Wednesday, 16 March 2016

Boatshed's used boat market report for 2016. Overall, the key market points of the last 6 months are as follows:

  • Although the market remains smaller than it was, there are a growing number of buyers looking for decent, good value boats and in some areas there is a chronic under supply of boats for sale.
  • We are seeing a trend for medium sized sail boat ownership.
  • Incorrectly pricing a boat for sale is the biggest obstacle to selling it.
  • The impact of depreciation on used boat values is too often underestimated or ignored.

The size of the used boat market

As I have reported before, the overall market for used boats has contracted with less boats being available for sale than before the 2008 global recession. Generally, owners are holding onto boats for longer than they used to, putting off trading-up or replacing their current boat. This situation has altered little overall in the last 6 months. Whilst it is apparent that many owners are staying away from the used boat market currently, often because they have an impression that it will be hard to achieve a decent sale price for their boat, or will take an age to find a buyer, in fact the contraction in the supply of decent used boats for sale and that in certain locations it is proving easy to find buyers for decent boats, means that, perhaps counter intuitively, now is a very good time for many owners to sell. For instance, during Boatshed’s Annual Conference in January, our broker in Portsmouth reported that, at the moment, she is managing to sell boats almost as soon as they are listed, but is not getting enough new listing to replenish stock as quickly as she would like. Other regional brokers are in similar positions. Not every market at the moment is, perhaps, as buoyant as that, but this illustrates that owners should not be put off listing used boats for sale in the current climate. As I often remark, from one point of view every boat is, or should be, for sale.

Buyer activity

In the last 6 months at Boatshed we have seen our buyer base grow considerably. Typically, we have more buyers using our system to look for their next boat than other brokers do, but in recent months the number of registered users regularly searching for boats to buy on Boatshed.com and our other sites has increased to 700,000 and we are attracting about 260,000 unique web visitors each month searching for used boats - an all time high!

Usually these buyers are focused, informed and discriminating; in other words, serious buyers who know what they are looking for. Add to those statistics that about 60% of the boats we list we sell within only a few months and the conclusion is clear; whilst the overall size of the market has contracted significantly in most sectors, nevertheless there are outstanding opportunities for owners with decent boats to sell quickly for a good price, as generally there are more buyers in the market than there are available boats.

Emerging market trends

In the UK, Europe and USA, we are seeing an increase in the popularity of 35 - 45 ft sail boats. Demand is shifting, as to an extent, people are noticeably moving away from power to sailboats. There are a number of reasons for this. ‘Fuel costs’ for power boats is more of a topic of discussion and contention amongst owners than it used to be. I regularly encounter boaters who are switching to sailboats whilst grumbling about the cost of filling up a power boat. In my experience the overall cost of power and sailboat ownership is pretty similar, in fact, but if you regularly use a power boat and take it longer distances, it is hard to ignore the cost of fuel and fuel consumption.

It is also clear that more people are getting into boating to seek-out lifestyle challenges and learn new skills - which ambitions can be better suited to the sailboat environment than to power boats, generally. It used to be the case that unless you had grown up as a dinghy sailor, or your parents owned a family yacht when you were a child, etc., getting into sailing in later life was a daunting prospect. These days, with a raft of excellent and affordable sailing course available, catering for almost every skill level from ‘zero’ to ‘hero’, anyone can fairly quickly become a basic day sailor with the confidence to handle a small - medium sized sailboat. Many of these people - who in the past might have bought a power boat to access the seas - now opt for sail boats instead.

Pricing

Incorrectly pricing a used boat for sale remains the single biggest obstacle to selling it quickly! I have discussed this topic before, but the challenges surrounding it continue. Unfortunately, across all sectors in the global markets in which we operate, whenever a owner insists that his or her boat is marketed at a price considerably in excess of that recommended by the local broker, interest in the boat stalls, the marketing process becomes drawn out, eventually resulting in price reductions, until the particular boat is priced in line with its competition and a buyer is finally found. Whilst brokers in some other organisations will flatter an owner by over-egging the value of a boat in order to secure the initial listing, that approach (which is an anathema within Boatshed) does not serve seller or buyer. Very rarely will a buyer even engage in a boat which is over priced, and with so much comparable boat information immediately available to a potential buyer these days, it is hard not to notice that a boat is being offered for sale at too high a price; ie inexplicably, for more than similar boats for sale are priced at.

At Boatshed we take pricing very seriously indeed. Unlike some, we do not pick figures ‘out of the sky’ or necessarily go along with the ‘off the cuff’, or ‘gut value’ voiced by an owner. In most cases our owners want to sell without unnecessary delay. Our brokers, therefore, research the actual local and extended markets for a particular boat, comparing it to recent sales and other boats available for sale, and taking note of applicable trends and our extensive data and historic boat sales records and achieved price statistics. Armed with that key information they will recommend a sale price which is designed to make the boat competitive in the applicable market whilst giving fair value to it.

It is well known that Boatshed sells boats twice as quickly as other brokers and we never have owners complaining that we have undersold a boat, so I am satisfied that our approach to pricing best serves our customers. However, when an owner ignores the price recommended by the broker - considering that for some reason his or her vessel justifies a price in excess of the obvious competition - attracting interest in the boat and finding a willing buyer can become extremely hard, to everyone’s frustration. Price a boat realistically and there is no reason why it will not sell fairly quickly in the current climate. Over price a boat and be prepared for a long, uncertain wait searching for a buyer.

Depreciation

Linked to correctly pricing a boat for sale is the thorny matter of depreciation. Inescapably, a new boat is a depreciating luxury asset. Just as with a new car, the moment a new boat is commissioned by the local dealer and delivered to the customer, it loses a significant amount of its value against the price that has been paid for it. Whilst this fact is readily acknowledged in the car market, it is less so for boats.

The price value of new luxury cars depreciates rapidly in the first years of ownership, so that, typically, after 3 years most expensive cars have depreciated in value to around 50% - 60% of their initial purchase price (regardless how well they might have been cared for by their owners). The depreciation curve on most boats is similar (with a few exceptions amongst top end, sought-after bluewater sailboats). Expensive power boats suffer the worst from steep depreciation curves, but all new boats are notably affected.

New boat manufacturers do not necessarily advertise or discuss depreciation, and all too often owners who buy new boats ignore or forget about the impact of depreciation when it is time to sell. In my view this is a mistake. The industry - for new and used boats - should be more informed about depreciation and go to better lengths to communicate its effects on price to boat owners looking ahead to eventual re-sale.

Looking ahead

Although there are less boats for sale worldwide than there used to be, there are plenty of keen buyers searching for used boats to buy - Boatshed’s own stats clearly demonstrate that. I expect that situation to continue.

Boat interest and ownership is growing in newer markets such as China, the Far East and Malaysia. Larger broking organisations such as Boatshed will continue to meet that demand by providing quality brokerage services in those markets.

Technology and the online environment will continue to influence how boats are marketed for sale and replace traditional brokerage methods.

Correctly pricing a boat for sale will continue to be centrally important to achieving a timely sale.

Neil Chapman. Founding Broker, Boatshed.com