Vol 2 - What Makes a Watch Valuable? Dissecting The Watch Market Today.
Last updated: Sept 2023 | Est.12 mins
Welcome back to The Oliver Digest, where we talk all things watches as fellow collectors, free from the influence of sellers and sponsors. We took an attempt in the last volume to understand how we got to our current obsession with luxury timepieces (read here). In this second volume, we'll be exploring the question that's on every collector's mind: what makes a watch valuable?
Rolex Yacht-Master Ref. 16622
Watch valuation differs from investment asset valuation
When it comes to wristwatches, there is no objective taste or opinion, but there are secondary market trends and key opinion leaders which influence the value of each unique timepiece. While there are no objective value investing fundamentals in the valuation of luxury watches, there are qualities, attributes, provenance, historical performance, and design elements that altogether would help you accurately price each unique timepiece reliably once you understand the watch market today.
Editor’s Note: It's important to note, however, that watches should not be viewed as investment assets. While they have historically preserved purchasing power over time, they should be seen primarily as toys for collectors to enjoy, rather than as a means of making a profit. As we've seen in recent years, secondary market dealers who touted watches as investments during bullish market conditions of 2020-2022 also suffered the most losses when the market corrected from 2022-2023.
That said, understanding what makes a watch valuable can help you choose pieces that will bring you joy and hold their value over time. So, let's dive in and explore the intricacies of the luxury watch market together.
10 things that impact the value of a watch
1/10 - Movement
The movement is the heart of the watch, and it plays a crucial role in determining its value. There are 3 main types of movements in watches today: automatic, manual-wind, and quartz.
Automatic movements, also known as self-winding movements, are powered by the movement of the wearer's wrist. As the wearer moves, a rotor inside the watch winds the mainspring, storing energy that powers the watch's functions. These movements are usually the most complex to design, build, and maintain, thus commanding higher value.
Manual-wind movements are powered by winding the watch's mainspring by hand. The wearer must manually wind the watch regularly to keep it running. These movements are typically less complex than automatic movements, and command more value than quartz movements.
Quartz movements use a battery to power a quartz crystal, which vibrates at a precise frequency to keep time. The introduction of quartz movements significantly reduced the cost to produce accurate timepieces; however, they also pushed mechanical movement watch-makers to upscale their offerings into luxury goods.
There is a positive correlation between the complexity and craftsmanship levels of a movement to the value of a watch. For example, a watch with a manual-winding mechanical movement with complications such as a tourbillon or minute repeater will typically command a higher price than a quartz watch or a watch with a simpler automatic movement.
2/10 - Design
To most collectors, the pure aesthetic design of a watch is the main factor that justify its value. Aesthetics of a watch is often intertwined with the functionality of the dial. A watch with an iconic, timeless design like the Rolex Submariner dive watch or the Cartier Tank dress watch will often be more valuable and hold value better over time than a watch with a less aesthetic design. Functionality of designs, such as chronograph or moon-phase designs, can also add value to a watch. For example, a Rolex Daytona with a chronograph function is highly sought after by collectors because of the beauty in the well-executed complexity of the design. Whereas a time-only Rolex Oyster Perpetual fetches for less value compared to the Daytona due to its simpler design.
3/10 - Provenance of brands, models, and references
The history and provenance of a watch, including its brand, model, and reference, greatly impact its value. Endorsements and cultural influence can also add value. For example, a watch worn by a celebrity or a historical figure can command a higher price than a similar watch without that provenance. Additionally, watches that are associated with important moments in history, such as the Omega Speedmaster worn by astronauts on the moon, are highly valued by collectors.
Swiss brands such as Rolex, AP, Patek, JLC, and Vacheron have the greatest historical provenance in the watch market.
Sports models such as the Rolex Daytona, AP Royal Oak, and Patek Aquanaut fetch for more than their dress watch counterparts within the same brand.
References within a specific watch model also fetch for different values due to its provenance. For some watches such as the Rolex Explorer 1, the vintage reference 1016 fetches for almost double the value of its modern younger brother due to Ref. 1016’s coveted, “flawless” design execution. Whereas a modern Vacheron Overseas model would out-perform its vintage predecessor references due to a more refined integrated bracelet design.
4/10 - Modern vs Vintage
Modern watches are often valued for their larger modern sizing, technical advancements, and superior build quality. Vintage watches are prized for their patina’ed aesthetic charm, and often rare, unique designs. The price difference between a modern and vintage reference of the same watch would depend on each unique watch model based on all other factors mentioned in this article.
