Investing in Luxury Watches
If Patek Philippe is to be believed, a luxury watch is never owned, merely looked after. But then Patek, which is one of the only brands in the world that consistently proves to be a solid investment (in financial terms anyway), can afford to be smug. You really do look after a Patek for the next generation. Or the auction house. Other brands (unless they’re Rolex, which has excellent resale value): not so much.
So the first thing to know, going into a conversation about luxury watch investment, is this: you need to be clear on exactly what kind of investment you’re making. Emotional? Stylistic? Or financial? I’m assuming as a luxury watch nerd you’re probably interested in all three. My advice is to do your homework, and to spend plenty of time researching, learning, and loving luxury watches. You can start right here, with some pointers to get you thinking. I’ll begin with the most important question of all: passion, or hard-headed monetary investment?
Buy with the head, not the heart
All collectors are defined by love. That’s as true of luxury watch nerds as it is of stamp collectors, butterfly collectors—you name it, if someone’s interested enough to collect something they have a relationship with the object that goes beyond mere liking.
So far, so good. But an emotional luxury watch purchase is no guarantee of financial return. In fact no luxury watch purchase guarantees a financial return, with the possible exception of uber-famous grail pieces like the Paul Newman Daytonaor a Patek Philippe Perpetual Calendar Chronograph. So your first decision is crucial, because here you’ll be choosing between an investment for your own pleasure, and an investment to enlarge your bank account.
The bottom line: emotional purchases cost you money. Rational purchases increase your money. It’s up to you to decide which type of buyer you are.
Research is king
Whether you’re buying a luxury watch to sell or to own, research is everything. Immerse yourself in detail: about the history of your luxury watch, the variants available, the options open to you. It might be a whole brand lineup you’re interested in, or a single watch: either way, the information is out there. There are Rolex forums, Omega forums, Patek Philippe forums—in fact, there’s a forum for just about any highly-regarded luxe watch brand you can think of. Get on them, get to know the people who post there, and gather as much information as you can on your area of interest. The more you know, the better the chances of buying a watch that really answers your criteria.
If you’re interested in a specific model, all information is critical. Like the fact that, while Rolex printed COSC-certified dials for some no-date Subs in 2010, but not for others, the theoretical difference in accuracy is not a deal-breaker for Rolex collectors. Some want the COSC dial for the authentication of accuracy: others prefer the non-COSC dial because it looks cleaner.
If an individual brand hasn’t caught your attention, then you may be looking for luxury watches that embody certain characteristics. Watches that have the core ‘virtues’ of mechanical excellence. And if you’re buying for investment, you should be focused on the virtues that are most popular with collectors. By this I mean the tried-and-tested models, which you know will hold their popularity for long periods of time. The Speedmasters. The Royal Oaks. The Nautiluses. Blend a knowledge of enduring grail pieces and classics with an understanding of which edition to buy (see Limited editions and ‘best versions’, below), and your chances of growing your investment will increase.
Know your budget
Luxury watches come in all shapes, sizes—and price tags. You could drop multiple millions on a Richard Mille or a Jacob & Co. Or you can spend between £3k and £12k on a Tudor, a Rolex, an Omega, a Patek Philippe. On average, ‘true’ luxury watches (i.e. those that will generate nods of approval from people who love watches) start at the £2k mark, and from £4-5k onwards you can score a standard model from any of the big brands.
Pre-owned luxury watches are slightly cheaper, which allows you to get in the game at a technically higher price point: though the actual value of the piece, of course, is diminished from its original retail price. Research is even more crucial when buying a pre-owned piece, both to attest to the trustworthiness of the source from which you buy, and to assure that the watch you’re buying is what it says it is.
Antique watches and auction value
Some luxury watch brands seem to hold much higher auction values than others: Patek Philippe, as noted, is the all-time champ. Of the 10 most expensive watches ever sold at auction (at time of writing in 2016), nine were Patek Philippes. Certain historic models also fetch prices well over either their original retail price or their ‘standard’ auction value: these tend to be luxury watches with star association, or models that have developed a huge cult following.
Of the cult models, none is more famous (or valuable) than the Rolex ‘Paul Newman’ Daytona. Manufactured between the mid-1960s and the mid-1970s, these non-standard-dial Rolexes are the stuff of legend. If you happen to find a verifiable black-dial 6263 Daytona in your nan’s attic, you’re looking at more than a million bucks’ worth of auction value.
Another all-time star is the Patek Philippe Perpetual Calendar Chronograph, ref 2499 in platinum. Only two of these luxury watches were ever produced: one, sold at auction in 2012 for over three million dollars, used to belong to Eric Clapton.
In general, though, antique luxury watches are no guarantee of big auction sales. Which brings me to a different kind of investment: new and recent luxury watch models, for sale on the pre-owned market.
Limited editions and ‘best versions’
Modern luxury watch brands are not run by foolish people. They’re helmed by clever individuals who understand the personality and desires of their audience. And one of the key ways in which they generate revenue is by releasing limited-edition runs of legendary watches.
