From our partners: Yacht ownership is complicated — J.P. Morgan Private Bank offers some factors to think about.
The global superyacht industry continues to thrive. The 2022 Global Order Book records from Boat International found that there are 1,024 craft currently on order — a rise of 24.7% on last year. There are numerous reasons why the yacht industry is booming. The Covid-19 pandemic played a major role in both generating demand and slowing production — this has contributed to a backlog of orders.
Additionally, high levels of wealth have exploded globally. According to Forbes, the US alone now boasts 500 more billionaires than before the pandemic. There was also an increase of Ultra High Net Worth Individuals (those with a net worth over $30m), whose numbers have doubled in a decade and rose 9.3% in 2021.
But a warning to those wanting to toast their success by taking to the seas: the yacht market is a complicated one, with numerous hidden costs that can quickly get out of control. In order to navigate the tricky waters of the global yacht industry, the uninitiated are advised to seek out the guidance and counsel of experts.
Set your intentions
Yachts and superyachts come in a wide variety of shapes and sizes, from small sailing and motor craft to behemoth 250ft superyachts that practically act as their own jurisdiction. When entering the world of seafaring it is vital to set your intentions.
The first question that should be asked is how big and how often you want to go. This is key as it quickly illustrates if making a purchase is the best move and what type of ownership model will be most effective.
Let’s say you’re transfixed by the allure of spending a family holiday aboard your own floating palace, but only intend to do so for a single week each year. In this case, it is likely that purchasing your own superyacht would be financially inefficient.
Taking the charter route will keep costs down. It would also avoid the legal, tax, docking, storage, insurance, maintenance and crew-related headache that comes with owning your own vessel.
If your heart is set on ownership — perhaps you plan to use it regularly or offer your own yacht for charter — then purchasing could be the correct move.
Is now the right time?
The demand for yachts is higher than ever. Boat International state orders of superyachts (those over 80ft in length) have surpassed the previous 2008 peak. If placed end to end, the ships on order would stretch 24 miles. Some will have the patience to wait for a vessel, others will not. What if your financial situation changes? In three to five years your ambition for a vessel could have completely altered.
This is another reason why chartering may be a good initial first step. It gives you the ability to try out different styles of ship. This in turn gives you a better understanding of a vessel’s capabilities and drawbacks. Everyone would love a megayacht, with two pools and a helicopter pad that is capable of hosting all your friends and family at once. But best of luck finding somewhere to moor it.
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Of course, there are numerous options. Often superyachts have tenders for the sole purpose of transporting people to shore at ports not capable of harboring larger yachts. This is exactly the experience that could be garnered from chartering and would help you decide further down the line.
It is also important to remember that while demand for yacht ownership has recently increased, so has yacht charter. In fact, chartering remains a popular choice among some of the world’s wealthiest individuals.
Things to consider
Buying a yacht is a huge commitment so it is vital to understand how it may affect your lifestyle and financial goals. Of course, chartering is cheaper and because of this, it will likely garner you a bigger yacht. However, chartering leaves you at the whim of availability. Those who like total control of a situation will not enjoy missing out on their yacht of choice if it has already been booked.
If you purchase your own vessel, it opens up the endless possibilities that come with customizing your own yacht. For some, curating their personal paradise among the waves is part of the allure that comes with ownership. Making key decisions on interior and exterior design can make a yacht feel your own.
Throughout the entire process, it’s likely you will need a variety of experts to ensure everything goes as smoothly as possible. These include brokers during the buying process, lawyers to set up contracts and aid the flagging process, managers to maintain the yacht post-delivery and private bankers to incorporate the yacht into your personal finances.
Finally, it is important to consider your ownership model. It may be possible to own the yacht via a trust limited liability company or limited partnership. This may help to protect financial assets later down the line.
A well versed team at J.P. Morgan will be able to guide you through each step of this process, ensuring your assets are maximized. This will allow you to sail the seas with the confidence that you have made the correct decision at each point along the lengthy but rewarding process.
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