5/10 - Condition of the watch
Regardless if a watch is new, pre-owned, or vintage, the quality of the watch is what makes the difference between 2 watches of the same watch model and reference number. Watches that have all original parts fetch for the highest value within its market. Watches that were well taken care of, showing strong resemblance to the shape and condition of when it left the factory would fetch for more than its beat up, stretched out, and overly polished counterparts.
Modern watches are easier to determine its value by comparing how close the condition of the watch resembles that of a brand new one from the authorized dealer.
Vintage watches, on the other hand, involve much more intricate details. Within vintage, conditions are determined by how little was the watch polished over the years, how original are the watch parts with their correct time-period, and how has the watch patina’ed over the years. In many instances, the better the patina, the higher the price; in other instances, “over-patina” can hurt its price.
6/10 - Material of the watch
The materials used to create a watch also impact its value. Precious metals such as gold and platinum are often used in high-end watches and fetch for a higher value than its stainless steel variations. However, stainless steel versions of popular sports models such as the Nautilus have historically out-performed its precious metal counter parts in value retention. For example, a $10,000 retail stainless steel watch could fetch for $30,000 on the secondary market (3X), whereas its $25,000 gold variation only fetches for $37,500 on the secondary market(1.5X). This is because stainless steel models are usually more durable in quality, easier to liquidate, and more understated in design compared to a yellow-gold variation.
7/10 - Dress vs sports
Dress watches, with their elegant designs and thin profiles, are often associated with formal occasions and can command high prices depending on the level of craftsmanship that goes into developing ultra-thin movements.
Sports watches, however, overwhelmingly dominant the demand in today’s watch market due to its influence in today’s culture and fashion. Thus sports models of the same brand fetch for higher prices than their dress watch counter parts.
8/10 - Rarity/quantity
The rarity and quantity of a watch can greatly impact its value. Watch variations of a popular model that were only produced for a short period of time or in limited numbers can be highly sought after by collectors. For example, the Rolex "Red Submariner" was only produced for a short period of time in the 1960s, making it a rare and valuable collector's item today when compared to other mass-produced Submariner models.
9/10 - Overall market demand
The overall demand for a watch, including factors such as design aesthetics, ease of liquidity, brand popularity, and cultural influence, can impact its value. The market has historically favored brands and watches with high recognition, such as Rolex’s Submariner or the Patek Philippe Calatrava, compared to other lesser recognized watches with similar build quality and sophistication. Watches that are easy to sell, with a wide range of potential buyers, are more valuable than watches that are difficult to sell. For example, watches with smaller case sizes, more expensive precious metals, or unusual designs may appeal to a narrower group of buyers, making them harder to sell and lowering their value.
Before the quartz crisis in the 1970s triggered most mechanical watch-makers to push into the luxury sports watch era, dress watches were the most sought-after in the market. Since the 1980s, however, the market has consistently demanded stainless steel sports models over all other variations and designs.
In the watch market today, the go-to advice for buying a first watch is to buy a stainless steel Rolex sports model. These watches are fairly reasonable in price points compared to other brands, they represent the epitome of timeless luxury watch design, they are the gold standard in watch build quality, and they are the most traded watches in the market - which means you can liquidate out of these watches in the shortest amount of time, while preserving your purchasing power.
10/10 - Macro environment
Finally, the macro environment can also impact the value of the overall watch industry. Economic factors such as inflation and interest rates can impact the overall value of luxury goods, including watches. The period of zero interest rates pushed the growth of the luxury goods industry that include the watch market’s explosion and Bernard Arnault’s summit. The period since interest rate hikes has not only affected the global economy, but also led to a significant price correction in the watch market.
IWC Pilot on metal bracelet
Up next
As we wrap up our discussion on the various factors that contribute to a watch's value, you can tell that it's a complex equation that goes beyond just the brand or the materials used. The rarity, history, and overall aesthetic appeal of the timepiece are all important factors to consider. Furthermore, a watch's value is ultimately determined by the market demand, which can be influenced by trends, events, and even celebrity endorsements. In the coming weeks, we'll delve deeper into each of the above factors, starting with the different types of watch designs to help you identify your next watch.
Hope this has been a great introduction to what makes a watch valuable in today’s market. Feel free to reach out to me at blog@oliverdigest.com if you have any more questions, I’d be happy to help.
