Economic conditions mean it’s a great time to purchase a boat, writes David Lockwood.
I’m often asked if this is the right time to buy a boat. Right now, my imaginary brokerage firm gives a strong ‘‘buy’’ recommendation. All the indices are in favour of the hedonist: lifestyle dividends are at historic highs, the all-important PE ratio — that is, price-to-entertainment value — promises great returns, while sellers are keen to offload stock at the back end of summer.
Of course, qualified financial advisers will tell you boats don’t make economic sense. They depreciate as speedily as luxury cars, require significant outgoings and demand your precious time. But that’s just the economic argument and, after decades of pleasure boating, I believe the experiences outweigh the monetary loss. It’s a better-than-fair trade right now.
So let’s go shopping. The basic tenet of supply and demand is the overarching market force. When demand decreases but supply remains unchanged, a surplus occurs. This leads to a lower equilibrium price, but there’s another force at play now – consumer sentiment and perceptions.
The founder and chief executive of finance and leasing company Finlease, Mark O’Donoghue, has observed that those who work in a counter-cyclical manner often prosper. He should know, having spent more than 20 years in the boat-lending game and, more recently, developing an interest in Pacific Boating, a Sydney-based boating club where members pay for access to a communal fleet.
‘‘It’s an absolute, absolute buyers’ market,’’ he says. ‘‘From a purchase point of view, we’re in the best time I’ve ever seen. We’re doing a reasonable number of boats, we’re seeing some boat-buying activity, but the constraints that are there now are purely about perceptions.
‘‘New members to Pacific Boating aren’t going for the cheaper, longer-term commitment but the short-term, more expensive introductory model. This is an interesting buying signal. People don’t want liability of more than a year.’’
Statistics say we’re saving more than we ever have, we’re paying down our mortgages more than ever, because we’re being far more conservative. ‘‘The fundamentals for borrowing are actually pretty sound,’’ O’Donoghue says. ‘‘We’ve got low unemployment, low interest rates, low inflation and a rather lofty Australian dollar.’’
At the same time that the number of boats on the second-hand market outstrips demand, imported new boats have never been cheaper. That’s thanks – or no thanks if you’re a local manufacturer – to the Aussie dollar. With the global expansionist policy from the multinational boat builders, who have no other way to grow except outside the US and Europe, it’s no wonder imported boats have never been cheaper.
But are they better? Running uphill on an uneven playing field, our enduring local boat builders have made the decision to build up to a standard rather than down to a price. Australian-made boats from stables such as Riviera and Maritimo have become better than at any time in their past.
New or second-hand, imported or local, one thing remains certain – interest rates are low. Mortgage rates are about the mid-5 per cent mark, meaning that drawing down on your mortgage offers some of the cheapest boat-buying money around. Just make sure you amortise the debt within a similar time frame as a personal loan.
O’Donoghue says boat loans are running between 7 per cent and 8 per cent, with the boat forming its own security in most cases. As an example, a typical lender will take the view that if it all goes pear-shaped the vessel can be offloaded in a fire sale for 50 per cent of the purchase price. So it will want 50 per cent deposit for the loan. However, in reality, most boat borrowers have reasonable net worth, lenders make a value judgment on their assets and position, and a 20 to 30 per cent deposit is more common.
There’s some very keen buying in the second-hand cruiser fleet. Much of that has to do with holding costs or outgoings. Berthing, insurance and slipping are hard to swallow when you’re boating very occasionally or not at all in winter.
Look for comparatively low hours on diesel engines, service records and regular maintenance, and engage a surveyor for peace of mind. Most boats from the past few decades need just a basic makeover.
In short, it is a great time to buy a boat. Dealers will be clearing trailer-boat stock at the Rosehill Trailer Boat Show in March and history may well judge this to be a pivotal year, especially post-election when, just maybe, perceptions change.