Take Hublot. A Big Bang is a Big Bang. But what if you’re a Formula One fan as well as a Hublot fan, or a fan of a particular football team? Limited-run Big Bangs, like the Hublot Big Bang Red Devil Bang or the King Power Big Bang F1, are rare enough to command a market: and common enough to mean there’s always one around for a smart investor to pick up. While there are only a few editions of each piece, Hublot as a brand always has a couple of special-run Big Bangs in its current catalogue. You might have to go to a specific boutique to get one, or keep your eyes on the mint-pre-owned market, but they’re out there.
Richard Mille is a master of the art of limited editions. Like the legendary RM056 Tourbillon Chronograph Sapphire Felipe Massa. In its original run, this luxury watch was limited to just five timepieces. 10 years later, Richard Mille created 10 more. If you’re lucky enough to get your hands on one, you can be fairly sure it will increase in value as collectors hunt them down.
And then you’ve got the ‘old model vs new model’ effect. Sometimes, a luxury watch brand will release an updated model of a much-loved watch, which infuriates the true-blue brand aficionado. Or which corrects a perceived error in the old design. Either way, the move can create an investment market. When brands unveil new versions of old watches and are seen to get it wrong, the discontinued watch may become highly sought-after. When brands make old watches better, the phased-out model sometimes gets a price cut: just the thing if you’re looking to enter the luxury watch world with a budget lower than the retail or resale value of the watch in question.
This happened with the Rolex Explorer I, which got a re-release in Rolex reference 214270. The new Explorer I had an increased case size (by 3 mm), but kept the old Explorer hands. When Rolex rectified the situation with the release of 2016’s 214270, pre-2016 models with short hands were the subject of much discussion. Would the price go down, short term—and in the long term, would it increase as the ‘short hand model’ became a collector’s item? In actual fact, and as pointed out on many a Rolex buyer’s forum, price fluctuations for regular production models are impossible to predict. It’s possible that ‘shorty’ Explorer I models will attract collector’s premium prices, just as the Paul Newman Daytona, an odd-looking beast that everyone hated when it was released, suddenly became valuable in later years.
Overall, pre-owned modern watches hold value because of what they are, and the condition in which they are found. And the value is always, ultimately, with the buyer. Will a buyer pay slightly less for a mint condition pre-owned watch that is still available, brand-new, from the official dealer? Probably. Will a buyer pay more for a discontinued luxury watch in mint condition that is now seen to be the preferred version of a specific piece? Almost certainly, if they’re an avid watch collector. If, on the other hand, their interest in luxury watches begins and ends with the brand (rather than a multitude of geeky reasons for preferring, say, a Patek Philippe 5270G-001 to a 5270G-018), a buyer may only be interested in scoring a big name for a smaller price. And that’s why you have to buy clever if you want to make money from luxury watches. Buy the limited runs that will always appeal to collectors, and you stand a much higher chance of scoring a return on your original outlay.
Buy it to wear it: then sell in three years
Super-valuable luxury watches may never leave the watch safe, or the bank vault in which they are kept. But where’s the fun in that? A watch is made to be worn. Its fascination lies in its visibility. After all, what’s the point in owning a Patek Philippe, or an Audemars Piguet, if people don’t know you’ve got it?
They say you can spot a Rolex from 100 metres away. The Oyster case shape is so ingrained in the culture of the watch lover that it’s unmistakeable. The same is true of a Royal Oak, a Big Bang, a Nautilus. We buy these objects either because we love them, or because other people do. And a big part of that love comes from the genuine pleasure of wearing them. The weight, the vibration of the movement on your wrist: or just the thrill of the impeccable design.
There’s a time limit on luxury watch ownership, if you’re in the market to make money. The sweet spot for resale is around three–five years. Longer than this, and you may not realise the best value when selling on.
Wearing a luxury watch, of course, puts it in harm’s way. The knock on the desk edge. The splash of water. That’s why choosing the right piece for your lifestyle, and the lifestyle of prospective buyers, is so important. Got a hurried city lifestyle with plenty of knockabout commuting on packed tube trains? An ultra-delicate Jaeger-LeCoultre is probably not for you. Spend your weekends in the great outdoors? Pick something that can take the environment: an Audemars Piguet Royal Oak Offshore, for example, or a Tudor Black Bay
Look after it
Sounds obvious, right? But what, actually, does looking after a luxury watch entail? Well, whether you’re buying it to wear forever, or to sell on at some point in the future, a proper care regime is important. Number one on the list: servicing. Regular servicing is key. A standard (i.e. non-sports) luxury watch generally needs servicing at two-year intervals. A tougher model that gets tougher treatment should be looked at more regularly: I recommend once per year.
You may be tempted to polish your luxury watch, to preserve that just-bought shine. Don’t. Polishing is the curse of the fine watch case. Under the magnification of a loupe, it’s possible to see the damage done by over-zealous polishing: tiny hair-like scratches, gradual deterioration of lugs and sharp edges. When you come to sell your timepiece, you’ll find that evidence of polishing decreases the value.
Be careful with water. If your watch has a low water-resistance figure it may be unwise to take it swimming. It’s definitely unwise to do so if it’s on a leather strap.
Look after your investment, and it will last you a lifetime. Perhaps even longer. And then, even if it isn’t a Patek Philippe, you can still pass it down to future generations.
