The yacht Amadea, originally owned by sanctioned Russian Oligarch Suleiman Kerimov, was seized by the Fiji government in 2022. EUGENE TANNER/AFP via Getty Images
The yacht industry was considered by analysts to be invincible, because its customers are too wealthy to be bothered by inconveniences like inflation and recessions. Moreover, the number of people who can afford yachts, ultra-high-net-worth-individuals worth over $50 million, are growing. In 2022, Credit Suisse predicted that the global population of individuals wealthy enough to buy yachts would grow by 121,000 over the next five years to 385,000.
And yet, the yacht industry hasn’t been doing very well lately. The percentage of super rich who own yachts has been declining since 2017, indicating that new members of the $50 million+ club may be blasé about splurging on a palace at sea.
Russia’s 2022 invasion of Ukraine may be partly to blame, according to a research note by Berenberg Bank, as chronicled in the Financial Times on Thursday. Now, when the megarich think about purchasing a yacht, they have to weigh the possibility of creating an optics problem for themselves.
“The beginning of the conflict in Ukraine has led to a decline in yacht order intake since Q2 2022, with UHNWIs taking a cautious approach and postponing orders,” Berenberg wrote, using the acronym for ultra-high-net-worth-individuals worth over $50 million. “Since then, the listed luxury yacht manufacturers have suffered from a lower level of interest from the financial community, linked to the perception that yachting is significantly exposed to Russian clientele.”
Berenberg did not provide the data for the exact decline in sales. However, the percentage of ultra-wealthy people with yachts, according to Berenberg, peaked in 2014 at 3.6%, and tumbled to 2% in 2021, the most recent year for which numbers are available. The decline shows that the shift in yacht buying habits of the rich and famous is a long-term trend that preceded the Ukrainian invasion, which started in 2022.
North America is home to the most people with over $50 million at around 145,000, followed by Europe at around 41,000 and China at 35,000. As of 2021, America’s ultra wealthy owned 25% of the world’s yachts, but the vessels are most closely associated with Russia, despite only 9% of yachts being Russian-owned. This’s because yachts are synonymous with the Russian oligarch lifestyle. Russians own some of the world’s largest and most expensive yachts, with Vladimir Putin’s reported to cost up to $700 million. The world’s largest yacht by gross tonnage, worth about $800 million, is owned by Russian oligarch Alisher Usmanov, and comes with an indoor pool, a helicopter and two helipads, and a 96-person crew.
They are a status and political symbol in Russia that other global billionaires—even ones from other countries—may now be wary of owning.
“You have to have a yacht, otherwise you’re not an oligarch,” Anders Åslund, author of Russia’s Crony Capitalism, told Insider. “It’s a very status-conscious group.”
The link between yachts and the Russian oligarchy, specifically in relation to the war in Ukraine, came to a head when, in 2022, Western countries sanctioned Russian billionaires deemed close to the Kremlin and seized their yachts. Although authorities also confiscated mansions, bank accounts, and private jets, it was the yachts that made for the juiciest headlines—helped by photos of the opulent floating castles. Over 400 Russian yachts were put on the sanction list, although the vast majority of them were never seized because they were untraceable or had already been moved from countries where they risked seizure.
Of course, the recent decline in yacht sales, as described by Berenberg, also coincides with economic turmoil created by rising interest rates and amid fears of recession. A regional banking crisis in the U.S. along with some upheaval in Switzerland have added to the uncertainty. Berenberg noted that the recent yacht sales decline could be attributed to wealthy people not wanting to make big ticket purchases amid a weak economy.
Still, the mix of yachts sold are increasingly leaning towards bigger vessels. Smaller yachts, which can go for a measly few hundred thousand dollars, are expected to become a smaller percentage. Called composite yachts, they made up 67% of the market in 2016, but are projected to shrink to 52% of it. However, the amount of money spent on them is expected to grow 51% to $7.4 billion by 2026. Meanwhile, Berenberg predicted that the market share of super yachts—which cost more than $30 million for their custom designs and often steel hulls instead of fiberglass—would grow by 14.2% to $3 billion in 2026, making up nearly 21% of the market compared to 17% in 2021.
Credit: Source link