Bad news for luxury watches resale market
The resale market for luxury wristwatches was on fire earlier this year, but it appears to have had a dose of cold water in recent months.
A price index that tracks 30 models with high trade activity fell by 9.3% in May 2022, after having peaked in April. Even the index tracking the Rolex brand, which tends to have very high value retention, slid by 5% in May 2022.
“In January and February this year, even as prices were continuing to increase, we saw a reduced amount of [sales] volume,” WatchCharts” founder Charles Tian told Insiders.
“It definitely created this false perception that the market was higher than what it actually is,” he added.
Compared with other asset classes, Rolexes had a pretty competitive run in the year leading up to March 2022, with certain models like the highly coveted Daytona outperforming the S&P 500.
Rolex produces roughly 800,000 new watches per year — far from enough to meet current demand — which has led to a robust secondary market. Then, the pandemic kicked off a frenzy for pre-owned luxury watches that McKinsey estimates will top $29 billion by the year 2025.
“There were definitely some people out there who were listing prices very optimistically and continually raising prices week after week trying to instil confidence in the market,” Tian said.
The slump in watch value over the past month follows a brutal season for just about every type of asset, with the S&P 500 shedding roughly 20% of its value and bitcoin declining by over a third.
Like many other assets, Tian said, the second-hand watch market saw a mix of new people getting interested in collecting, investors seeking alternative asset classes, and a healthy dose of speculation pushing prices up.
“I think that rapid short-term increase that we saw from the end of last year to April of this year was just unsustainable, and I think it just had to come down to earth a bit,” Tian said.
In the long term, Tian says he expects Rolexes and other high-end brands like Audemars Piguet and Patek Philippe to resume their decades-long trend of appreciating in value, even if at a slower rate than the past two years.
The Rolex market index is an indicator of the financial performance of Rolex watches on the secondhand market. From 01/02/2022 to 31/07/2022
It is comprised of 30 popular Rolex models with high trade activity. The index shows the average market price of these 30 watches over time
Speculation and insurance
Claims relating to policies covering assets that lend themselves to speculation or whose market price is subject to large fluctuations, often lead to disputes between the Insurers and the Insured. The Italian legislation relating to non-life insurance establishes that, if the value declared in the policy, and therefore covered by it, represents only a part of the value that the insured item had at the time of the loss, the Insurance Companies are liable for damages in proportion of the aforementioned part (Proportional Rule). This insurance basis in the case of watches lends itself to possible over-insurance or under-insurance, disputes on the documentation presented by the insured to prove the value of the asset that is the subject of the accident, disputes and customer discontent in the event of under-insurance and application of the proportional rule, delays in defining the claim, relative costs, etc.
Instead, by applying the accepted estimate, or an expert report, drawn up by a third party, containing the valued list of the Customer’s assets, which is updated annually. In the presence of a preventive estimate, the parties by mutual agreement may derogate from the Proportional Rule, provided that the valuation was carried out by an independent company.
In this way, in the event of a claim, once the coverage of the claim has been ascertained, the settlement will take place fairly and quickly.