The biggest costs of superyacht ownership are usually considered to be items such as crew salaries, maintenance, fuel and insurance. In reality, if you buy the wrong yacht, or simply pay too much for the right one, the biggest cost will be depreciation.

When discussing the costs of owning a yacht, most conversations understandably focus on annual operating expenses, but the line that never appears on any operational budget is depreciation.

That is because depreciation is a very different type of cost. It often remains invisible for years and only becomes painfully real the day the owner decides to sell. By then, many of the decisions that determined that outcome have already been made.

In over twenty years in the industry, I’ve rarely seen depreciation discussed openly. Perhaps because it is an inconvenient truth that more often than not, yachts are depreciating assets. They are extraordinary luxury assets that provide experiences and memories that few other purchases can match, but they should still be viewed as luxury assets rather than conventional financial investments.

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However, before going any further, I want to make one thing very clear. This article is not intended to discourage anyone from buying or building a yacht. Quite the opposite.

Helping clients buy, build and enjoy yachts has been my career and remains the most rewarding aspects of what I do. Some of my clients have owned the same yacht for many years and have enjoyed every minute of it. Others have progressively moved up in size, building experience and confidence as their passion for yachting has grown.

Nor am I suggesting that every yacht suffers huge depreciation. That simply isn’t true.

I have been involved in numerous transactions where owners have experienced very little depreciation and, on several occasions, I have even seen yachts sell for more than their original construction or purchase cost. I certainly can’t always promise that outcome, but it does happen. Long shipyard lead times, inflation in new build pricing and strong demand for exceptional yachts can all work in an owner’s favour.

My purpose here is much simpler. It is to make prospective owner aware of the matter and what they can best do to protect themselves. Depreciation is a cost worth understanding before you buy or build a yacht, not years later when you eventually come to sell it.

Whilst some depreciation is inevitable, a surprising amount can be mitigated. Put simply, depreciation can be the biggest cost of yachting, but it doesn’t have to be.

Why nobody talks about depreciation

One of the things that has always surprised me is just how rarely depreciation is discussed openly within our industry.

Perhaps that is understandable. It’s a topic that certainly might make the task of shipyards and brokers selling yachts even more challenging! It isn’t something owners particularly enjoy thinking about when they’re embarking on one of the most exciting purchases of their lives.

Yet avoiding the subject doesn’t make it disappear. In fact, I would argue the opposite.

The earlier depreciation is discussed, the easier it often becomes to minimise.

Throughout my career I have always preferred to have that conversation right at the beginning. Some people may think that sounds like an odd approach for a broker. I don’t.

The majority of our business comes from repeat clients and referrals. My objective has never been simply to help somebody buy one yacht. Ideally, I want to help that client throughout their entire yachting journey, whether that involves buying, selling, building or chartering multiple yachts over many years.

That changes the way you advise people.

If a client overpays significantly for a yacht today, there is a good chance that when they eventually come to sell they will be disappointed by its resale value. That disappointment isn’t directed at the market. More often than not it is directed towards the adviser who represented them when they bought it.

In simple terms, if you allow a client to make an avoidable mistake on the way in, there is every chance it will be the last transaction you ever do together.

There are different ways to build a brokerage business. Some businesses survive by continually having to find new clients. Personally, I have always believed it is far better (and easier!) to maintain long-term relationships than constantly replace them.

That means sometimes having conversations that are uncomfortable in the short term but enormously valuable over the long term.

Depreciation is one of those conversations.

Every yacht will be for sale one day

There is one sentence that I repeat to every client, whether they are buying an existing yacht or embarking on a new construction project.

“One day in the future, every yacht will be for sale.”

It is an incredibly simple statement, but I genuinely believe it is one of the most valuable principles an owner can keep in mind throughout a purchase or construction process.

That doesn’t mean you should build a yacht for somebody else. Far from it.

If you are investing years of your life creating a custom yacht, it absolutely should reflect your own lifestyle, your family’s requirements and your personal taste. Otherwise, what is the point of building a custom yacht?

However, there is an important distinction between building something that reflects your requirements, lifestyle and taste and building something that is so specific that it appeals only to you.

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And the same is true when buying an existing brokerage yacht. The issues follow the boat in the future. Are you about to buy a yacht where you are effectively the only buyer? When the day comes that you want to sell, will there also be only a tiny pool of buyers because one, or perhaps several, aspects of the yacht give her very narrow market appeal?

Real world examples: Small Decisions, Enormous Consequences

One of the biggest misconceptions about depreciation is that it is driven only by the age of the yacht.

In reality, some of the largest losses in value are created by decisions made before the yacht is even launched.

