While the stock market continues to give investors a roller-coaster ride, the secondary market for luxury watches is ticking along quite nicely, drawing interest — and investment — from the wealthy.
Overall, the market for luxury assets such as art, collectible automobiles and watches is hot, with Knight Frank’s Luxury Investment Index growing 16% in 2022.
A recent survey by Knight Frank found that nearly half of wealthy investors plan to buy a luxury watch in 2023. The survey polled 500 family offices, private bankers and wealth advisers.
While fine art remains more susceptible to volatility and cyclical trends, secondhand luxury watches have outpaced other collectibles in the past decade as a better way to preserve value. Between 2018 and January 2023, average prices for secondhand models of Rolex, Patek Philippe and Audemars Piguet increased 20% annually, despite multiple events depressing global markets. During the same period, the S&P 500 index averaged 8% annually.
Prices and sales consistently eclipsed previous records in 2019 and 2020. And despite a dip in 2022, the highest price paid globally for a secondhand luxury watch in an online sale was achieved at Christie’s in Hong Kong last month: $5.8 million for a Patek Philippe Sky Moon Tourbillon.
Sotheby’s introduced weekly online watch auctions in 2019 — a year when private sales quadrupled in value and doubled in volume. The auction house called it “perhaps the most significant shift since the emergence of the collecting category in the 1980s.”
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FROM PASSION TO PROFIT
With some watches delivering total returns greater than 200%, longtime watch collectors are shifting priorities.
“Historically, it’s been about true passion and the fun of the chase and getting what you want,” said fintech entrepreneur Sid Vasili, who runs his family office from London. “Latterly, it’s been about returns and investment.”
Vasili bought his first Rolex 25 years ago to celebrate his business success. He’s one of a group of collectors who meet regularly at private members’ clubs and other discreet venues to admire millions of dollars of timepieces and discuss the market.
In late 2019, Vasili learned of manufacturer slowdowns and fulfillment problems. Using online charts to track prices globally, he could see the market was heating up.
“A Rolex that sells for $7,000 and then rises to $15,000 — it’s crazy,” he said. “I ordered six Rolexes, and I’ve ordered another three. I acquired them specifically for potential returns, and if I don’t move them on and they all end up as legacy pieces, that’s fine.”
Some family offices are taking their interest beyond just buying luxury watches as collectibles.
The family office of Kuok Meng Xiong, the grandson of Malaysian billionaire Robert Kuok, recently invested in Wristcheck, an online trading platform for pre-owned watches that recently opened a retail location at Hong Kong’s Landmark shopping mall — well-situated near a Louis Vuitton and Tiffany. Wristcheck CEO Austen Chu, who developed a huge following on Instagram with photos of his own watches, recently collaborated with Audemars Piguet on a titanium perpetual-calendar special edition for China.
WATCHES ON THE WEB
Product shortages have propelled the pre-owned market, which has also benefited from Chrono24 — the world’s leading platform for luxury-watch sales, with more than 2 billion euros (about $2.2 billion) in watches sold through the site. Analysts credit Chrono24 with connecting the global market and adding layers of transparency. Users can view current and previous price reports for different models and can choose an escrow option for payment.
Founder and co-CEO Tim Stracke started Chrono24 in 2002 and has seen a 25% to 35% increase in transactions in the past decade, with a significant acceleration since COVID.
“When COVID normalized, people were fearing inflation and the loss of stability,” Stracke said. “As stores reopened, people found empty shelves, so guess where they went? They went online. The global scarcity of desired watches fueled our growth.”
Like all asset classes, research is critical, Stracke said. Not all brands or models are equal.
“For me, it started with a fascination of the technology, and then I learned about the different brands, and then I learned that these are very stable assets,” Stracke said.
Just as important as tracking prices is staying on top of pop-culture trends. Stracke pointed to major sporting events such as the Australian Open, when Rafael Nadal won while wearing Audemars Piguet’s Royal Oak watch.
“That day was the all-time-highest traffic on our platform,” he said. “We had a customer who wanted the same model Nadal was wearing. We helped him find it.”
'IT DOESN’T WORK FOR ALL'
Both Stracke and Vasili warned that, like most collectibles, investing in watches only makes sense if there’s an interest or passion, not simply a desire for a potential return.
“In some instances, it doesn’t work for all,” Vasili said. “I don’t collect wine because I don’t understand it and I don’t drink, so it’s meaningless to me. If somebody wants to get into watch collecting, do your research; be very, very careful; and don’t be persuaded by the hype. Do it because you want to do it and you believe in it.”
While some reports suggest that the market could be softening, product shortages are set to continue for the next two to three years. So even if a pullback occurs in discretionary spending, analysts believe the market will stay buoyant for the long haul. And as Vasili pointed out, in the worst-case scenario, luxury watches — unlike fine art, cars or wine — are portable, durable, legacy assets. Said Sarah Willersdorf, the Boston Consulting Group’s global head of luxury, “The fact that luxury watches often hold their value over time helps justify the purchase.”