Luxury Watches – Consumption + Investment

Luxury watches have long been seen as a status symbol and were purchased for their aesthetic appeal. Now, they are gaining popularity among the wealthy as collectibles and as investments. According to Knight Frank's latest The Wealth Report, the Luxury Investment Index was down 1% per cent in 2023 from the previous year. However, the value of watches, art, and jewellery all rose and helped contain the decline in the index.

Unlike other status symbols such as luxury cars, watches are more profitable investments as their value does not reduce due to their usage. They can be worn and still be sold for a higher price, ensuring that not only can you enjoy their benefits as a luxury but also make a profit on their sale.     
 

Benefits of investing in luxury watches

Luxury watches can result in massive gains from the appreciation of its market value. According to the aforementioned Knight Frank report, the value of luxury watches rose 5 per cent in 2023. This rate of return is higher than that on savings accounts offered by most Indian banks.     
But what about safety of your investment? Remarkably, since the 1970s, the price of a stainless-steel Rolex has never depreciated, according to industry experts.     
 

Another huge advantage a watch has over other luxury items is that its value is not fully linked to instability in stock markets and economic downturns in general. Consider the Covid pandemic, with 2022 seeing the value of luxury watches fall by just 8 per cent even as the S&P 500 fell by 19 per cent.     
 

Luxury watches are also relatively liquid, in that they can be sold fairly quickly. This is largely due to huge demand and low availability of them. As such, their high liquidity means they can be converted into cash quickly in times of need.     
 

What determines the price of a luxury watch?

1) Scarcity :

Like all luxury investments, the value of a watch is a function of its supply. For instance, a limited edition Patek Philippe watch would take as long as eight years to make with premium materials. As a result, it is invariably in high demand on the secondary market given its rare nature. And when demand far outstrips the supply, the price can often be sky-high.

The reason luxury watches can fetch an exorbitant amount is due to the slow rate of production. A single Rolex watch requires 500 hours to make and some specific models have a six-year waiting list purchased directly from the brand. This huge waiting list is the result of multiple factors, including buyers anticipating a rise in the value of the watch in the coming years.

Frustrated customers have also theorised that luxury watch manufacturers may also be deliberately keeping supply low to ensure prices remain high. However, Rolex has denied being an advocate of such a tactic.

"The scarcity of our products is not a strategy on our part,” Rolex told Yahoo Finance in 2021. “Our current production cannot meet the existing demand in an exhaustive way, at least not without reducing the quality of our watches – something we refuse to do as the quality of our products must never be compromised,” Rolex added.

2) Authenticity :

Beware of counterfeits. Due to the low supply of these luxury watches and the high demand, unscrupulous elements will always exist to take advantage of the mismatch. As such, ensuring only an authentic piece is purchased can be a time-consuming and costly affair, including costs related to authenticating a previously owned time-piece that may not have its original paperwork.

3) Brand :

Compromising on quality usually never works. A luxury watch from an unknown brand may be available far quicker and at a lower price, but there would be a reason for that – lack of demand for it. And for luxury watches, price appreciation is a function of rising demand. Top brands such as Rolex, Patek Philippe, Audemars Piguet, and Omega can be resold at huge profits; independent manufacturers like Philippe Dufour and FP Journe are also safe bets.

4) Exclusive Features :

Some luxury watches come with their own exclusive features, which add considerably to their value. Some watches are provided with split-second timers, perpetual calendars, and ultra-flat faces. Most of these watches are made of different materials, such as stainless steel or titanium, adding to their durability. Then there are more luxury features, such as the Cartier Libre which comes with 735 diamonds as well as sapphires, and corals, among other precious stones. The price? A cool $300,000.

5) Age and Condition :

When it comes to luxury watches, second-hand ones can also fetch an excellent price and be of immense value due to their vintage nature. The Rolex Daytona from 1968, for instance, can go for a whopping $300,000 at auction houses. And when certain makes have links to celebrities, the prices can go through the roof. In 2017, the Rolex Daytona once owned by American actor Paul Newman was auctioned for an eye-watering $17.75 million, becoming the most expensive watch ever sold.

But before investing in luxury watches, extensive research is a must. It is not easy to foresee how the segment will perform in the future. So, keeping track of the value of pieces on the market or those you own is critical. Consult a reputed dealer to double-check when it comes to the authenticity of a time-piece and avoid getting duped into buying a counterfeit, a poorly serviced second-hand, or even stolen items.