I’ve seen apparently minor design decisions remove tens of millions of Euros from a yacht’s future value, not because the yacht wasn’t beautifully built, but because it appealed to a much smaller audience when it eventually came to market. A yacht can be exceptional in terms of quality and finish yet still prove difficult to sell because one or two fundamental decisions significantly reduce its market appeal.

Two examples from my own experience illustrate this perfectly.

The first involved a client who had built a beautiful custom yacht. We later handled her onward sale, although, to be clear, we had not been involved in her original construction.

The yacht was well engineered, meticulously maintained and immaculately presented with a stunning, complex, contemporary interior. The owner had built her exactly to suit the way his family used the yacht and during his ownership she served them perfectly.

One of those decisions was to build the yacht with only three crew cabins. For their style of ownership, it made perfect sense. They only ever used the yacht privately and preferred to dedicate the additional space to themselves rather than increase crew accommodation. From their perspective it was entirely logical.

Unfortunately, the day eventually came when they decided to sell.

We took the yacht to market and the response was extremely positive. Hundreds of prospective buyers viewed her over time and almost everyone commented on how beautifully she had been maintained.

Then they discovered the limited crew accommodation. Immediately the conversation changed.

Some buyers wanted to charter the yacht for part of the season. With only three crew cabins, delivering the level of service expected in today’s charter market would have been extremely difficult. Other buyers intended using the yacht only privately, just as the current owner had done. Yet they quickly recognised something else. One day they too would want to sell the yacht.

They understood exactly the same issue would confront them in the future.

In other words, they weren’t rejecting the yacht because it didn’t suit them. They were rejecting it because they realised it would be more difficult to sell on again in the future.

They had subconsciously adopted the same philosophy that I discuss with almost every client.

“One day every yacht will be for sale.”

A decision that had worked perfectly for one owner ultimately reduced the yacht’s appeal to almost every subsequent owner. Not only did it affect value, it made the sales process significantly longer. That matters. A prolonged sales campaign doesn’t just increase depreciation. It also means the owner continues incurring ongoing running costs.

Depreciation and operational costs suddenly start hitting together.

Another example came during one of my own new construction projects.

The client had a very clear vision. The yacht was being built purely for private family use. They had absolutely no intention of chartering and were adamant that four guest cabins would be sufficient. I explained that I thought this would significantly affect resale value one day.

The owner’s response was immediate: “This is my yacht for life. The only time this yacht will ever be sold is after I’m gone.” 

It was an entirely understandable position. One of the attractions of building a custom yacht is that you can create something perfectly suited to your own requirements rather than somebody else’s. I respected that view.

However, I also encouraged him to think about something that none of us can predict. Life changes. Families change. Businesses change. Health changes. Priorities change. Very few people set out to sell a yacht only a few years after taking delivery. Yet it happens surprisingly often.

Fortunately, although the owner chose to proceed with four guest cabins, I persuaded him to install all the plumbing and services necessary for an additional cabin while the yacht was still under construction in order that a change of layout at a later date would be that much easier. That relatively inexpensive decision proved helpful, but did not fully mitigate the effect of his decision to have only four cabins.

Not long after delivery, circumstances changed completely and the owner decided to sell. We now had a magnificent yacht, beautifully built and immaculately maintained, but one fundamental issue continued to dominate every discussion.

The owner became increasingly frustrated because buyers loved almost everything about the yacht. They simply didn’t love that one decision. After many conversations he admitted something. He acknowledged that this single decision had cost him over EUR 10 million. It would have only cost approximately EUR 500,000 more to build her with five cabins.

Simply because once the yacht was delivered, changing her layout involved a project. A period of time in the shipyard when she couldn’t be used and while many ongoing operational costs such as crew and insurance would continue.

And one thing that almost every brokerage buyer has in common is this: they don’t want to buy a project. They would prefer to buy a yacht ready to go. They want to complete the purchase, move their belongings on board, cast off the lines and start enjoying their new toy.

That is one of the reasons I believe design, layout and specification deserves far more attention than it often receives during the pre-contract stage.

Some decisions are remarkably inexpensive to make before construction begins. The same decisions become extraordinarily expensive later on.

As a very general guide, market expectations have evolved considerably over the years.

On yachts between around 30 and 50 metres, buyers generally expect at least five guest cabins.

On yachts between around 30 and 50 metres, buyers generally expect at least five guest cabins. Between 50 and 60 metres, five cabins is still usual, but six will generally broaden the yacht’s appeal significantly. Above 60 metres, six guest cabins is effectively the expectation, while yachts over 80 metres often benefit from seven or more.

However, understanding what the market generally expects is incredibly valuable because future buyers inevitably compare your yacht with every other yacht available in that size range.

