See the reality that will soon hit yacht buyers.

Most articles about value added tax on yachts concentrate on the rules that guide the application of the tax: for example where was the yacht on the 31st Dec 1992? Can you produce documentary proof that will satisfy Customs? These days this proof is becoming even more important as countries crack down on applying the rules and the stakes are higher due to larger sums being involved. Indeed this has already started to happen. Portugal, Greece and Spain have announced big increases to their VAT rates from 1st July 2010. Political pundits are betting that the UK will also resort to a VAT increase to help reduce its budget deficit.

What does this all have to do with owning a boat? From the 1st July 2010 buying a brand new boat becomes more expensive. The second hand yacht market is often the route to better value. But other market influences will also make themselves felt in the second hand market over the coming months. In the last three years a number of yacht production companies have gone bust and others have reduced production drastically to cope with the economic downturn. In other words the flow of new boats into the overall base of boats has been much reduced since the recession started. The VAT increase across many EU countries will further suppress the future supply of new boats.

Pricing is the mechanism by which supply and demand are kept in balance. The smart buyer will move right now. Yacht prices are unlikely to decrease further, indeed my contention is that over the coming months we will experience a tightening of the market. A second hand yacht bought this spring/summer is destined to hold its value and we will start to see price increases which we have not seen in the past three years.

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