Thursday, 9 Apr 2020

Time as a value – luxury watches as property investments

In times when digitalization is gaining more and more influence on the everyday life of each of us, analog objects do not lose their value. On the contrary: tradition and history are often embodied by values that cannot be represented in binary lines of code. As diverse as the possibilities that lie behind the gate of digitalization that was opened at the beginning of the century maybe, some people are convinced that they are holding on to what is not being grasped by the technological Revolution. This is a possible explanation for the increased interest in property investments, such as watches or vehicles, in recent years.

When one of the first pocket watches was developed in the year 1500, no one suspected that almost 500 years later there would be digital competition from Apple Watches or mobile phone watches. But even if it briefly looked like that digital timepieces would displace analog models, this was not true in the luxury watch business.

Whether classic models from brands such as Patek Philippe, A. Lange & Söhne or sporty models from manufacturers such as Rolex or Omega: you will also find interested parties in times of digital watches.

The motives for buying a watch could hardly be more different. Whether it’s out of passion, as an Investment or to build up your collection: total sales in the luxury watch business are rising steadily. In times when sales figures, such as those of the tech giant Apple, are beginning to stagnate or are declining, the trade-in luxury watches in 2019 is expected to record sales growth of 3.1% worldwide.

Investment from passion-watches as passion Investment

When passion and investment ideas coincide, we also speak of Passion Investments, investments made with passion. Often it is gifted to an important milestone in life or heirlooms that form the beginning of a collection. One of the most popular examples of how a watch can increase its value through personal valuation is the Rolex Daytona worn by Paul Newmann. That Watch, which was considered missing for many years, was auctioned in 2017 for 17.75 million euros. The jewel given by his wife was to serve Paul Newmann as a lucky charm during his rides as a racing driver. The set engraved on the inside, drive carefully. Me“ gives the watch its uniqueness.

Investment with ulterior motives-increase in the value of property investments

It is precisely these increases in value that can make watches so attractive as an Investment. Not all watches have such an appreciation in value due to their history, but they are particularly relevant for portfolio diversification due to their value stability. The constancy in value is influenced by two important factors: on the one hand, a watch has a watchmaking value. This value is determined by the manual effort of the movement production (measured by complications), the rarity of the movement and valuable materials such as Gold, diamonds or platinum. On the other hand, the performance of a watch is primarily influenced by the change in market value.

Artificial scarcity is a popular means of luxury manufacturers to raise prices. Not infrequently, it is limited quantities and low delivery figures that lead investors to pay significantly more than the estimated list price. An example: the GMT Master 2 Batman from Rolex is listed at a price of€ 8400, but often achieves prices on the market of € 16,000 to € 18,000.

After purchase, there are other things to consider: to maintain the value of the watch and maximize profit, regular maintenance, and proper storage are crucial. The owner of a Rolex should revise his watch every 10 years, for example by changing the oil.

If the watch is worn regularly, make sure that it is not placed on a glass surface or in a cold place at night. The accuracy but also the Oil can suffer from temperature fluctuations. However, if a watch is not worn for a long time, other aspects come into focus: above all, dry, dust-proof and sun-protected storage is important. Also, it should be fully wound every three months to keep the oil moving in the movement.

Another example of positive performance is the Nautilus model from Patek Philippe. It now changes hands at many auctions for a price of 48,000€ – with an original new price of 26,000€.

From collectors and hunters-from building a watch collection

If you do not see the watches as a pure investment but are interested in building or expanding a collection, other factors are important.

Watches of the same manufacturer, age or Material can be chosen as the basis of a coherent collection. If a certain model is not immediately available, it is necessary to be patient. The hunt for the favorite work of art requires time.

One of the most popular watch collections is held by Eric Clapton. The singer, who became known as a Blues and Rock guitarist, has dedicated his collection mainly to the Rolex brand. He is often spotted wearing a Rolex Milgauss but also likes to wear a Datejust in steel and a Day-Date in yellow gold. In addition to other Rolex models, his collection also included a Daytona “Paul Newmann”.

What all watches have in common in their purchase in the end: no matter which motif is followed and which type of Watch is preferred, the choice of the right dealer is a crucial part of the overall puzzle. It is not uncommon to notice through market sounding that dealer margins of 40-50% of the selling price are common.

In addition to the well-known watch retailers such as Wempe, Bucherer or Rüschenbeck, digital platforms such as Chronex or Chrono24 are increasingly finding their place on the market, making it possible to purchase luxury watches online at discounts on the list price.

Through the market entry of online retailers, it is important to create uniform security features to make retail customer-friendly. With the newly introduced Trustedwatch quality seals “Trusted-Dealer” and “Buyers Beware”, precisely those providers can identify themselves as certified on their Homepage. These certificates signal to potential customers and buyers the clear message of serious and safe trading. When it comes to finding the right retailer, these seals of approval, along with other information sources created by digitalization, such as comparison portals, forums, and digital magazines, can help you acquire the right watch from the right retailer.

As with all investments, Warren Buffet’s wisdom applies here: “Risk comes from not knowing what you are doing”.

The Internet serves as a cross-border place for professional exchange and complements the analog world with a digital platform.

This can be used as a source of information to find the right model or track performance. After all, it is the desire of every investor, regardless of the motive, to make a comprehensive informed investment in good conditions.