Luxury Watches as an Investment
As a rookie collector, George Saviano bought watches because they fascinated him with their intricate mechanisms, not their potential price appreciation.
Since 2004, he has bought about 30 timepieces. Some increased by 50%, others would make him pennies on the dollar, he says. As he gained experience and knowledge about watchmaking and the watch market, he has become more selective.
"I saw that if I limit myself to buying fewer, more expensive and more exclusive pieces, I enjoy them more, and they are also a better investment," says Saviano, 58, a cardiologist who lives in East Brunswick, N.J.
Like BMWs and iPhones, most watches—whether they cost $500 or $50,000—drop in value as soon as they leave the store. The question: How to select the winning models that will hold value or increase in price over time?
Resales at Auction
"To invest in watches, you either buy vintage, or you buy incredibly rare and special pieces," says Adam Lindemann, New York-based collector and principal shareholder in Ikepod, Swiss maker of timepieces designed by Marc Newson. "I bought them all: Paul Newman, Steve McQueen, James Bond," he says of vintage models nicknamed after film stars. "That was the fun part. Then I sold them all, and I made money."
At auction, the resale value of vintage watches skyrocketed between 2004 and 2008. "It felt as if people were buying pieces for one price and selling them a month later for a 10% profit," says Aaron Rich, Sotheby's (BID) department head of watches in New York.
When the speculative bubble burst in the summer of 2008, some pieces that had been fetching $100,000, dropped to $30,000 to $40,000, Rich says. That led to a temporary paralysis when sellers didn't want to sell and buyers didn't want to buy.
The mood changed in the second half of the year. In December, Christie's held its strongest New York auction (an earlier sale in Geneva set 12 world records). "We had clients tell us, 'I am not earning any money in the bank, so I'd rather put it into something I can wear, enjoy, and that's holding its value,'" says Sam Hines, a Christie's vice-president and head of watches in New York.
Well-preserved, rare vintage pieces by Patek Philippe, one of the top Swiss watch manufacturers, led all watch auctions at Christie's last year. The most expensive lot of the year was a 1942 model in 18-karat gold, featuring a perpetual calendar; it fetched $2.77 million, almost doubling its high presale estimate.
Although you do need a discretionary income to collect watches, being a Saudi prince or Russian oligarch is not a prerequisite.
Holly Savino, a stay-at-home mother of two from New Jersey, found a "tremendous amount" of investment possibilities under $50,000, she said. She favors Patek's men timepieces from the 1940s and 1950s because of their attention to detail and iconic designs. She hasn't sold her vintage Pateks yet but has been able to sell non-vintage men's Pateks at a profit.
Contemporary ladies' watches, as she recently discovered, don't make good investment. She lost money on a Patek with a diamond bezel. "Most ladies' watches are seen as pieces of jewelry," she said. "They don't fit into the history of horology, I don't care who the maker is."
A select group of contemporary men's timepieces make good investments if they are produced by one of the top brands and are extremely complex mechanically and limited in number, Sotheby's Rich says. Companies that manufacture these limited-edition collectible models include Patek Philippe, Vacheron Constantin, Audemars Piguet, Breguet, A. Lange & Söhne, and independent newcomers, such as F.P. Journe, Richard Mille, and Greubel Forsey.
A Bevy of Winners
Sky Moon Tourbillon is Patek Philippe's most complicated wristwatch, featuring a sky chart and moon phases and orbit. It currently retails for about $1.2 million, and only two pieces can be made each year. In 2008, one of the timepieces from 2003 fetched $1.5 million at Sotheby's in Hong Kong. The head of the company handpicks the buyers.
A lower-priced example is The End of Days model from the Royal Oak Offshore collection by Audemars Piguet. Produced to mark the release of Arnold Schwarzenegger's film End of Days, it retailed for $13,600 in 1999. Last spring the company resold one piece from the edition of 500 (which sold out) for $85,000.
In 2008, several models by F.P. Journe, a Swiss maker that produces about 950 timepieces a year, fetched more at auction than their original retail prices. The 2005 "Vagabondage" collection comprised 69 platinum wristwatches, each priced at 54,800 Swiss francs ($51,844). In 2008, one piece from the edition sold for 81,600 Swiss francs ($77,199) at Antiquorum Geneva.
The platinum model of German maker A. Lange & Söhne's Tourbillon "Pour le Mérite tourbillon", manufactured in 1996, fetched 315,000 Swiss francs ($262,740) at Christie's Geneva in 2008. It retailed for $103,000 before the entire edition sold out.
Watches by Greubel Forsey, a maverick Swiss brand, are so intricate that the company makes only 150 items a year. In December, its handmade Invention Piece One model from 2007 fetched $459,240 at Christie's Hong Kong, establishing an auction record for the brand. Only 11 were made. The piece's auction tally was on a par with its original store price of $460,000, even as some retailers were offering 15% discounts on high-end watches.
"It's outstanding to bring that kind of a return on a watch that is still in production," says Roberto Chiappelloni, owner of Manfredi Jewels, which sells Greubel Forsey and other luxury brands to hedge fund managers in Greenwich, Conn. "It's an amazing piece of architecture for the hand."
Typically, "if you want to sell a new watch and realize a return on your investment," he says, "you have to wait about 20 years."
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