Is the Watch Market Due for a Correction?

The rare watch market, particularly as it concerns mechanical wristwatches, is an odd duck as collectibles go.  Most people don’t even wear wristwatches anymore, as they have their smartphones to tell them the time.

Despite this, and the decades-old trend towards quartz movements in the timepiece industry, the market for rare and unusual timepieces seems to be insatiable.

Just a few years ago, during the Great Recession, watch manufacturers were concerned about going out of business due to the lack of demand worldwide.  In less than a decade, this has changed dramatically, and makers such as Rolex, Patek Philippe, Breitling and others are suddenly churning out tremendous numbers of watches.

Many of these are limited editions, with unusual features – moonphases, a tourbillon, lots of gold, lots of diamonds, and often with production numbers that are well under a hundred pieces.

Some of these also have prices that are well north of $50,000.  A few even have prices that go into seven figures, as seen below:

One would think that the market for such things would be saturated by now.  Everyone has but two wrists.  You can only store so many watches in your case.  The limit for the number of $10,000+ timepieces that someone might want to own would seem to be finite.

Yet production continues, and people are snapping up the limited edition items as fast as they can come off of the assembly line.  Much of this is due to the explosive growth of the economy in China, and people there are quick to want to show off their success.  One way to do that is to show people that you have “Western” symbols of success, and expensive automobiles and luxury watches are a great way to do that.

Rolex Cellini

Because of this, a surprising number of these expensive watches have found their way to Asia, and that does leave some people in the industry concerned.  If all of those watches are over there, what happens if there’s an economic collapse?

Another issue is that there is a seeming glut of vintage pieces for sale right now.  You might flinch at the price that you’ll have to pay for a brand-new Rolex, for instance, but you can buy one from the 1970s or 1980s that’s in great shape and which still has the Rolex pedigree for a lot less money than you’d pay for a new one.

Savvy collectors know this, but the newly wealthy in Asia don’t care…today.  That may change if the market gets a little shaky.

There are a few other factors that suggest that a market correction may soon be in order:

  • Anti-corruption laws in China now make it difficult to bribe public officials, and high-end watches used to be the currency of choice for that.
  • As sales have increased, so have prices, and a lot of would-be buyers are starting to balk at prices that have doubled or tripled in recent years.

It’s hard to say if the market is going to collapse, or fade, or just quietly slow down.  But as anyone in manufacturing can tell you, double-digit sales booms don’t last forever.

Sooner or later, and possibly sooner, there’s going to be a downturn in the high end watch market.  The biggest driver of this, of course, will be the overall economy, and if there’s a global slowdown in the stock markets, then the luxury goods markets will soon follow.

Now might be a good time to start investing in vintage timepieces, rather than limited edition new ones.