Watch your money grow
Buying the right timepiece can pay off quickly
Peter McGarrity
SCMP Jan 09, 2011
Buying a new watch is in many ways similar to buying a new car – a premium is paid for the latest models and once you take it out of the dealer’s showroom its value will likely drop by around 30 per cent.
However, in certain circumstances it is possible to make money from buying watches. At the top end of the market, it is easier simply because you can buy more exquisite pieces, the supply of which is strictly limited by the manufacturer.
For example, at a recent Sotheby’s auction in Hong Kong a 2009 Patek Philippe diamond and platinum perpetual calendar sold for HK$2.1 million, handing the owner a healthy HK$500,000 profit on the purchase price in under a year.
Now before you rush out and buy an expensive watch – and try to justify the purchase to your spouse as a wise investment – there are certain factors to consider. In the middle range of the market (HK$40,000 to HK$100,000) it is considerably more difficult to make money from your collection.
Vanessa Herrera, head of the watch department at Sotheby’s Hong Kong, said: “If you want to buy a watch as an investment in this sector of the market, you should focus on brands that have an established history and are able to tie in their newer pieces to that history, creating a narrative that purchasers can relate to.”
Certain brands such as Patek Philippe, Rolex and Cartier have been very successful at this, and so it is no surprise that their watches do particularly well at resale. For example, Patek has created an aura of timelessness and nostalgia by implying that their watches are heirlooms to be passed down to the next generation and the current owner is just a temporary custodian.
Panerai is another brand that uses this technique with great success. The company, which originally made military instruments for the Italian navy, now makes huge diving watches. The advertising features the company’s military connections and the connotations associated with this: precision, robustness, manliness.
These factors, plus an ever-increasing demand (often from desk-bound businessmen) for larger and more rugged timepieces, have helped add to the desirability factor of the watches.
As a result, select Panerai titanium models from only five or six years ago are now selling for more than double their original price.
Herrera’s other suggestion for those buying in the middle range is to buy recently discontinued models of successful brands that have been replaced with updated versions.
“In the short term, when a new model of a successful brand is launched, people will be looking to buy that model, but during this time the recently discontinued pieces are neglected and so the price drops. I recommend you take the opportunity to pick up one of these watches during this time because when the novelty of the new model has worn off, the price [of the discontinued model] will go up again,” she said.
If you are interested in investing, Hong Kong is as good a place as any in the world to start. China is the largest market in the world for Swiss watches, accounting for more than 25 per cent of total worldwide sales.
Hong Kong-based international finance lawyer Neil Campbell has been buying for about 15 years and his collection includes six Rolexes, two Jaeger-Le Coultres, two Cartiers, a Panerai and a Franck Muller. His primary motive for buying watches is pleasure – he enjoys looking at them and above all wearing them.
However, Campbell, who has never sold one of his watches, is also an astute reader of the market. Many of the watches in his collection have gone up in value and most, if not all, have at least maintained their value.
He considers one of his best purchases to be a Jaeger-Le Coultre with a rose gold case and a black dial. Jaeger no longer makes this watch with a black dial and has no plans to do so in the near future.
“A dealer in Switzerland told me to hang on to this watch as it is in much demand and that if I lost it I would be unlikely to be able to get hold of another one,” he said.
Another of his successful purchases is a Rolex Daytona – again with a black dial. “This watch retails at HK$73,000 but it is almost impossible to buy a new one from a Rolex dealer. I picked this one up for HK$82,000 a couple of months ago and it is already retailing on the second-hand market at HK$95,000.”
For would-be investors, the watch market is a highly visible one as manufacturers publish the recommended retail purchase price for models and authorised dealers are bound by this recommendation. The internet has also transformed trading. It is now easy to purchase watches from dealers around the world and compare prices.
However, as with buying anything on the internet, there are issues to consider. One of the main stumbling blocks is that the seller is unlikely to be an authorised dealer and any warranty it gives will not be backed by the original manufacturer.
Other common problems include the difficulty in confirming whether you will receive the watch’s original case, tools and receipt – the absence of which will affect value if you try to resell. There are also many fakes.
Most serious collectors avoid the internet simply because there is no substitute to seeing your purchase first hand. Campbell cites an example of how he once saw a Rolex Milgauss with a green sapphire crystal (it gives a greenish hue around the edge of the dial) on the internet and was not particularly impressed. But later when he was shown one by a dealer, he liked it so much, he bought it on the spot.
If you are uncertain about the value of the watch that you want to buy or sell, you can always contact an auction house. Sotheby’s, for example, has a database on watch prices and tracks sales around the world. Even if you have no intention of bidding at an auction you will be able to speak to an expert and access some top quality advice free of charge.
When you are purchasing a watch with a view to resell, it is important to remember that even though the watch market is global, there are some regional variations. There is a strong preference in Asia for new pieces, whereas in Europe a vintage or antique watch that has obviously been worn and reeks of old money can command a premium. Even flaws such as the discolouration of the dial – a common occurrence on certain types of vintage and antique Rolexes – can add value to the piece.
According to Julian Chow Shum of David Watch, “the trend in Western markets is for solid, durable, practical watches which are suitable for everyday use. In the Asian market, we like more luxury, more diamonds, rose gold and complications”.
International watch dealer Marc Djunbushian said of the vintage and antique market: “It is difficult to make money in this sector of the market if your budget is under HK$100,000.
“If you have a bigger budget, there is money to be made, especially in minute-repeating watches and enamel watches, because both require the attention of master craftsmen. What I have learned from my 15 years’ experience as an expert is that perfection, rarity and complication will always bring a profit.”
Djunbushian recommends “watches from the ’70s that use different materials and have unusual designs” as more affordable investments. Already dealers in Europe are holding on to these pieces in anticipation of future demand.
Another tip from both Djunbushian and Herrera is pocket watches. These types of European watches are in high demand in China (especially the ones in gold) and good pieces can still be picked up for a reasonable price.
If you are thinking purely in terms of investment, few would dispute that there are much easier ways of making money than in the watch market, especially if your budget is limited. However, if you are interested in watches, then it seems that if you follow a few simple principles it is possible to combine your interest and either maintain the value of your collection over time or even realise a healthy profit.