Thursday, 04 June 2015

Many of the conditions and trends in the international used boat market that I reported upon in November 2014 continue and remain highly relevant to boat sales today. Overall, the market can be summarised as follow:

  • 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.
  • Generally, owners tend to hang onto boats for longer than they have done in the past.
  • 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.
  • We are now seeing a continued improvement in sales in the USA and Canada.
  • The relative values of currencies, notably Sterling, the US Dollar and the Euro, have a real effect on pricing.
  • 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.
  • Owners are advised to take first offers seriously.
  • Generally, used boats represent excellent value for money.
  • The marketing of boats is now dominated by digital and online media.
  • 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.

Market contraction

As we have discussed before, the overall market for used boats has contracted in the last few years, with less boats available for sale than before the 2008 global recession. This contraction is not unique to used boats. 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 continued to see 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.

Some owners are hanging on to their boats because they are nervous about price or their ability to sell quickly. Whilst these are understandable concerns, in fact now is a good time for most owners to consider selling whilst the available stock of used boats for sale is at its lowest for 7 years.

There are plenty of buyers around

Despite the economic downturn, the drawn-out recovery is beginning to take hold in the UK, the USA and in certain parts of Europe and the Mediterranean. There are plenty of buyers in most locations keen to purchase used boats and that trend, fuelled by increased confidence and a realisation that used boats offer value for money, is likely to continue in many markets. 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 not finding capable buyers, but rather quality boats to sell

The impact of currency fluctuations

The fall in the value of the Euro against the US Dollar and Sterling during the last 6 months results in USA and UK priced boats being more expensive to Euro buyers. This impact should not be underestimated as many used boats from the USA and the UK have traditionally been sold into Europe. When considering the likely markets for their boats, USA and UK owners are well advised to take the fall in value of the Euro into account when pricing their boats for sale, if they hope to find a buyer within the Eurozone.

In contrast many boats located within the Eurozone priced in Euros represent extraordinary value for money for US Dollar, Sterling and other currency buyers. Very often Eurozone boats are ‘tax paid’ and even factoring in transportation costs, will be cheaper to buy than similar local boats priced in Dollars or Sterling etc.

Brokers with international reach, such as Boatshed, have been well placed to adapt to the trend of pleasure boats being routinely sold across borders. Arranging the international movement of used boats is all in a day’s work for our brokers.

Sensible pricing and genuine value for money remain the most import factors when selling a used boat.

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 continues to be of central importance to these buyers, trumping brand loyalty, vessel specification or location. 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.

Input from experienced brokers here can make the difference between a quick sale around the asking price, or a slow, drawn out sales process involving repeated price reductions. Our brokers benefit from historic sales data covering over 20,000 boats advertised for sale during the last 15 years. This database assists our brokers to predict with accuracy the right price at which to promote a boat for sale, and the prevailing market conditions. We think we get it right most of the time as generally the first person to view a boat that we advertise for sale will buy it and across used boat markets we achieve about 80+% of advertised sale prices.

The ‘first offer’ could end up being the best offer

The idea that the first person who views a boat will buy it is, perhaps, counter-intuitive to a traditional brokerage approach. Owners might be reluctant to accept the first offer they receive, preferring to ‘hold out’ for more, or convincing themselves that they have underpriced the boat. However, our experience and sales data demonstrate that very often the first offer is better than subsequent offers, or even the eventual sales price achieved. If a boat is sensibly priced by an informed broker there is every expectation that the first offer will be at a decent price reflecting the value of the boat. Certainly, that is the approach we take at Boatshed, with the overall aim of selling boats quickly and at the right price.

Digital and Online media

The marketing, promotion, search for and sale of used boats is now dominated by digital and online media. Anyone looking for a boat these days will rely upon the internet to source and shortlist boats, so that anyone selling a boat needs to ensure that his/her boat is effectively and widely advertised for sale online. Brokers such as Boatshed - which led the way with online marketing of used boats - offer owners and buyers complete digital platforms simplifying the process of finding, selling and buying a boat. Brokers who are reluctant or slow to embrace these technologies, or which do not have access to large, online international platforms, will continue to see their listings fall away as owners and buyers are drawn to online sales platforms.

Looking ahead

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.

However, the stock of available used boats for sale is at its lowest for many years and is expected to grow only gradually as shorter periods of ownership kick back in over time.

At the moment and for the foreseeable future the ‘value’ of most used boats is exceptional. Excellent used boats are available at extremely reasonable prices. That value can be even greater within the Eurozone with the effect of currency fluctuations.

June 2015

Neil Chapman Founding Broker and MD of Boatshed