General aviation seems to have evolved into a new “life form” on planet Earth. Gone are the days when private aircraft ownership was vilified. The inconveniences and health concerns of airline travel, combined with the wealth generated by the asset inflation, have driven demand for aircraft ownership to new heights. But scarce inventory has perpetuated fear of buyers being left behind, and the prices have responded accordingly. Will that same fear of missing out amongst sellers create a corresponding inflection point in pricing?
The narrative of buyer fear of missing out (FOMO) is well documented. However, emotions do not only drive the impulse to buy. The bubble has gotten so big that there may be a rivaling FOMO burning inside owners – TO SELL. With everyday goods in short supply (have you tried purchasing a car or truck lately?), it is no secret that anyone in possession of an airplane has an appreciated asset. It is not hard to see that the current market conditions are leading many to ponder “Are we there yet; has the aircraft market topped out?”
The demand side of the equation may answer this before the supply side can respond. After 22 months of rally, the S&P may have stalled, and the Fed has announced at least 3 interest rate hikes in ‘22. But even if demand remains strong, might more supply start to work its way into the marketplace due to owners’ fear of missing the top? While we ask that hypothetically, we believe some degree of that is happening already. So, what is our counsel?
The vast majority of you should ignore the noise. Hold. You’ve considered upgrading, but seeing the inflated market, stay put and cherish what you have. One caveat: if you are looking to make sizable investments into avionics, upgrades, and/or refurbs, consider how these upgrades typically depreciate over time. Be sure to account not only for the money, but also the opportunity cost (aka flying time) involved.
For those wanting to upgrade, do not focus on the soaring prices, but on the price delta between the two deals. Timing is an issue, of course. You prefer to not own two aircraft, or you can’t be without an aircraft. Concurrent or quickly-sequenced transactions will add a high level of complexity with associated pitfalls; consider the benefits of working with a broker like us who can handle both sides.
Those who have considered selling but have put it off due to the hassle or sentimental attachment, now is the time to sell. The market is better than ever to sell, and you have heard the prices that comparables have brought. It makes sense to cash-out before it’s too late. With no great substitute for an aviation “MLS,” a broker who is an expert in aircraft type will have fresh data to get you the top price in this rapidly changing marketplace; so, choose your representative wisely.
While no one knows exactly what ‘comes’ next, we have watched the aircraft marketplace with fascination and probably a little anticipation. We welcome your input on this and offer our help, if you’d like to enlist it.