JUNO INVESTING ©

A timely investment: luxury watch-buying is up 66%

JUNO INVESTING ©
A timely investment: luxury watch-buying is up 66%

 

The editorial below reflects the views of the editorial contributor only and content may be out of date. This article is sourced from a previous JUNO issue. JUNO’s content comes from sources that it considers accurate, but we do not guarantee that the content is accurate. Charts are visually indicative only. JUNO does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions.

WINTER 2017

By Sarah Fitzpatrick

Your mobile phone displays the correct time for any time zone, can self-adjust to daylight saving, and is always with you – but watch makers aren’t worried. A watch is more than something you use to tell the time, and can be a good investment.

The Knight Frank Wealth Report 2017 luxury investment index shows that rather than declining, watch-buying has increased by 66 per cent over the last 10 years, and figures are up 4 per cent in the past year. 

This looks extremely healthy next to the 0.04 per cent increase in sales of coloured diamonds in 2016, although it is still way behind wine and cars for growth in liquid assets.

As with any potential investment, there are good and bad choices. 

Most valuable brands

Luxury watch sales are driven by three main brands: Patek Philippe, Cartier, and Rolex. 

A rare, stainless steel, 1941 Patek Philippe reference 1518 perpetual calendar chronograph with moon phases became the most expensive wristwatch sold at auction in the world last year. It went under the hammer in Geneva and realised just over US$11 million, smashing its guide price. 

This amount of money might seem mind-boggling for a watch made simply of stainless steel, with no precious metals or jewels, but this shows how highly fine watches are valued. 

The most expensive watches sold at auction are not jewel-encrusted, and are often made by Patek Philippe. Their complex mechanisms have been produced by highly skilled horologists, and they’re rare – the 1518 sold above was one of only four ever made. 

As Grant Partridge of Partridge Jewellers says: “With many brands, such as Patek Philippe and Rolex, it isn’t just the aesthetics and the outside of the watch where the value lies. A significant amount of the value is in the precision and technical craftsmanship of the internal movement of the timepiece.”

What to look for

Montblanc’s Neil Baudinet says, as an investment, luxury watches should perform like high-end cars. “In the short term, they won’t make money and may lose, but in the long term, careful investments are likely to perform positively.” 

He picks the limited-edition Montblanc Metamorphosis II, released in 2014, as a “super-amazing watch” to invest in. It certainly ticks the boxes: only 18 of this model were made, so it’s rare; and the movement is hugely complex, including a function with interchangeable dials, showing the time and date on one and a chronograph on the other. 

Baudinet believes these factors will put the Metamorphosis II firmly in the sights of collectors. At NZ$535,000, it is a big-ticket item, but unfortunately this turns out to be another useful investment gauge: cheaper watches aren’t likely to hold their value, let alone achieve good returns. 

Big spenders get an added bonus. Serious buyers are flown to collect their watch, and see the hand-made-watch factory in Villeret, Switzerland, which has been in production since 1858.

Partridge adds that well-known brands are also more likely to hold their value. Rolex, for example, are in short supply and world demand is high.

“Many of them are very tradeable, so when the first owner wants to change their current timepiece for a new model, they achieve excellent retained value.” 

Scarcity adds to the value of Patek Philippe watches. Some of the quantities produced are so small,
New Zealand is lucky if it receives even one of a model for the entire country. 

“Take the release of the new platinum World Time – we’ve received many requests for it, but we may only have one fortunate customer this year,” says Partridge.

Provenance

In a 1996 New York sale, a triple string of fake pearls worth perhaps US$65, but with a guide price of US$500, was sold for a staggering US$211,500. Pushing up the price was the fact they had belonged to former First Lady Jackie Kennedy. Such is the power of provenance, driving price far beyond intrinsic value. 

Value by association has spawned a lucrative business in product placement, and is working today for watches. The fictional character James Bond was created by writer Ian Fleming with a Rolex on his wrist. In Casino Royale, he wrote: “It had to be a Rolex . . . a gentleman’s choice of timepiece says as much about him as does his Saville Row suit.” 

Fleming himself wore a Rolex Oyster Perpetual Explorer, the same model that accompanied Sir Edmund Hillary on his expeditions. The brand is a byword for luxury watches, and part of their appeal is that they are also rugged enough to be worn by adventurers. 

But times change. In 1995, Omega signed a deal to be Bond’s new timing partner, and one of the classic Seamaster range has been at his cuff on screen ever since. 

What’s hot right now

Baudinet says he sees trends come and go. “Yellow gold is taking a back seat for now, with rose gold on top, and black strong on the sports side for men.” 

However, he points out that buying a fine watch is a long-term ownership proposition, so trends don’t always apply to investments. 

In the ladies’ market, Partridge finds that many women today are choosing traditionally man’s-size watches: “They make more of a statement.”

He says the most important thing to remember, however, is to please yourself. Watches are not just a way to tell the time, but to emphasise your personal style.

“We don’t sell watches as investments; [they’re] to give pleasure and joy.” 

Murray Crane of sharp contemporary tailors Crane Brothers knows good style and has a “soft spot” for Rolex. He says though trading watches is no meal ticket, the right pieces hold their value well and collecting can become a passion.

“The vintage resale market is very buoyant, but buying new is fine if you don’t want to resell.” 

However, their most significant investment value may be in your personal style because, as Crane says: “First impressions last, and one of the easiest ways to get the measure of any man is to look at his wrist – and his shoes, but that’s another story!”

DEFINITIONS

Horologist: A clock- and watch-maker. 

Chronograph: A stopwatch time-recorder.

Movement: The clockwork mechanism inside a watch or clock. 

Provenance: A history and record of ownership of a work of art or object. A famous owner can boost an item’s value.