Time is money: Are luxury watches a good investment?
The current wave of smartwatches, like any new technology, will be outdated by the time you’ve finished reading this article. But certain classic watches not only tell the time, they increase in value with it.
While the poorest performing of all the other asset classes (barring furniture), the watch sub-category of the Knight Frank Luxury Investment index still rose 68 per cent between the fourth quarter of 2004 and the final quarter of 2014, for example.
There has been increased interest in nearly all luxury asset classes in recent years, but one reason the watch market is currently so buoyant, says Jonathan Darracott, global head of watches at Bonhams, is because it is “driven by accessibility of information, and the fact that people can educate themselves quite quickly, leading to buyers being more confident about what they’re purchasing.”
But as an investor, where should you start?
“Traditionally the watches that hold their value are Rolex and Patek”, says Darracott, adding that “other companies like Omega, Heuer, and IWC can retain some sort of value.”
Patek Philippe watches have done particularly well in recent years, and are seen as the most collectable and investable on the market. A 1933 Patek Philippe Supercomplication pocket watch broke records in 2014, selling for 23.2m Swiss francs (£19m). A one-of-its-kind Patek wristwatch went for a cool 7.3m Swiss francs at a charity auction last year.
While these are obviously exceptional items, there is a good reason for buying watches classed as antique. HMRC rules mean that personal possessions judged to have a lifespan of less than 50 years – which may include some watches – are exempt from capital gains tax.
If your budget is rather smaller, there are still watch models that are likely to keep their value even if they won’t deliver a substantial return over time.
The Rolex Submariner and Daytona are solid purchases and attainable for those buying in the mid-to-upper £3,000 to £7,000 price range, according to one dealer. They have the added advantage of not needing to be locked up in a safe – you can actually wear them. Certain Breitling and Omega watches are also good stores of value.
But where to buy your watch? Leaving London can help. There’s a correlation between local property values and the price you’ll pay for a watch at auction. In Yorkshire, for example, company overheads are far lower, which is reflected in profit margins – so the price you’ll pay often undercuts most London dealers.
As a means for diversifying a portfolio, watches, like other alternative investments, are tangible, high value items – but values can fall as well as rise in an opaque market.
Mohammed Syed, head of financial advice and investment solutions at Coutts, “always advises clients to reserve investment for markets that they really understand, and to invest with the long-game in mind, as they have to be prepared to hold these assets long term.”
Most watch enthusiasts don’t collect for the returns – any profit is an aside to the joy of owning a beautiful timepiece. So it isn’t advisable, Syed says, to see a watch, or a collection of watches, as a core component of your investment portfolio.