Building or buying a yacht with broad market appeal is not about compromising your own enjoyment. It is about protecting yourself from unnecessary depreciation in the future.

What Really Causes Depreciation?

One of the reasons depreciation is often misunderstood is because people assume there is a single cause. There isn’t.

Depreciation is usually the cumulative result of dozens of decisions, some made by the owner, some by the shipyard and some simply by changing market conditions.

In my experience, the biggest influences include:

• Overpaying in the first instance. 
• Choosing a shipyard without understanding how different brands perform on the brokerage market. 
• Too few guest cabins. 
• Inadequate crew accommodation. 
• Highly personal interior styling that appeals to only a very small audience. 
• Insufficient tender and toy storage. 
• Galleys that are too small to comfortably support the number of guests. 
• Poor laundry set-up. 
• Insufficient cold and freezer storage. 
• Limited cruising range for the yacht’s intended operational profile. 
• Deferred maintenance. 
• Poor cosmetic presentation. 
• Major class survey or repaint required in the near future. 
• Wider economic conditions. 

None of these factors exist in isolation. Collectively they determine how many buyers will seriously consider your yacht and, ultimately, what they are prepared to pay for it.

That is why I believe depreciation should never be viewed as simple bad luck.

More often than not, it is the cumulative consequence of a series of decisions made over many years.

Shipyard choice has a bigger influence than many people realise

Another major influence on depreciation is the shipyard where a yacht is built.

Like almost every luxury asset, brands matter. That reputation has usually been earned over decades through consistent quality, engineering, reliability and buyer confidence. When somebody buys a yacht from a leading Northern European or established Italian shipyard, they are not simply buying the yacht itself. They are also buying into the confidence that future purchasers have in that brand.

Over the years I have seen many people try to “beat the market” by building at new or relatively unknown shipyards. Sometimes the attraction is a lower contract price. Sometimes it is shorter delivery times. Occasionally it is simply the excitement of doing something different.

There are undoubtedly talented people emerging in new shipyards around the world and some will become the established names of the future. However, history has shown that many owners who believed they had saved money at the outset ultimately lost considerably more through depreciation and post-delivery issues.

Buyers naturally place a premium on certainty.

A pedigree shipyard has an established reputation. Surveyors know what to expect. Captains know what to expect. Engineers know what to expect. Brokers understand how those yachts perform in the brokerage market.

That confidence has value.

It is one of the reasons why well-designed yachts from the world’s leading shipyards often follow a very different depreciation curve from yachts built elsewhere.

In fact, during periods of high inflation or when shipyards have four or five-year order books, I have seen exceptional custom yachts from respected shipyards appreciate in value during their first few years of ownership.

That may sound surprising.

However, if commissioning an equivalent new yacht would cost substantially more and require a four-year wait, it can make perfect commercial sense for a buyer to pay a premium for an almost-new yacht that is immediately available.

I certainly wouldn’t suggest this is guaranteed. It isn’t. But it demonstrates an important point. Depreciation is not fixed.

It responds to supply, demand, inflation, shipyard capacity and buyer confidence.

Not all yachts depreciate in the same way

One of the biggest mistakes people make is assuming there is a single depreciation curve for every yacht. There isn’t.

A 35-metre production yacht and a 75-metre custom yacht are entirely different asset classes.

Production GRP yachts between approximately 30 and 45 metres are built in relatively large numbers. They are produced from moulds, construction periods are much shorter and there are numerous shipyards building fairly comparable yachts.

When one of these yachts comes onto the brokerage market it is often competing against hundreds of similar yachts. That naturally places downward pressure on pricing.

Large custom yachts over 60 metres are completely different. They are built to order, construction typically takes 3-5 years and the number of directly comparable yachts available at any one time is often remarkably small.

In reality, when selling a 70-metre custom yacht from a leading shipyard, your competition may only be a handful of other yachts worldwide and that scarcity changes everything.

For this reason, I often give different advice depending upon the size and type of yacht a client is considering.

If somebody wishes to purchase a 35-metre production yacht, I will frequently encourage them to look seriously at the brokerage market. There are often exceptional opportunities where somebody else has absorbed the steepest initial depreciation and the buyer can acquire a beautifully maintained yacht for significantly less than replacement cost.

Conversely, the equation can be very different for a large custom yacht where the right design, from the right shipyard, purchased at the right price, may retain value remarkably well over time.

Maintenance is an investment, not an expense

Another factor that has an enormous influence on depreciation is where a yacht sits within its maintenance cycle.

One of the first questions experienced buyers ask is not simply how old a yacht is, but what major maintenance lies ahead.

