Boat prices after Covid 19

[andypag]

Wow, this lot are a tough crowd!

Originally Posted by chakil

Hi fellow sailors,

The boat prices will crash at least %40 on monohulls and %30 on multihulls, anyway there was a bubble on multihulls after the hurricanes , you may say it will be back to real value

Most of the charter companies will downsize or bankrupt ..

Sailing will not be so attractive for a period of time as the quarantine rules will be on practice until there is a vaccine

Charter companies or individuals who made some downpayment for new boats will burn the deposit and never deliver their boats, these boats will be overstock in the companies and will be on sale with big discount to create cashflow

Second hand market will try to keep the value until the flow from the big charter companies

At least 2 of the big 5 will close or change hands..

EurUsd will crash to 1 or 0,75 by the end of the year , where the real discount will occur

My pennies worth on Cats which is my personal interest...



I think the Charter businesses are going to struggle. But I'm not sure how cash poor they are when you consider some don't have much capital overhead cos their boats are owned by owners not the company. Staff are low paid freelancers that can be furloughed easily to match demand. Marinas will abosorb the pain with their charter company clients, because they have no option and they'll take the long term view. There's no get-out for those owners who can't sell, and aside for some increased expenses maybe there's not much incentive to get-out if they're planning to pick up their boats at the end of a five year contract.



But other charter companies who own their own stock, will find it much harder to sit out effectively a years worth of income. The larger ones might be supported by increased debt from banks, and that will either make the businesses less profitable further lowering demand, or at worse just delay any bankruptcies for 1-2 seasons. The companies that will survive will consolidate or become leaner but ultimately charter hoiday demand will drive the size of the stock they keep and the boats they sell.



Compared with beach holidays a charter holiday seems like quite an attractive option if you want to be away from "dirty infected other people", but weigh that against the increased hassles of restrictions to freedom of movement and difficulty getting to charter location start points. The price will be pressure upwards through reducing economies of scale. Hard to second guess how badly demand for charters will be while we wait for a vaccine. Dented certainly but maybe not crippled.



There's also a numberof "gonna buy a boat one day" buyers (full disclosure - that's me) and "I want to get away from this crazy world" buyers (also me) who are now galvanised into looking for a bargain. But we aren't a significant cohort. As we fill the orders and buy up second hand boats coming on to the market, the prices should be steady, or slightly declining with expectation of market bottoming, but will supply or demand run out first? And when? It's anybody's guess. I'd guess supply will out live demand and we'll see that really kick in with market adjustment downward by spring 2021.


I've been looking at lagoon 380 and 400s for a long while, and there's a lot coming out of Croatia, Greece and Martinique just now. Pretty tatty tired boats that need some corn to make them liveable, but those same boats last year were much less plentiful and much more expensive. Production cats in charter really kicked off a decade ago. Regardless of Covid we're due to see the second hand supply increase steadily. (Irma not withstanding).

Interesting point made about brokers inflating the price. With travel restrictions, brokers will become more essential to the sale process for both buyers and sellers. (even though they will continue not to live up to that trust). They do create hype but they also help owners be realistic about the value of their boats. So many private sellers live in a rose tinted bubble of how priceless their boat is, compared with market listings. But I do think brokers do chivvy the market along in whatever direction it's going. A lubricant to market movement. They are just as willing to encourage a hike in the price if the market can take it, or a discount if that's what's needed to get the sale.



The wider ecconomy has so far been supported by bailouts which are starting to dry up, and I think will evaporate before this medical crisis is over. That's where the scarring of the economy will happen. And that will effect the poor and the rich. But friparies like buying or keeping a boat will be among the first things to be shelved as the belt tightens. That's why on balance I think we're set to see a big drop in prices. Cheap boats being hit hardest. Certainly 30%. Maybe 50%. That's less likely but I don't think anyone can say now it's impossible. If you follow the tipping point theory of supply and demand, then a small imballance downwards will trigger a big discounting if people are desperate to sell, and given the overheads of boat ownership, they will become desperate.

It's already happening, but I think it will take a while for the market to really move. Firstly because it will take a while for owners to come to terms with lower valuations for their pride and joy, and secondly it will be a few months before the owners that are going to find boat ownership really onerous (the ones with debt on the boat, high mooring fees and a generally highly geared lifestyle) to hit that wall, but when they do they will firesale and that's what will drive the market downwards.


Owners will either sell cheap, or hunker down, with a few neglecting their boats along the way. Maybe in 5 years when covid is a memory, the market will more than rebound as the new-normal of teleworking allows many more people to live at sea, or avoid air travel by using boats.


All of that assumes we don't see a large second wave of infection. If we do, then boats prices will be washed away in it.



Only time will tell who's wrong or right. Fair winds everyone.