sometimes refitting or upgrading her. In some areas this means that there are simply not enough quality used boats to meet demand, so that boats for sale in those areas can sell very quickly.

The USA and Canada remain important markets for used boats. The split there between motor and sail boats is roughly 80% (motor) and 20% (sail). The extremely cold winter at the end of last year and the late arrival of warmer spring temperatures in 2014 across much of North America meant a dampened start to the traditional selling season for all types of boats. Things picked up during the 2nd and 3rd quarters of the year and overall growth has slightly improved in the USA and Canada. The market for 30 - 45 foot motor and sail boats has been particularly healthy.

As in the UK and Europe, there has been a shortage of good used boats available for sale in most North American sectors. The strength of the Euro against the US Dollar in recent years has led to more boats being sold from North America into Europe and the Mediterranean than is usual. Brokers with international reach, such as Boatshed, have been well placed to adapt to the trend of pleasure boats being routinely sold across borders. Improving car and house sales across America indicate increased confidence and spending amongst US consumers, which we expect to impact positively on the sale of used boats in that market.

Our Far East and Middle East offices are performing well, consistent with the growing popularity of boating in those regions. Looking ahead, we expect boating and boat ownership to grow in Russia and China, as levels of disposable income continue to rise in those markets and consumers invest more in recreational activities. At Boatshed we have entered the important St. Petersburg brokerage market in Russia, and we are developing opportunities in China and Malaysia.

Despite the economic downturn and the slow, drawn-out recovery that is beginning to take hold in the UK, the USA and in certain parts of Europe and the Mediterranean, there remain plenty of buyers in most locations keen to purchase used boats, hence my opening remark about a market underpinned by the desire of many boaters to get afloat, regardless. At Boatshed, for instance, we currently have over 600,000 registered customers looking for used boats, and look they do, thoroughly, regularly and often; typically, we get over 150,000 unique web visitors each month searching for used boats to buy. Most of the boats that we list we sell; about 60% are sold within a few months. So, for many sectors of the used boat market, and perhaps contrary to first impressions, the main challenge we face is finding quality boats to sell, rather than capable buyers!

Nevertheless, the market for used boats around the world remains one of cautious, discriminating, discerning buyers. Above all else, the need for boats to provide genuine value for money has never been a more important consideration to these buyers. More important than brand loyalty, vessel specification or location. The ability to meet this fundamental requirement is more readily available within the second-hand boat market than the new built sector. To a large degree, an owner selling a used boat has a fairly wide discretion at what price he/she is willing to sell; a freedom not easily matched by new boat manufacturers. Despite this, in practice owners often overprice boats for sale, unless they are properly informed and advised by experienced brokers. Pricing a boat at the top end of its market in the current climate will, in our experience, significantly reduce the prospects of selling the boat at all. In contrast, competitively pricing a used boat for sale is the surest way to sell it quickly.

When valuing a boat for sale, owners are well advised to be realistic, not optimistic, about the achievable price. New electronics, lockers bursting with treasured equipment and recent upgrades, whilst costly to an owner, generally do not add much to the achievable price of a boat, something which owners can be reluctant to acknowledge. Those things might help a boat stand out from the crowd and may nudge a boat ahead of the competition, but they are unlikely to attract a price premium.

At Boatshed we endeavour to price boats to sell in the prevailing market conditions, however robust those might be. We take advantage of our wide reaching sales statistics to consider (a) what boats are selling where at what prices, (b) attract repeated online interest, (c) are physically viewed and (d) sell within a reasonable timeframe, and compare that knowledge against boats that do not represent value for money, which attract little if any interest and might fail to sell at all. Generally, across used boat markets we achieve about 80% of advertised sale prices, which indicates to us that our approach to valuing and pricing boats is firmly in line with actual market conditions and the ability and willingness of buyers to purchase. Over pricing or ‘vanity’ pricing of boats in the current marketplace serves neither seller or buyer.

The lessons learned from this experience are clear:

  • (i) there remains a strong market for quality used boats of a wide variety in most sectors and locations; and
  • (ii) owners who price boats competitively, offering genuine value for money, should achieve strong sale values, quickly.

We do not expect these market conditions, characteristics or value for money considerations to alter significantly in the next 12 months, or so.

Summary

The main global markets (including the UK, Europe, the Mediterranean and the USA and Canada) for used sail and motor boats have contracted in the last few years, with less supply of good quality used boats in key market sectors.

There remain plenty of capable buyers looking for the right used boat in most sectors across the global territories we serve. These buyers are thorough and discerning.

As a result, in many sectors now is an ideal time for owners with boats to sell to enter the marketplace.

Boats for sale must offer genuine value for money, by being competitively priced to sell, price being the determining factor for most buyers when deciding to buy.

We expect these market conditions to continue during the next 12 months.

Looking ahead, boat ownership is expected to increase in newer markets, such as Russia, China and areas of the Far East, necessitating a greater international reach and a globalised approach to motor and sail boat sales by brokers.

November 2014

Neil Chapman
Founding Broker and MD of Boatshed