Every five years, yachts that want to remain “in class” undergo an extensive classification survey. In simple terms, the classification society undertakes a comprehensive inspection of the hull, machinery, safety systems and critical equipment to ensure the yacht continues to comply with the required standards.

This is not a quick exercise. It can take several months and often involves the yacht being out of the water while inspections and any necessary remedial (sometimes expensive) work are completed.

Likewise, maintaining the exterior paint finish of a large yacht is a significant undertaking. Depending upon usage, climate and an owner’s expectations, a major repaint may be required every five years or so, with smaller cosmetic works undertaken between major paint periods.

These projects cost millions of Euros. They also remove the yacht from service for up to 6 months.

Consequently, a buyer looking at two otherwise identical yachts will almost always place greater value on the yacht that has recently completed her class survey and repaint than one where one or both are on the immediate horizon.

Maintenance also influences buyer confidence in a more subtle way. A beautifully maintained yacht suggests careful ownership. Deferred maintenance raises questions. If obvious cosmetic issues have been ignored, buyers inevitably wonder what else has been postponed.

I often say to clients that every Euro saved through deferred maintenance will ultimately cost two Euros more in future depreciation. It is a false economy.

Maintaining a yacht properly rarely feels inexpensive at the time. Not maintaining it properly almost always proves far more expensive later.

It is another reminder that depreciation isn’t linear. The curve changes according to the yacht’s build yard, design, condition, age and position within its maintenance cycle.

An obvious fact: the price you pay determines your future depreciation

Perhaps the single most important factor of all is remarkably simple. What you pay in the first instance.

This is also one of the greatest frustrations I have with the brokerage market.

Unlike residential property or publicly traded shares, there is no comprehensive public register of sold prices for superyachts. As a result, asking prices and true market values can differ dramatically.

Owners understandably invite several brokerage houses to pitch for the sale of their yacht. Unfortunately (and we see it often) some brokers promise values that are simply unrealistic because winning the listing becomes more important than giving honest advice.

The result is that buyers often assume negotiating a large percentage off the asking price automatically represents a good deal. It really doesn’t.

I once represented a buyer interested in a yacht with an asking price of EUR 24.9 million. The yacht suited his requirements extremely well, but I advised him that the asking price bore little resemblance to fair market value.

His starting position was that he would happily pay EUR 19.9 million because psychologically paying less than EUR 20 million felt like a successful negotiation. Had he done so, he would almost certainly have congratulated himself on achieving a 20% discount.

Instead, I advised that we should make an offer of EUR 15 million, which he thought was too aggressive, but he was open to giving it a go.

The negotiations lasted around three months and we dug in. Eventually we bought the boat for… EUR 15 million. Five years later we sold her again. For essentially the same amount.

Had the owner purchased her at EUR 19.9 million, he would have suffered almost 25% depreciation, despite the market remaining relatively stable. Because he bought at the correct price in the first place, that depreciation was effectively eliminated. 

The easiest way to reduce future depreciation is to understand true market value before negotiations even begin. 

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Market Conditions Still Matter

No discussion about depreciation would be complete without acknowledging the wider market. Some events are simply beyond anyone’s control.

The financial crisis of 2008, the Covid pandemic and geopolitical events such as the conflict in Ukraine and more recently with Iran all created periods of uncertainty.

During the early stages of some of these events, buyers naturally became more cautious and forced sellers often had little choice but to accept substantial discounts.

Fortunately, one of the characteristics that has consistently impressed me over the last two decades is the resilience of the superyacht market. Every major downturn initially feels unprecedented. Yet time and again the market has recovered.

The strongest shipyards, brokers, designers and owners have adapted and continued.

That doesn’t remove short-term volatility though.

Conclusion

Most people do not buy a superyacht as a financial investment. They buy one because of the extraordinary experiences it creates with family and friends.

Some depreciation is simply part of enjoying one of life’s great luxuries and should be accepted as such.

Owners expect to pay for fuel, crew and maintenance, because those costs are part of expected yacht ownership and the amazing experiences that it in turn creates.

What owners understandably dislike is losing money unnecessarily because of avoidable mistakes made before they even bought the yacht.

Paying too much in the first instance. Selecting the wrong shipyard. Building the wrong specification. Ignoring maintenance. Simply put, making decisions today without considering tomorrow.

Those are all risks that can often be reduced through experience and informed advice.

That is why I believe depreciation deserves far more attention than it currently receives.

Not because it should discourage ownership. But because understanding it allows owners to make better decisions before those decisions become expensive.

It can be the biggest cost of yachting, but it doesn’t have to be.

And that brings me back to the one sentence that has shaped much of my advice to clients throughout my career.

“One day in the future, every yacht will be for sale.”