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The First Buyer's Market Since 2001

While driving to Annapolis last October, a few days before the 2008 Annapolis Sailboat Show, I had the radio turned to stock market news. The Dow was plunging like a rock and I couldn't help but wonder what sort of boat show it would be. A few days into the show, Alexis de Boucaud, our Florida agent, came to me and said: "Phil, I think the Dolphin 460 has come down in a price a lot - like $200,000."  He explained to me that over the course of just a few days the Brazilian currency had weakened nearly 30% to the Dollar. I later opened up the currency tables of the Wall Street Journal to see that the Pound, the Aussie Dollar, the South African Rand, and even the Canadian currency were falling hard as well. As the economic crisis went global people were fleeing to the Dollar.

As a yacht broker who specializes in the international catamaran market I can tell you that currency plays a massive role in our business. When I am representing a buyer, for example, I am just as interested in the seller's level of motivation as I am in determining when he bought his boat, what currency he bought it in, and what currency he had to convert to pay for it.  This is the only way to determine how many Dollars, Pounds, Rand or Euros he has into his boat. It is this information that gives me some handle on where the seller's pain point may lie. In my experience all sellers have pain points that they are loathe to cross and these are very often currency related.

In the current market, with both currency and economic conditions unstable, many would-be buyers are sitting back and hoping to time their catamaran purchase with the exact moment that the catamaran market hits bottom. Just as many are sitting back waiting to jump back into the stock market when it starts to turn up, a lot of catamaran buyers are taking the same approach. It is the case, however, that the catamaran market does not move nearly as swift as the stock market or the housing market. Most of the multihulls in the world are owned with cash by relatively high net-worth owners who can easily ride out a downturn if they wish to.

Ok, so what sort of catamaran market do we have now?  Well, to paraphrase our new president, "It's silly time." Silly because neither buyers or sellers really have a clue as to where the market is headed in the short term, and silly because currencies are ping-ponging about so wildly that the price of a boat can vary by as much as 15% based on a short term currency swing one way or the other. Take the Euro to Dollar exchange rate. A few weeks back the Euro was trading at 1.22 to the Dollar. It is now 1.31 to the Dollar. Go figure.

Despite all the market and currency volatility, the sky is not falling on catamaran prices. The market is correcting, however, to a new reality. Here is how I see it:

1. We have entered into a buyer's market. The seller's market of the past three years, especially for dollar sellers, is coming to an end. Over the past four months prices have slid, on average, about 10 to 15%.
2. Up until the current crisis the European economy was running stronger than the U.S. economy. European and foreign buyers were driving catamaran sales on a global basis. Now that market panic has spread worldwide there is a global slowdown in catamaran sales. 
3. As charter revenue slows in 2009 we will see higher depreciation than normal on four cabin, four head catamarans coming out of bareboat programs. 
4. Demand will remain strongest in the under $300,000 price point as this is where many buyers will land when they wish to buy a boat that can also serve as their home. Over the past month we have sold three catamarans in this price range to buyers looking for a boat that can easily serve as a full-time home if necessary. 
5. The clean, owner version cat, nicely equipped and well cared for will continue to draw the most interest and see the least depreciation. I predict it will level out at no more than 15% off what prices were last year at this time - all things being equal with currency, etc. 
6. New boat sales will fall by as much as 40% over the next year, precipitating the closure of many smaller catamaran builders. Long term it will mean less inventory in the market and stronger brokerage sales in two to three years for clean, late model catamarans.
7. What is a catamaran worth?   Despite the fact that there are many who think the sky is falling, like real estate in Detroit or condo's in Miami, I do not see brokerage catamaran prices falling much more than 15% to 20% over the next year. Most catamarans are cash owned, not bank financed, as such that the repo man is unlikely to come calling. The catamaran market is nothing like the small to medium sized powerboat market, where the majority of the boats are bank leveraged. If you have a hankering for a powerboat, well, you can certainly buy one now for up to 40% to 50% off. Many are in repossession and the banks want them off the books. Such is not the case with voyaging catamarans.
8. I do believe that buyers who are not wedded to one particular brand are now in a much stronger position than they were just a few months ago. If they are patient they can make offers until they find a seller who just really wants to sell. 
9. For those who want to purchase a very specific brand of cat, with a specific layout and in supreme condition, the options for getting a bargain at 20% off will be more limited. It is one thing to make offers on an x-bareboat brand with ten or more on the market at the same time. It is quite another to go after a pristine, highly sought after owners version with cruise gear, etc.
10. In a year or so I predict the market for American catamaran buyers will become more difficult as I suspect the dollar will weaken further as we print more money and inflation kicks in. Cat prices could well climb back up very fast in dollar terms. Those with stronger currencies will go anywhere in the world to get a super deal on a used cat. I believe this will increase the upward pressure on used catamaran values - especially on the cats over 40 feet as it has over the past two years with the formerly strong Euro, Rand, and Aussie Dollar.
11. I believe the market for cats 38 feet and under will continue to deflate a bit more because foreigners will not travel to buy them. Cats in this size are typically not deemed large enough to serve as full time homes - at least for many. 
12. The market for voyaging trimarans will remain very weak as the trimaran has lost favor with the majority of buyers all over the world. Smaller, trailer able tris, will also likely decline in value as they are generally not homes but rather costly toys for racing and pleasure sailing.
    

These predictions are nothing more than my own late night thoughts on the catamaran world. Markets move in mysterious ways. I certainly deem it a very good time to be a buyer, especially for those who are not wedded to any one brand but are rather quite willing to chase after the best deals. These deals will be fantastically low, I believe, in the brands that have sold a considerable portion of their production into charter over the past ten years.

I do not know how long this window will last. Six months?  One year?  It is very, very hard to say. My own guess is that as soon as the irrational panic leaves the market things will stabilize and we will be in for a period of slow growth for the next year or two. But the demand for catamarans will remain as strong as ever.

Perhaps I am entirely wrong in all of this. Perhaps this entire economic scare is teaching us that it is time to stop counting our money and focusing on our blessings; maybe it is a time to start living our dreams and stop worrying about the future.

Here is to a happy and healthy 2009 for you and those you love. I promise to worry less and live more in the year ahead. Join me. Let's go sailing.

Sincerely,
Phillip Berman

About the Author: Phillip Berman is the President of The Multihull Company, and the author of several books on catamaran racing and sailing. To learn more about his company visit: www.multihullcompany.com