Leveling Luxury: The High End Watch Market

Ryan Heshmati

October 14, 2022

Introduction

The Patek Phillipe Nautilus is an iconic Swiss timepiece from an iconic Swiss brand. In January of 2021, the watch was fetching around $90,000, according to WatchCharts.com. By March of 2022, however, its value skyrocketed to nearly $200,000. Over the last two years, the prices for luxury watches from companies like Patek Philippe and Rolex have risen dramatically. During this time, purchasing these timepieces became a near-impossible task from authorized dealers, leading buyers to pay massive markups on the secondary market. After seeing this runup, prices for luxury watches have declined substantially, and that same Nautilus is quoted as down $30,000 in value from the peak in March. 

Market Mania:

Supply chain issues and a host of other challenges limited production capabilities to the point where manufacturers were failing to produce fast enough. As a result, a booming secondary market formed. The market saw rapid price increases, and due to high levels of appreciation, reports, like the one released by Bob’s Watches, an online watch dealer, and highlighted by the New York Times, compared Rolex watches to traditional asset classes like stocks and real estate. Paul Altieri, the founder of Bob's Watches, pointed out his amazement at Rolex watches topping the ranks as the best asset class within the report. Demand for luxury watches as an investment may have also played a key role in their significant appreciation.

What Goes Up Must Come Down:

After a series of month-over-month increases, prices are now moving in the negative. Jeffries analyst Kathryn Parker believes demand for watches has not faltered, however, and feels increases in supply are really to blame for the fall. Bloomberg notes that the increase in supply of Rolexes in the months of June, July, and August caused Rolex prices to fall 5.9%, 3.5%, and 5.1%, respectively. For those who purchased these pieces as collectors, this drop may only be annoying, but to investors, this is devastating for an asset class that was ranked number one not too long ago.

Summary:

Luxury watches enjoyed impressive returns for a couple of years, but the party is over. Losses, while less problematic for those who held through the good years, are particularly stressful for many new entrants. Rolex notably has a long history of comfortable annual returns, but it is worth noting that these returns are eaten into with maintenance costs. Whether the bottom is in sight remains to be seen, and some might be inclined to stop the bleeding while others may feel it is an opportunity to add to collections.