Looking at consumer trends among UHNWIs, it appears that spending on luxury items has started to decline. According to CNBC, the high-end real estate market is having its worst year since the financial crisis and sales of homes priced at $1.5 million or more fell five per cent in the second quarter of this year.
Furthermore, this year’s Pebble Beach Classic Car Auction in northern California, which attracts a mix of car-crazed billionaires from around the world, also reported a dip in sales in comparison to previous years. The total value of cars bought during the show in August came in at $245 million, reportedly “a third less than last year, as many of the highest-priced cars went unsold”, according to Fortune.
Art auction sales are also in decline: sales at Sotheby’s dropped by 10 per cent and auction sales at Christie’s were down 22 per cent from the previous year. The decline in these luxury sectors could be linked to volatile markets and slow global growth, and many economists fear that this downturn hints toward another recession.
"We have continued to see a reasonably strong flow of sale and purchase work in the second-hand market and this applies across the size range..."
A decline in spending among some of the wealthiest people in the world across these ancillary markets could signal a red flag for the superyacht industry. SuperyachtNews.com spoke to William MacLachlan from HFW LLP about whether he has seen a decline in sales and purchases within the superyacht market.
“I must confess that, whilst not everyone is calling 2019 a ‘vintage year’, we have continued to see a reasonably strong flow of sale and purchase work in the second-hand [superyacht] market and this applies across the size range," he comments. The level of sale and purchase, of course, fluctuates all the time and much depends on the time of year and the number of yachts on the market.
“Perhaps more telling is the fact that our yacht designer clients continue to be very active, with plenty of new contracts, including some right at the top end of the market," MacLachlan continues. "Given the time it takes to get from the point at which a design contract is signed, to the yacht being delivered, this doesn’t indicate to me a real reduction in the confidence of UHNW clients in the medium-to-long term.”
MacLachlan confirms the same sentiment for yacht builders, insisting that, “they continue to have healthy order books and, indeed, some lack much in the way of space capacity”. However, this could always reverse as it did during previous recessions. “In 2008, existing orders were cancelled and fewer new ones were placed," MacLachlan adds. "However, the market is much more stable than it was then, and without the speculative projects we saw then, so I don't think we are about to see a dramatic reversal.”
MacLachlan’s comments are reassuring amidst the uncertainty of the future of the economy and the superyacht market’s robustness. “We are seeing plenty of buyers coming out of the US and elsewhere,” he concludes. “Indeed, tax changes in the US under the Trump administration have, in many cases, made yacht ownership more attractive.” It may not come as a surprise that policies under the Trump administration support the richest one per cent of the country. However, in an industry that caters to such a niche client pool, it may come as reassurance.
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