Rolex and Patek Philippe investments beat S&P gains since 2018

The benchmark averaged annual returns of 8% while a basket of pre-owned watches increased more than twice as much

Luxury brands like Rolex have led the way in timepiece investing in recent years. AFP

Prices for Rolex, Patek Philippe and Audemars Piguet watches appreciated by an average of 20 per cent a year since mid-2018, outpacing the S&P 500, as values for pre-owned luxury timepieces surged, a new report shows.

The stock index averaged annual returns of 8 per cent from August 2018 to January 2023, meaning a basket of pre-owned watches from top Swiss brands grew at more than twice the pace, the report from Boston Consulting Group and secondary market dealer WatchBox said.

That’s despite prices of some pre-owned models, including Rolex Daytonas, Patek Nautilus and AP Royal Oaks declining by as much as a third since the market peaked in the first quarter of 2022.

Prices for a basket of so-called independent brand watches including FP Journe, H Moser & Cie and De Bethune — a small Swiss producer which is majority owned by WatchBox — returned 15 per cent over the same period. The report touts luxury watches as an alternative asset class to stocks, bonds, art and wine.

Over a longer period, stocks outperformed watches as an investment asset.

The S&P 500 had a compound annual growth rate of 12 per cent between 2012 and 2022, while Rolex, Patek and AP watches averaged 7 per cent.

Secondary-market watch price increases accelerated sharply during the pandemic as millennial and Gen Z consumers, cash-flush and stuck at home, discovered a pricey new hobby collecting Swiss watches.

The rise and fall of cryptocurrency values has also correlated with used watch prices.

“Value and transparency are the drivers of the secondary market and that has been a driver of liquidity,” Sarah Willersdorf, a managing director and partner at BCG in New York, said in an interview.

More than 60 per cent of transactions were online compared to 15 per cent for new purchases. While men still make up the majority of buyers, the number of female and younger collectors is growing rapidly, she added.

Philadelphia-based WatchBox is one of the top sellers of pre-owned watches in the world with operations in the US, Switzerland and Hong Kong and backers including former NBA great Michael Jordan and activist investor Bill Ackman.

Boston Consulting Group and WatchBox co-funded the consumer research conducted for the report.

The secondary luxury watch market grew to $24 billion in 2022 compared to the primary retail market which was worth $55 billion.

The pre-owned market is expected to grow by 9 per cent a year to $35 billion by 2026 as prices rise and more people begin collecting watches, according to a BCG forecast.

LuxeConsult, an independent Swiss analyst and consulting firm, recently forecast that used luxury watch sales would overtake the primary retail market by 2033 with sales surging to $85 billion.

Often dubbed the “grey market,” the secondary luxury watch sector was boosted in December when Swiss giant Rolex said it would start authenticating pre-owned watches for resale through its network of authorized dealers.