on 26/03/19 09:00
A number of different factors determine whether a particular watch is investible and, as you’ll see, the more likely route to profitable watch investing may come from the pre-owned sector rather than buying a watch brand new. What are the things you need to know about making the decision to buy a watch to form part of your investment portfolio?
1. The brand
The maker of the watch matters more than you might imagine. While there are plenty of luxury watch manufacturers, only certain brands have the potential to show a return on investment later on.
Lloyd Amsdon, founder of pre-owned watch specialist, Watchfinder, in an interview with Men’s Health, said that “the lesser known a brand, the less likely its watches are to hold value. This is when buying a watch becomes a head versus heart issue – do you buy a watch that will hold its value well, or do you buy the watch you really want?”
The most collectible and investible brands have “legacy”, according to Mitrajit Bhattacharya of Ethos Watches. “You will not buy a 100,000 CHF watch without being sure that the manufacture will take care of its servicing 100 years down the line. No wonder marquee brands which exist for centuries fetch good prices for their top lines.”
Watch manufacturers which use deep discounting as part of their business model to boost both the top and bottom lines generally don’t produce collectible or investible pieces as a large part of any future resale value is based upon the original purchase price. If you’re purchasing a new watch for use and/ or for investment, be careful on the dealer you select to buy your watch from. The investible brand names are very selective about the retailers and partners they work with so try to select a dealer who has a relationship with the manufacturers which really matter. With watch retailers, “like will to like” and you’re unlikely to find anything worth collecting in an establishment offering no prestige marques.
According to Robert-Jan Broer of Watchtime, the American watch collector magazine, he’s often asked “What brands offer watches that tend to increase in value over time?”. His answer is “Rolex and Patek Philippe”.
Rolex is, most probably, the most famous watch brand in the world. British in origin however now firmly Swiss, the company is a regular entrant onto Forbes’ most powerful global brand lists. Of all the world’s luxury watch makers, it is the most productive with around 2,000 timepieces made every day. Another Swiss firm, Patek Phillipe & Co is worn by royalty around the world and the company is renowned for its complex mechanical arrangements and elegant styling.
In explaining his opinion, Mr Broer references the history of both Rolex and Patek Phillipe, the demand for both brands, the high level of brand recognition they enjoy, and their association with some of the most important historical and cultural icons of all time. Patek Phillipe collectors watches command higher new sale prices than Rolex and collectors value the brand’s “exclusivity”.
2. The model
In the same article, Mr Broer lists the specific models from Rolex, Patek Phillipe, and other luxury brands which are “most in demand”. He cites the Rolex Submariner or Daytona, Patek Philippe Calatrava or Nautilus, Omega Speedmaster, Breitling Navitimer, Panerai Luminor Marina, TAG Heuer Carrera, and Audemars Piguet Royal Oak – “what a watch enthusiast would call the usual suspects”.
Paul Altieri, CEO of pre-owned and vintage Rolex dealer Bob’s Watches, agrees, in an interview he gave to Time Money magazine. “Along with Patek Philippe, (Rolex is) the only brand that is able to maintain the high resale value with the majority of its products”.
Virtually all of Bob’s Watches’ entire business model is centred around Rolex. “(Rolex have) held their value the best. 90% of what Bob’s Watches does is Rolex. They dominate the new market and the old market... The watches that have done the best over time have been the sport watches: The GMT, the Submariner, and the Daytona”. He however concedes that there is no guarantee that any of the models he mentions will either keep or increase their value over time. Why’s that? Because of the way that the price of luxury watches, even the most in-demand models, changes over the decades following purchase.
3. Association with celebrities
The most valuable watches have the most interesting history behind them. If a watch can be traced back to a famous previous owner – particularly a film star, a very senior and influential politician, an A-grade sports star whose legendary status is assured, or an historical figures – you can expect to pay a significant premium on the watch over an identical model from the same year without a notable association.
