Richard Draper
June 1, 2021

Investing in Luxury Watches Explained


Despite the emergence of smart watches, to many watch enthusiasts, nothing compares to the mechanical elegance and craftsmanship of a ‘timepiece’ like a Patek Philippe. While you might be familiar with watch collecting, did you know many people buy watches as an investment? 

The watch market is booming. If you have ever wondered if a watch would make a good investment, how to spot a fake or what the difference is between a normal watch and an ‘investment grade timepiece’ then this is the article for you.

Watch market overview:

The global luxury watch market is currently valued at over USD 7bn and has grown over 10x during the past decade thanks, in part, due to watches increasingly being worn as a status symbol and the growing influence of social media. Switzerland remains the undisputed leader, producing over 95% of all luxury watches selling for over USD 10,000.

It’s not just new watches that are in hot demand though. The secondary market is estimated to be worth over USD 5bn in annual sales and has seen huge growth in recent years with platforms such as StockX and Chrono24 making it easier than ever to buy watches online. 

This growing secondary market has caught the attention of traditional brands looking to operate in the secondary market too. A notable example of this includes Richemont’s acquisition of Watchfinder in 2018. This type of vertical integration enables a more closed ecosystem to facilitate additional value capture and revenue stream diversification, for example, by offering trade-in programs. 

Now you have a rough idea of how big the watch market is, let’s explore why and how you can invest in the market. 

Why invest in watches?

Many people turn to tangible assets as a store of wealth in a crisis, and as a way to diversify their portfolio. Beyond just a steady store of value though, some watches such as the Patek Philippe Nautilus or Audemars Piguet Royal Oak have produced impressive returns over the past few years, as you can see from the charts below.

Patek Philippe Nautilus estimated value, source: Chrono24


Audemars Piguet Royal Oak estimated value, source: Chrono24


As with any investment, specialist knowledge is often required. Let’s start by looking at the difference between a standard ‘watch’ and what an investor/collector would consider as a ‘Timepiece’.


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Regular watches vs timepieces:

According to the watch trading academy, the key differences include:



So what makes a ‘timepiece’ sought after and give it the potential to appreciate in value?


Key attributes that define the rarity and value of a timepiece:


Although all the factors above play a role in the value of a timepiece, rarity is a key driver of collector demand. Watches that have been discontinued or that are inherently limited in supply (e.g. special editions) have seen strong interest from collectors. Speculation on watch forums or from industry commentators such as Watch Newsletter as to whether a watch will soon be discontinued, for example, can often move secondary market prices.  

Passion for a complicated movement also plays an important role at the most exclusive end of the market, take for example, Jacob & Co’s Astronomia Collection. 

For any digital watch fans, one brand looking to bring scarcity and authenticity to smart watches using NFTs is Watch Skins.


Notable brands:

Only the most exclusive or renowned brands are usually considered for investment purposes. The top three brands favoured by collectors and investors, include;


And to a lesser extent;


How to invest in timepieces

You could just go out and buy shares in a listed Luxury goods company such as Swatch, Richemont or LVMH to gain exposure to the asset class, however, unlike the majority of Luxury brands some of the biggest and most desirable names in the watch industry are still private companies. Based on data in the chart below from LuxeConsult and Morgan Stanley you can see that in 2019 the top four private companies Rolex, Patek Philippe, Audemars Piguet and Richard Mille had a combined market share of 35%



Buying a watch directly from the supplier can, however, be very difficult. Supply is often very restricted and buyers are normally faced with a long waiting time of up to several years. 


Some dealers also won’t allocate the best stock to new clients, preferring instead to offer their long-standing or wealthiest clients stock first. It’s certainly not impossible to purchase a new Rolex Daytona for example, but you will likely have to wait. If you can’t wait or would rather buy a second-hand modern or vintage watch, then there are an increasing number of options available.


Auction houses

Traditionally some of the finest timepieces such as the 2019 sale of a Patek Philippe Grandmaster Chime which sold for USD 31m, have sold at world leading auction houses like Sotheby’s or Christie’s.

The COVID-19 pandemic, forced this often antiquated industry into the 21st century with sales activity online accelerating dramatically. Improvements in technology and willingness of buyers to use digital platforms has no-doubt improved liquidity and transparency in the market, as with many other collectibles. Online watch auctions are now ‘mainstream’ which will likely increase confidence and pricing transparency.


Online marketplaces 

If you don’t have the budget to shop online at Sotherby’s then there are a number of other reputable online marketplaces offering a range of timepieces, such as;



Fractional ownership 

If you are not sure where to start or don’t have the budget for an entry level collector’s timepiece that might set you back over USD 10,000, then you could consider fractional ownership. Koia, breaks collectibles down into digital fractions enabling anyone to invest in a curated selection of exquisite assets starting with as little as £50.

Counterfeits

When purchasing a watch, it pays to only buy one from a reputable source. Believe it or not, it is estimated that there are over 40 million fake swiss watches produced each year.


Top tips for avoiding a counterfeit purchase:



Market Outlook

The value of investment-grade timepieces has grown significantly over the past 5 years, however, the trends fueling this growth remain in place for now. A move to digital sales channels combined with strong exposure via social media has increased accessibility and demand for the most exquisite timepieces. This trend is expected to continue as younger collectors enter the market and aspire to own unique timepieces. From a geographical perspective, Asis represents the fastest growing market and women's watches are also expected to be increasingly in demand. 


Conclusion 

The watch market is an exciting and rapidly growing segment within the alternative asset investment world. Collectors focus on a handful of criteria when selecting a watch including; the quality of material, craftsmanship, brand equity, provenance & scarcity. It is important to distinguish between a ‘watch’ and a ‘timepiece’ for investment purposes and to be extremely careful when acquiring a new item. Many collectors have started to be excluded from the market due to some of the significant price rises seen over the past few years. Koia sees fractional ownership as a way to allow anyone to access the benefits of alternative assets, such as watches.  


At Koia, we allow you to start investing in tangible assets for as little as €50, via fractional investing. Our experts make sure to source and buy the best assets, and we take care of authentication, storage and insurance. All of the benefits, with none of the hassle.

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The articles and information made available on Koia are provided for information and educational purposes only and do not constitute financial advice. You are advised to consult with an independent financial advisor for advice on your specific circumstances.