The Monaco Yacht Show is where the Super Rich go to look at Super Yachts. Celebrating its 25th anniversary, it’s the largest ever, with 121 Super Yachts on show – average size more than 47 metres – and 500 companies exhibiting. If you are considering buying a super yacht it is an ideal place to go.
The Super Yacht industry has doubled in the last 15 years. Sales volumes have hit record highs, it is estimated to contribute €25 billion to the global economy and a new generation of younger buyers has entered the market, attracted by cutting-edge technology which is revolutionising the yachting experience.
The conventional wisdom is that this rapid expansion has made it a buyer’s market, but is that still true? And, if you’re looking to enter it, whether for investment or pleasure, what do you need to know?
No one is better qualified to answer these questions than Russell Crump, Director of Sales of Sales at leading broker Yachting Partners International (YPI), who has worked in the industry for more than 20 years and successfully negotiated more than 70 yacht sales.
“It has been a buyer’s market for the last four years because of the fall-out from the global meltdown, but more recently it has picked up,” he says. “There are now more buyers than sellers. The beginning of the year was the first time in eight years that we’ve had fewer boats on the market than buyers”.
That means it’s a far cry from the days when a canny buyer could negotiate anything up to a 30% discount on the advertised price. Not that many buyers are canny – in Russell’s experience, clients who are steely negotiators in their business lives can lose all common sense when indulging a private passion. “It’s an emotional investment, not a rational one,” he observes.
The first question a prospective buyer has to ask is whether to buy new or pre-owned. Often the lure of the new proves irresistible, but, generally, pre-owned offers better value and with more than 2,000 on the market there’s no shortage of choice.
The first thing a good broker will advise is to disregard the price. To know whether you are getting good value or not you need to know the background of the yacht. Price reductions, no matter how enticing, should be treated with caution – indeed they might flag up a risky investment. “Good value” is not just about price; it’s also about the running costs, crewing, eventual upgrades and refits, chartering potential and re-sale price.
No prospective buyer, particularly one who’s new to the market, can hope to know all that, which is why choosing the right broker is so important. You are buying their knowledge and experience.
A starting point
Most new buyers start with a 10-metre yacht and work their way up in size. Around 70% of sales take place in the 24-metre to 40-metre range, but if you’re looking to make a splash straight away with a 24-metre acquisition you should expect to spend at least £4m.
But that’s just the starting point. A yacht of that size needs a minimum crew of two – a captain/engineer and a steward – and the captain will need to be kept on all year round to keep the systems and machinery working. If you’re buying a yacht of up to 30 metres, you need to work on the basis that every year you’ll be spending 10% of the purchase value on running costs. With a crew of four and an average 100 hours motoring time a year you’ll be spending £800,000 on food, fuel, crew, insurance and berthing costs.
The average size of a yacht has almost doubled from 25 metres to 40 metres in the last 25 years and yachting is an increasingly regulated industry once you get to the 40-metre class. The number of tax charges increase as do the regulations and requirements for entering territorial waters. Running a yacht of that size is now a full-time business, which is why Monaco-based YPI has a separate yacht management division.
There’s no definitive guide to depreciation, but Russell has his own rule of thumb: “The guidelines are that in the first two years you lose 15% a year, in the next three years you lose 10% a year. After five years you’ve lost well over 50% of the value”.
Owners who buy new tend to keep their yacht for an average three years before looking for the latest new model off the production line – almost 50% of pre-owned yachts on the market are less than eight years old – and that’s where the value can be found.
The biggest mistake many novices make is to be attracted by the exterior appearance of a yacht. “However nice it may look in the marina, you don’t look at it when you’re on board. The interior is far more important,” says Russell. The second mistake is to go for speed; in reality, fuel costs mean owners rarely take advantage of their yacht’s capacity.
Sailing yachts, meanwhile, account for around 12% of sales in the market. Technological developments – carbon masts, composite rigging, durable moulded sails, hydraulic and electric captive winches and free-standing masts – have made them increasingly attractive to a younger breed of owner looking for performance without sacrificing comfort. But it has to be a real passion; those who purchase sailing yachts have very different criteria and are a very different breed of person from those who go for motor yachts.
The two main buying seasons are just before summer and in December. If you’re looking to buy for the summer you need to start looking in March, but everyone is doing the same so the price goes up. The best time to buy, in Russell’s experience, is to start in October. Typically, a deal will take up to six weeks to complete, progressing from agreement to a memorandum of understanding, then a survey, which might trigger a discount or an agreed repair programme, and then the paperwork, which can be extensive.
Monaco is where the business of Super Yachting can be seen in all its glory, but it’s rarely where the deals are done. And it’s certainly not the place for bargain hunting. Production boats sell at the London, Southampton or Dusseldorf shows.
Monaco, however, is the only show in the world where you will see the most exclusive, ground-breaking yachts all in one place and ready for offers.