2022 has seen a lot of movement in the luxury watch market. Movements that even the most knowledgeable experts couldn’t predict. We’ve seen brands like Rolex, Audemars Piguet and Patek Philippe rise in price dramatically over the last two years due to the economic boom, and while experts expected this to slow down, the market had other ideas. And, although the market as a whole can be considered down right now, prices remain high among some brands which are still performing and holding value well.
Stay in the loop with Trilogy Jewellers - here’s what’s happening in the luxury watch market, and why.
Rocketing prices at the start of 2022
The beginning of this year saw more rocketing prices in the market than we at Trilogy had ever seen before. Without much logic or reason, some models were climbing by as much as $5000-$10,000 per week, with no signs of slowing down!
Of course, this was unsustainable; it couldn’t continue forever. Market trends were exploding, and it was at the same time harmful and beneficial to the watch industry.
Price corrections right now
What goes up must come down. Right now, we’re seeing price corrections take place as the prices of many models are coming down to match the market. Luckily, the corrections aren’t as steep or rapid as the earlier growth was, and we’re seeing this as a good sign for the future of the market.
Take a look at why the beginning of 2022 was crazy in terms of growth, and why the market is now correcting itself.
Reasons for the growth earlier this year
- An increase in market demand
Despite financial concerns and a general pessimism towards consumer spending in the majority of areas, it seems that Swiss watches aren’t up against the same fate just yet. Demand continues to outrun supply, and Watches of Switzerland’s sales are expected to rise by a fifth this year.
Chief executive Brian Duffy said the company was “mindful” of today’s unsettled economic environment, but put the sales boost down to the fact that the “higher-income demographic is less affected by the cost of living pressures but more conscious of asset valuations”.
In 2021, Swiss watch exports achieved an all-time high of almost £18 billion, as reported by the Federation of the Swiss Watch Industry. Despite this, the waiting lists for Rolex, Patek Philippe and Audemars Piguet are spanning for years.
The fact that collectors and wearers can’t get their hands on the pieces they want is only driving up the prices even more.
2. Consumer preference for premium
Consumers want premium, high-quality products. According to The Business Research Company's Luxury Watch Global Market Report 2022, that’s why the market continues to grow - and why luxury watch costs aren’t dropping anytime soon.
2021 broke the record for the Swiss watch market, with the all-out trade worth ringing in at CHF 22.3 billion (around £19.2 billion). For context, the previous record was CHF 22.25 billion. Also in 2021, Western Europe was marked as the largest region in the market.
The desire for premium is driving the industry forward, along with more adults choosing to wear luxury watches as a social statement.
3. The market was being manipulated
The watch market is at the mercy of manufacturers, major dealers, collectors and auction houses. There’s no “industry watchdog”; it can be manipulated and can change course unexpectedly.
The exclusivity of the ultra-luxury market - and the rarity of certain men’s pieces - attracts collectors and investors as well as those wearing watches to demonstrate their wealth (usually via Instagram). Men’s watches are a robust investment and as more wealthy individuals enter the market, prices continue to soar.
The constantly rising prices at the beginning of the year instilled a lot of confidence in the market. As a result, we saw the everyday consumer speculating on watch prices and their speedy rise which pushed demand forward and further fuelled a growth in prices.
Why the market is heading back down
- Lockdowns disrupting supply & buy
Almost every market has felt the effects of COVID - and the luxury watch space is no different. Switzerland is home to over half of the globe’s high-end watch suppliers and the economy took a beating back in 2020 when global watch businesses reported revenue declines of up to 30%.
Another big reason for the decline in the market is lockdowns in China. China is the world’s largest market by population and by spend in the luxury sector, and when Beijing and Shanghai went into lockdown back in April, global businesses and markets felt the effects. This meant supply rose as demand and sales fell. With China now lifting their lockdowns, we can expect this impact to dwindle.
It makes sense to mention here that the sector didn’t come to a complete stop during lockdown - many turned to online watch buying when traditional selling avenues like watch shows and retail stores were crippled.
2. The macroeconomic impact of the European war
The ongoing war in Europe has had a macroeconomic impact. It’s affected confidence in the global economy, and since wealthy Russians have had their assets frozen, there has been an even bigger drop in the potential market for luxury goods.
3. The cost of living crisis
As everyone knows, we’re in the midst of a cost-of-living crisis. Inflation is high, energy bills are rising, and naturally, this forces consumers to tighten their purse strings. That means luxury purchases are taking a backseat for a while.
4. Crypto has crashed (and it’s affecting luxury watches)
Few people expected the crypto crash. Especially not those that invested generously in crypto over the last couple of years. What wedefinitelycouldn’t have expected was how the crypto crash affected the luxury watch market, with dropping Bitcoin prices having potential links to rising watch tags.
But why? Many people that bought cryptocurrency along with Rolexes, Patek Philippes and APs may be selling their watches to claw back some of the money they lost in the crash. This added supply may have dropped prices on some watches.
Is it worth investing in the luxury watch market right now? Let’s examine it brand-by-brand
In the short term, we see the price of some brands dropping off a bit. That said, the rising prices during early 2022 were good and we believe they’ll rise again.
In our opinion, the best time to invest is when the market is low. As people free up capital by selling assets, there are some bargains out there. While consumer confidence in the market and economy is low, consider buying - not selling - your next luxury watch during this period.
Despite movements in the market, there are some brands in the luxury men’s watch space that we can generally count on to hold their value.
It’s been said that “nothing is more liquid than a Rolex watch”. These iconic pieces have risen in value dramatically over the last few years. We’re talking 300-500% increases in vintage Rolex models.
Let’s examine the famous Day-Date. Prices for this brand’s anniversary watch - complete with olive dial - shifted from £20,000 in 2019 all the way to £75-80,0000 for the non-diamond piece at the start of this year. It’s now back down to £60,000. This is still considerable growth but a sensible correction compared to the hike at the beginning of 2022.
The windows of authorised Rolex dealers are generally looking empty nowadays, and if you’re in the market for one, you can expect to pay a premium. But it’s a premium worth forking out for. Industry experts don’t seeRolex watches dropping in value - they’re positioned as a durable investment that can withstand turbulent conditions.
Patek Philippe watches have changed identity, from an unachievable status symbol reserved only for the wealthiest, to a popular culture icon. The Nautilus and the Aquanaut, in particular, have become objects of obsession of late.
If history is anything to go by, Patek Philippes do more than just hold their value; they increase in price. Take the Nautilus 5712/1A-001. It originally RRP’d at £34,610 in 2009 and has since tripled in value.
The 5990 has grown on a whole other level. Five years ago, this watch was £40,000. Earlier this year, it jumped to almost £300,000. Today it’s dropped back down to just below £200,000 - but we’re still talking a 500% ROI in five years.
Audemars Piguet is not just iconic in the tennis and Formula One communities, it’s adored by the wider luxury watch industry. This is partly because of its rarity - AP produces fewer watches than Rolex or Patek Philippe and prices continue to surge.
In fact, in terms of the brands delivering high-yielding investments, Audemars Piguet comes in second place after Patek Philippe. AP yielded an average of 158% over the last five years.
Make the right decision
Stay on top of movements in the luxury watch space. Investors and collectors can reach out to Trilogy Jewellers for access to premium, rare watches from brands that hold their value over time. We’d be happy to provide advice and to source those watches you’ve been struggling to get your hands on.
Call 0203 9298227 or visit us in Hatton Garden, London.
Please note: This article is for informational purposes only and should not be construed as investment advice. Please conduct your own research before making any investments.
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