Reposted from Business Insider, Why now may be a good time to buy a used Rolex — if you plan to keep it by Dominick Reuter.
One year ago, pre-owned luxury watch prices were on a tear, soaring to record highs fueled by a combination of low interest rates, stimulus cash, and crypto gains.
Then, the US Federal Reserve started hiking rates, household cash reserves began to dwindle, and the crypto bubble popped.
Watch prices quickly followed suit, entering a months-long decline that is only now beginning to show signs of leveling off. The average price of the highly coveted Rolex Daytona Ref. 116500, peaked at $48,500 last March, before plummeting to about $30,000 in January, where it remains today.
But the tumbling price of used luxury watches like Rolex, Audemars Piguet, and Patek Philippe can also be explained by a simple economics principle: supply arriving to meet demand.
In other words, demand was so high – as evidenced by the prices people were willing to pay – that it encouraged collectors and dealers to reach into their stashes and offer even more watches to the market.
"What we saw was that basically the floodgates opened, and we saw a significant influx of supply particularly for the most in-demand watches," WatchCharts founder Charles Tian told Insider.
And a flood it was.
According to a Morgan Stanley analysis of WatchCharts data, the number of Rolexes and Patek Philippes on the market more than doubled in 2022, while Audemars Piguet saw a 78% increase.
"The price correction was mainly driven by the increase in supply," wrote Morgan Stanley equity analyst Edouard Aubin and colleagues. The increased inventory was "a result of watch dealers and individual watch investors offloading their stocks."
The initial stumble in prices also begat more inventory, Tian explained, as some sellers had financed their inventory with variable-rate loans that got increasingly expensive to handle as the Fed hiked rates.
For some, that meant accepting a lower price to liquidate their holdings, even if they were taking a loss, Tian said. The additional inventory caused prices to slide further, and the cycle repeated.
"The sentiment among the collecting community actually seems to be mostly like happy," Tian said. "In fact, many of them believe that the prices should come down even further."
Like the world of sneakers, which is seeing a similar pattern of higher supplies and falling prices (albeit for slightly different underlying reasons), now could be a good time to start or grow a collection.
Although Morgan Stanley warns that prices could see another three to six months of declines, they point out that the moves so far have been relatively constrained when compared to nearly every other asset class.
The most in-demand brands on the resale market — Rolex, Patek, and AP — still command a healthy premium over retail: even after the slide, the Daytona 116500's $30,000 resale value is more than double the $14,800 retail price (if you can even find one to buy).
Plus, the growing interest in watches is allowing certain models from other makers, like the Vacheron Constantin Overseas, to gain a foothold among the giants.
And finally, wealthy buyers — the type that can spend more than $10,000 to $100,000 on a timepiece — are still spending money, a fact that encouraged Rolex to introduce its own Certified Pre-Owned program.
It's probably still not a great time to be speculating, but for those who love the craftsmanship and plan to keep their watch for decades or even generations, now could be one of the best moments in recent memory.
One year ago, pre-owned luxury watch prices were on a tear, soaring to record highs fueled by a combination of low interest rates, stimulus cash, and crypto gains.
Then, the US Federal Reserve started hiking rates, household cash reserves began to dwindle, and the crypto bubble popped.
Watch prices quickly followed suit, entering a months-long decline that is only now beginning to show signs of leveling off. The average price of the highly coveted Rolex Daytona Ref. 116500, peaked at $48,500 last March, before plummeting to about $30,000 in January, where it remains today.
But the tumbling price of used luxury watches like Rolex, Audemars Piguet, and Patek Philippe can also be explained by a simple economics principle: supply arriving to meet demand.
In other words, demand was so high – as evidenced by the prices people were willing to pay – that it encouraged collectors and dealers to reach into their stashes and offer even more watches to the market.
"What we saw was that basically the floodgates opened, and we saw a significant influx of supply particularly for the most in-demand watches," WatchCharts founder Charles Tian told Insider.
And a flood it was.
According to a Morgan Stanley analysis of WatchCharts data, the number of Rolexes and Patek Philippes on the market more than doubled in 2022, while Audemars Piguet saw a 78% increase.
"The price correction was mainly driven by the increase in supply," wrote Morgan Stanley equity analyst Edouard Aubin and colleagues. The increased inventory was "a result of watch dealers and individual watch investors offloading their stocks."
The initial stumble in prices also begat more inventory, Tian explained, as some sellers had financed their inventory with variable-rate loans that got increasingly expensive to handle as the Fed hiked rates.
For some, that meant accepting a lower price to liquidate their holdings, even if they were taking a loss, Tian said. The additional inventory caused prices to slide further, and the cycle repeated.
"The sentiment among the collecting community actually seems to be mostly like happy," Tian said. "In fact, many of them believe that the prices should come down even further."
Like the world of sneakers, which is seeing a similar pattern of higher supplies and falling prices (albeit for slightly different underlying reasons), now could be a good time to start or grow a collection.
Although Morgan Stanley warns that prices could see another three to six months of declines, they point out that the moves so far have been relatively constrained when compared to nearly every other asset class.
The most in-demand brands on the resale market — Rolex, Patek, and AP — still command a healthy premium over retail: even after the slide, the Daytona 116500's $30,000 resale value is more than double the $14,800 retail price (if you can even find one to buy).
Plus, the growing interest in watches is allowing certain models from other makers, like the Vacheron Constantin Overseas, to gain a foothold among the giants.
And finally, wealthy buyers — the type that can spend more than $10,000 to $100,000 on a timepiece — are still spending money, a fact that encouraged Rolex to introduce its own Certified Pre-Owned program.
It's probably still not a great time to be speculating, but for those who love the craftsmanship and plan to keep their watch for decades or even generations, now could be one of the best moments in recent memory.