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A Timeless Investment Choice

As investors continue to ponder whether the recovery in markets is sustainable, some may find that this is the time to put their money in an asset class that lasts.

AP

The downturn has hit the luxury watch market hard. Luxury watch exports from Switzerland, where many of the premium brands are manufactured, have seen a decline of 25 percent over the past 9 months and the slump in demand was especially severe for watches made of precious metals.

However, the picture for "retail" luxury watches seems to bear little resemblance with the "collectible" luxury watch markets for brands such as Patek Philippe, Jaeger Le Coultre or Vacheron Constantin.

Sales of luxury collectible watches have been more resilient in the crisis and have shown buoyant demand as old and new investors fled into the prestigious asset class. Auctions held in May by auctioneers like Antiquorum, Sotheby's and Christie's clocked up a total of 90 million francs.

At a recent collectors' wristwatches auction held by auctioneer Antiquorum in Geneva, the sale of a platinum Patek Philippe set a new world record for its kind and sold for 114 000 Swiss francs ($114,000), while other auctions have seen prices for rare time pieces even reach the million dollar mark in the last several years.

Timing your purchase of a collectible watch may be more important than ever. Jon Cox from Kepler Capital Markets says collectible watches may also offer inflation protection as investors may be worried of higher price levels in the future. He adds that in some countries, a Rolex is even considered a currency.

Investors wishing to avoid the volatility of traditional asset classes, such as stocks or commodities, may find watches are a timeless investment. But as with many things in life, this investment is one for the long-term and requires investors’ patience: the value of collectible watches increases with time.

While age for most other asset classes is associated with depreciation and loss of value, a collectible watch investment ticks differently. The older a timepiece is, the more value it usually holds.

A word of caution for those who hope to make a quick profit: the market for collectible watches is very illiquid as these valuable timepieces are either passed on from one generation to the next or can only be bought and resold at auctions.

The return, and hence the retail price of a watch depends on many factors, beyond just the design and the quality.

Many experts cite the emotional value as being one of the most essential characteristics of a watches’ price: how much a luxury watch will fetch often purely depends on how much a buyer is willing to pay.

Tips for investing in collectible watches:

  • Reputation is key: Buy a brand with a long history and excellent reputation
  • Age does matter: Timepieces’ value increase with its age. Signs of wear and tear show a watch is authentic and has history, while a polishing only reduces a watches’ value
  • Rarity drives valuation higher: The fewer time pieces of one series exist, the more it will be able to fetch in an auction
  • Quality is King: As with other assets, the quality of the collectible watch, including its movement, are essential to its value
  • Slideshow: Most Expensive Rare U.S. Coins

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Alternative Investing 2012