Luxury watches are a hot favourite among wealthy Singaporean investors. Here’s everything you need to know about getting your first investment timepiece.
According to a report by research house Knight Frank last year, luxury watches are top on the list of investments among wealthy Singaporeans.
Among respondents who participated in the firm’s Attitudes Survey 2021, a whopping 79% stated they are most likely to collect premium watches.
Meanwhile, other popular passion investments such as art and wine came a distant second with 57% or respondents indicating interest, while jewellery came in third at 50%.
Perhaps this would explain the recent MoonSwatch madness, where hundreds of Singaporeans lost their minds and tempers over a collaboration between Omega and Swatch, never mind that these are simply mass-produced plastic versions of Omega’s much-coveted Speedmaster Moonwatch.
But since you’re reading this article, you probably have purer ambitions to become a real investor, and not just some opportunistic Carousell scalper. In that case, read on to find out how you can get started in the potentially lucrative world of luxury watch investing.
Reasons to invest in luxury timepieces
Potential for significant returns
Luxury watches can fetch some pretty impressive returns on your investment, which is undoubtedly a prime reason why they make for such popular investments.
Take, for instance, the Audemars Piguet Royal Oak, which is so in demand that it is trading for 376% over retail as recently as December 2021. Last July in Monaco, a Green Dial Nautilus by Patek Philippe fetched US$492,000 at auction, despite a retail price of just US$34,890.
And then there’s everyone’s favourite luxury timepiece — the Rolex. A report based on 10 years’ worth of sales data revealed that the average price for a pre-owned Rolex rose from US$5,000 in 2011 to more than US$13,000 by the end of 2021. That’s a better return-on-investment than stocks, bonds, real estate and gold!
Can act as inflation hedge
Luxury watches are valuable not simply because they are branded status symbols, but because of the skill, craftsmanship and artistry they represent.
Afterall there’s a reason why even though Rolex has basically been producing the same watch over and over, with only minor variations to colours, size and functions, collectors and investors are still ravenously snapping every piece up.
Why? Because it’s that specific combination of an iconic look, impeccable engineering and faultless quality that make the Rolex a timeless classic.
This formula is also followed by other popular premium watchmakers, notably Panerai, Grand Seiko and Omega. If you’re at all familiar with these brands, you’re probably already picturing one of these watches in your head.
This gives a branded timepiece staying power, in the sense that their perceived value does not evaporate over time.
Now, an asset that is able to retain its value more or less steadily is great for hedging against inflation — that’s the same reason why professional investors keep gold and silver in their portfolio.
Since luxury watches (and branded goods, for that matter) tend to hold their value well, your timepiece collection could conceivably counter the erosion on your net worth wrought by inflation.
Relatively low risk when compared to other investments
Investing in timepieces may be considered lower risk than, say, buying shares of a company, which could become worthless should the company collapse. In fact, should a beloved watchmaker wind up, there’s a good chance their watches will skyrocket in value!
Of course, the chances of that happening with any of the leading watch brands is probably close to zero within our lifetime, but the point is that watches can be less risky than other types of investments. Once you buy it, there’s very little that can threaten the value of your investment.
But to be clear, that’s not to say that investing in luxury timepieces is completely free of risk, which brings us to the next section.
Reasons not to invest in luxury timepieces
Highly speculative and finicky
The foremost criticism against investing in luxury watches is that it is highly speculative and finicky, as trends shift constantly and with no discernable pattern.
Every investor hopes to make a profit by selling their timepiece for a higher price than what they paid. The problem is, how do you know which model will appreciate in value, when it will appreciate, or if it even will see a rise in demand in the first place?
Hence, watch investing can be volatile, as you can’t reliably predict your returns. Compare that to say, bonds, which spell out exactly how much returns you can expect to receive.
High barrier to entry
With prices starting from several thousands of dollars, starting a luxury watch investment doesn’t come cheap. As you cannot buy less than a whole watch at a time (the way you can fractional shares in an ETF or index fund) you’ll have to scrounge up a considerable sum (or make funding arrangements) before you can start investing.
High prices aren’t the only consideration. Even if you have the money, you may not be able to buy the timepieces you want, owing to long waitlists and the habit of dealers selling only to their own customers.
This is further exacerbated by a spike in demand for branded wristwatches now that the pandemic is easing.
Factors such as these create a high barrier to entry for those interested in watch investing, and you may decide that overcoming them is not worth the effort.
Requires care and maintenance
Owning a luxury watch collection is something of a job. Unlike a crypto portfolio or robo-advisor account, you cannot simply ignore your investment timepieces until you need to sell them for money.
All watches require some degree of maintenance and care, especially ones that could one day be worth three times the value of your HDB flat.
Storing them in less-than-ideal conditions — exposure to temperature fluctuations, humidity or moisture, frequent vibration, etc — could cause imperfections and flaws, which will almost definitely drive down their value and demand. Worse, you might even accidentally damage or lose them if not properly secured.
Pieces that you’re holding over several years will also need to be sent for servicing — tuning, oiling, polishing, etc — to ensure the watch remains in tip-top condition.
As such, know that investing in luxury timepieces will require a fair amount of time, effort and even money on your part.
Beginner tips for investing in luxury timepieces
Start with the classics
If you’re new to luxury watch investing, it’s best to stick with the classics. Popular brands such as Rolex, Panerai, Seiko, Audemars Piguet and Omega are good places to start, but not all pieces will make for equally good investments. You’ll need to do some research to suss out which models have built up a cult following, to increase your chances of making a profit.
Curate your own collection
As you make your foray into the heady world of luxury watches, don’t be afraid to curate and cultivate your own collection of investment timepieces.
Pieces that call out to you deserve a second look, even if others aren’t exactly raving about them at the moment. You could have stumbled upon a future winner — who knows?
The point is not to be too hung up about only getting the pieces that are in demand right now, and adding a few less-popular pieces to your collection may prove fruitful later on.
Build your network
Whether you’re an investor or a collector, luxury timepiece investing can feel somewhat like an Old Boy’s Club — having someone you know on the inside can dramatically improve your experience.
We already mentioned that dealers have a habit of prioritising regular or long-time customers, which means some brands such as Rolex don’t even sell their new models to unfamiliar faces.
Furthermore, how are you going to charm your way onto the waitlist if you aren’t even on the mailing list for the latest launches, because these are almost always reserved for insiders only.
And then, selling your investment timepiece can also be a challenge. You may not know anyone to sell your watch to, much less get any offers. Plus, second-hand retailers are less likely to cut you a good deal if they don’t know you.
Therefore, if you’re serious about becoming a luxury watch investor, you’ll need to cultivate your own network of hobbyists, collectors, investors and dealers to clue you in on launches, trends, sentiment and deals.
Conclusion: Not always lucrative, but probably the most enjoyable
One last bit of advice before we end this article: Investing in luxury timepieces is best treated as a hobby rather than a hard investment.
Being able to identify fine watch models that have the most investment potential takes skill and experience, and even today’s sure bets may fall out of favour tomorrow. Plus, while luxury watches are regarded as high-liquidity assets in some circles, the magnitude and schedule of your returns can be unpredictable.
So you might as well take it slow and enjoy the ride, instead of stressing yourself out stampeding towards a specific amount of profit.
Afterall, luxury watches are the ultimate lifestyle products — they’re meant to be owned and enjoyed for their own sake, and if you manage to make a couple thousand bucks along the way, that’s just a nice bonus.
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