The price of luxury watches continues to decline
In 2023 we’ve seen global instability on the rise and economies become stagnant. It was only a matter of time before more affluent sectors of our economy began to feel the pressure. For most of this year the luxury watch market has been on the decline. So called “Hot Watches” like the Rolex Daytona or AP Royal Oak who were trading as high as $50,000 (Rolex) and $100,000 (AP) and are now trading for almost half of what of that. The financial slide of the luxury watch market isn’t just for the 5-10 unattainable watches, it is extended to the whole industry. The reach is so far that it has put a huge financial burden on many watch dealers throughout the world. The affects is many dealers are laying off staff or even going out of business. They once had large amounts luxury watches that moved quickly but it seemed like overnight they all had to dump inventory accelerating the price decline of the industry.
Like all things in life and established markets, there are ups and downs but eventually we’ll find stability in an equilibrium. For right now, it appears that we have some more instability in a downward market. To help the watch community understand the declining 2023 watch market, we want to highlight factors that affected luxury watch prices this year and what are indicator that we saw or could potentially look for to signal negative growth. Finally we’ll discuss what this means for collectors and our opinion if watch prices will continue to decline or even increase for 2024.
Factors that affect the price decline for luxury watches in 2023
Excess inventory: Both authorized dealers and grey market dealers stayed loaded with inventory during the boom in the watch market that peaked in 2022. When the luxury watch marketed started to decline there was an avalanche of over leveraged dealers, mostly grey market, who needed to move off of inventory quickly. Flooding the market with discounted watches made an immediate impact to the global watch market, which many believe was the start of the steep decline we’ve seen.
Investors exiting: Starting in 2020, the luxury watch market took off. Brands like Rolex, Patek, and AP were impossible to obtain and the pre-owned prices, even at trade in, were higher than retail prices. The quick win for capital gain brought many new investors into the watch industry who weren’t actually interested in using the product. As the market has softened, these transient investors have since moved on.
Interest rates: Many may be surprised but many grey market dealers purchase their inventory on credit or outside investment. This means that the longer grey market dealers sit on inventory, the more it will cost them. With the rise of interest rates, these costs have become even higher so online or grey market dealers are either only purchasing inventory at lower prices or moving off inventory faster at discounted prices.
Inflation: The cost of living is noticeably higher in 2023 than in previous years. We’ve experienced necessities rise in price like groceries that affect every household. Inflation is one of the root causes for this. With costs rising of the things that people need, there is less money in budgets for what people want. This impacts luxury watches because if there is less money in the market for them, demand will decline.
Global events: When uncertainty rises, human behavior is predictable. People will be more cautious with their spending and seek to find new trends or norms. With the recent violent global events, nations are on edge which means that spending is tightening, therefore there is less available resources to support the luxury watch market.
Indicators that signal the luxury watch market is softening
Dealers going out of business: The watch industry saw a massive spike in new watch dealers, mostly online, during the watch boom. Now that prices have been falling we’ve seen a large number of those operations close their doors or laying off a large percentage of their workforce. What this signals is that watches aren’t as profitable as before and/or there is much less inventory being sold.
Home price are down: A reliable indicator of an economy is the price of homes. Homeownership is essential and comes first in the hierarchy of family budgets. When home prices fall, it is because incomes can’t justify current home prices and if incomes can’t justify current home prices, the ability of incomes to purchase luxury watches diminishes.
Rolex prices declining: The gold standard of the luxury watch market is the price of Rolex watches. At one point every Rolex reference was selling more pre-owned than new at retail. Sometimes certain models were selling for 2-3x the retail price. In 2023 we’ve seen a sharp decline of the price of a used Rolex while we saw an increase in the price of new Rolex watches. With the cost of pre-owned Rolex on the decline, other brands are surly to follow.
What does this mean for collectors
A down luxury watch market will impact different types of collectors in different ways. There are two main types of collectors which are those who have enough disposable income to add to their luxury watch collection without selling and those who need to sell from their collection to acquire new watches.
If you are a collector who holds on to their watches, therefore having enough disposable income to continually add to the collection, you’ll benefit from a down market. As the luxury watch market softens, your buying power will increase therefore you’ll get better deals and can acquire more within your budget.
If you are a buy and sell collectors, limiting the number of watches in your collection, a downward trend watch market means that you have less buying power because you need to sell to buy. Therefore you will have limited options because you’ll be selling a watch for less money to buy a new one.
Will price of luxury watches continue to decline in 2024
Forecasting the future is always difficult but after a deep analysis of current market indicators, signals suggest that the luxury watch market will continue its downward trend into the 2024 year. There are actions that the luxury watch industry can take to improve conditions. Those include halting price increases, better inventory management practices, and focus on new product launches that mirror what customers are wanting.