4. Price curve of watches
The Chronocentric website, on their “Buyer Guide To Fine Wristwatches” article, states that “anytime you buy a watch or car new, the value immediately drops. For fine wristwatches, many can be resold for only 40% to 80% of what you will pay for them from a new watch dealer.”
If you’re collecting watches more as an investment to produce a return than something you use to tell the time and something you enjoy the experience of wearing, the pre-owned market might offer greater opportunities for return. It depends on the watch but price depreciation generally stalls between 20 and 30 years after the original purchase. It’s at that point the price may begin to rise but this outcome is far from guaranteed.
The original owner will have had to put up the depreciating price of the watch compounded by the effects of inflation. By buying a watch for investment at the right point of the price curve, there is a chance that, if you have selected the right watch, that the price will appreciate at a rate above inflation.
5. The high level of craftsmanship – quartz vs mechanical
Luxury watches have either a quartz movement or a mechanical movement mechanism.
Quartz watches are powered by a battery and they have fewer moving parts than a mechanical watch. The second hand on a quartz moves every second rather in the sweeping and smooth motion which characterises mechanical watches.
Mechanical watches are much more prized by investors and collectors because of the quality
and precision of the craftsmanship involved in the build. Mechanical watches loses about a minute every year so, for something that is not powered by electricity and that relies on essentially the same technology that was used centuries ago, they keep time incredibly well.
When a manufacturer produces a quartz and a mechanical version of the same watch, there is normally a slight premium for the mechanical version. However, once both watches have gone through their periods of depreciation as we mentioned in the “price curve of watches” section a little earlier, for a short time, the original purchaser of a quartz watch may actually lose less on his or her investment than the original purchaser of the mechanical version of the same watch.
6. Special or limited editions
Watch models whose brand has lived on and become more desirable well past the final date of production are often rereleased in special anniversary editions. In 1957, Omega released the Railmaster, Speedmaster and Seamaster 300 watches – all highly regarded by watch collectors (although not necessarily investors).
In 2017, all three were rereleased with special packaging and in very limited quantities. Often, these anniversary releases are given unique production run numbers. A well-preserved
special or limited edition goes through the same price curve as standard watches however, on
the releases that capture the imagination and enthusiasm of collectors, the depreciation period may not last as long as with other standard edition watches and the eventual price appreciation may be steeper.
If thousands of a special or limited edition were released, it’s probably better not to buy it for investment purposes.
7. A watch’s history
The most valuable watches have the most interesting history behind them. If a watch can be traced back to a famous previous owner – particularly film stars, very senior and influential politicians, A-grade sports stars whose legendary status is assured, or historical figures – expect to pay a significant premium on the watch over an identical model from the same year without a notable association.
8. An active warranty
Particularly on the higher-end watches, an active warranty will add to the resale value of a piece if you can transfer the factory warranty or a dealer warranty to your buyer.
9. Original presentation and packaging
A slight premium can be sought if a watch is sold with its original packaging and presentation.
10. Noteworthy serial number
According to Chronocentric, an interesting serial number may have a small influence on the resale value of a watch. Investors should look out for “even numbers; numbers with interesting patterns; numbers that relate to beginning, end or year changeover in production; or hidden meanings”. Missing or removed serial numbers reduce the value of a watch, sometimes greatly. Grey market luxury watch dealers will often scratch off the serial numbers and many manufacturers have responded by saying that they will not, under any circumstances, honour any warranty.
11. Condition of the watch
The condition of the watch has an impact on the resale value of any investment. Watches will be graded as “unworn”, “mint”, “fine”, “fair”, or “poor”. Before taking it to market, dealers and watchmakers will offer a repair and a restoration service to you. Whether it is worth it or not will depend on if the premium you get when you sell a repaired and restored watch is greater than the price you paid for it to undergo that treatment.
In our next article we will discover that there are three other main factors to consider when investing in watches.
There is a multitude of new and exciting ways to invest your money today. Here at Planet of finance we keep track of the most relevant developments to signal them for you. We are the ultimate meeting place to discover, connect and learn about the latest topics relating to your financial wealth.
Read more of our ebook on Passion Investing!