Luxury Watch Market update 2021 Fall/Winter

The Quantitative easing policies from the central banks had successfully averted a financial crisis in 2020. But with it came along the runway asset price and inflationary pressure, which partially explains the stellar performance of Rolex and Patek sports’ resale price over the past 18 months. There is no signs of slowing down in the watch prices. The disrupt of 2020 production of Swiss watches because of government enforced shutdown was another key reason. As we all know prices will go up if the supply is reduced, especially since there is no sign of waning demand during this period. Another of the observation from the 2020, are the reduction of the number of lower end watches sold. It could be the either the smart watches taking over the market shares and people preferring to concentrate on buying more upscale models, this trends is set to continue in 2021 and well into 2022:
– Polarization increase: Rolex (Tudor), Patek Philippe and Richard Mille dominates the respective price bands spectrum, with Audemars Piguet competing fiercely against Patek in the luxury sport category.
– Efforts by these above brands to curtail the flow of watches into grey markets, resulting bundles deals and customers force the keep the watches period before it is “safe” to resale. This “lock-up” period cos the resale market to dried up further, driving prices further up. The more the intervention, the trickier the situation gets. We can no longer walk in to a Rolex to view various models and decide the next purchase, because of empty display cabinets, instead we are presented on a bundle deal plan on how to get the desired watch (if we know the sales staff well enough).
What might happen?
Rolex Daytona 116506 in Platinum
The boom luxury market is set to continue but at the same time, we are also throwing some caution into the wind.
– the Fed Reserve indicated in the latest meeting that they are looking into reducing the stimulus and a possibility of an interest hike in the early 2022, to combat the inflation concern. This signal the start of the end of cheap borrowings. Assets valuations are fuel buy cheap loans, the song might come to an ending soon.
– Tech sectors other industries facing reality checks lately. We discussed previously: the boom in the shares market is not necessarily a clear indicative of the situation in the wider economy. There might have corrections if US and China both don’t manage their issues accordingly. (e.g US treasury budget, debt ceiling or inflation); China property market)
While there are still factors sustaining the demands of luxury watches:
– GST increasing to 9% in 2023? This drive an increase buying in 2022, before the tax hike in Singapore.
– Covid still preventing travel or other leisure pursuits; recreational budget for many people channel to buying luxury goods and watches.
Patek Philippe Nautilus 5712/1A and 3712/1A (centre)
What we ought to do?
As always, we urged everyone not to put all the eggs into same basket. While we can more or less say watches are investment tools and a likely hedge against inflation. It is still trend-driven; trends come and go. We should continue to review our holdings and replace watches within our collection from time to time. After all, our personal taste change too; so is our purchasing power. Selling off the watches we don’t wear is good way to streamline our collection, at the same time free up capital to fund for new purchases. It is a hobby that will give us capital gains if we manage it well.
Rolex Daytona 116508 “John Mayer” in yellow gold
Brands in prospective:
Rolex watch in generally has preformed very well in 2021 especially the Daytona watches and focus is now on the Platinum 116506, the first ceramic Daytona. Submariners, GMT and also on the rise as the supply continue to be limited going into 2022. Although the hype in Explorer and Explorer 2 ended with much disappointment, the price still well above the pre-Covid period. Yachtmaster 1 will see a face-lift soon and ceramic bezel for the SS model should be inaugurated within the next few years.
Rolex Submariner 126613LB
Patek Philippe:
What a year for Patek Philippe Nautilus and Aquanaut, some of these men’s model had appreciated 50%-100%. This trend seem to be continuing, there just not enough of Nautilus or Aquanaut to go around. As I mentioned earlier, efforts by Patek to curtail the resale market, including announcing the discontinuation of the super popular model 5711/1A backfired spectacularly. End or production models 5711/1A-014 and 5711/1300A-001 (green dial) traded at half a million price range 10x the recommended retail price. This really give a sense of desperation and greed (speculation aspect) that had driven the watch market of late. 5712/1A also under our spot-light as the possibility of Patek Philippe changing strategy on the sports models, small thin models giving way to large chunky models like 5726 or 5990. It is possible 5712 to be discontinued since it is now the oldest 30th Anniversary model (launched in 2006). We also wondering if 5167 (40mm) will be making way to 5168 (42mm) within the next few years.
Keeping Patek Philippe watches in original factory seal for better price appreciation. These seal watches performed significantly better in a auctions as compare to those worn ones.
Audemars Piguet
All eyes on AP Royal Oak’s 50th Anniversary in 2022. They already announced the current RO ultra thin 15202 to be discontinued, hence causing a the resale price to surge. 15202 has been the flagship model for AP and it is the direct descendent of the original Gerald Genta RO Jumbo 5402. It still using the original movement design till now. Such a significant model, it is a watch purist dream and it is unsurprising that the price of 15202 had doubled. ROs like 15500/15400/15400 and complicated ROs also see very substantial price increase.
Audemars Piguet Royal Oak ultra thin 14802BA Jubilee Edition in yellow gold. Circa 1992
What have Les Precision been doing:
Over the past 6 months or so, we have disinvested most of the Rolex. We fully exited from 116710LNs completely and some other submariner and dive watch models. We profit take on some of the 116600s. 116600 been our long term investment and we still feel it is worth holding to it. We did buy in Nautilus during this period adding 5712 to the 3712s. 5712 might the next to be discontinued right after 5711. Compare to 2020 we are actually holding to much higher cash (or fixed income) position, this is inline with our strategy of risk management against price fallout.
Since the announcement of discontinuation in the 2021, Audemars Piguet Royal Oak Ultra Thin 15202ST saw the resale price more than doubled