Art Insights In Depth: Question and Answer on Luxury Watches

Berkley One’s own Katja Zigerlig and Sean Johnson, Director of Fine Watches at Hindman Auctions, answer questions on the 2023 watch market for high caliber timepieces

Philosophers will tell you that time is one of the most precious commodities we have, so it’s no surprise that the wristwatch was an influential 20th century invention. Beyond mere functional capacity, there is a watch for almost every taste – from being purely functional, to adding an expression of personality and life philosophy. Watches can be fun, affordable, and creative iterations like Swatches as well as high-tech edgy collaborations such as the one between tattoo artist Maxime Plescia-Büchi and Hublot.

The big four watch brands on the re-sale market are Rolex, Patek Phillipe, Richard Mille, and Audemars Piguet.

Of course, some watch models are so coveted for their design and craftsmanship, that they have become highly sought after in the secondary marketplace. To learn more, our VP of Art, Wine and Collectibles Advisory, Katja Zigerlig, spoke with Sean Johnson, Director of Fine Watches at Hindman Auctions.

Photo: Rolex Submariner Ref. 1680; image courtesy of Hindman Auctions

Katja: Let’s start with the basics. What timepiece are you wearing?

Sean: I’m wearing a Rolex GMT Master II, Ref. 116710. I purchased this watch in San Francisco in 2018, back when it was still possible to buy these Rolex sports models directly from the Authorized Dealer. This watch now has a waiting list that ranges from 6 months to a few years, depending on the availability in the re-sale market!

Katja: I expect it is no surprise that the increase in your watch’s value coincides with the pandemic and the larger trend of increased values for luxury watches.

Sean: Yes, there was a spike in prices during Covid that peaked in spring 2022 for the most sought-after manufacturers (i.e., Rolex, Patek Phillipe, Audemars Piguet etc.). Enthusiasts with disposable income and time to research their hobbies. Since that time there has been a correction, which is healthy for the markets as some models are pushed up too quickly. There were more significant drops for some “hype” watches such as the Daytona, Nautilus, and Royal Oak, for example. However, the market will continue to expand over the next decade, and drive prices upwards. As a result, prices on some of the rarest (the top 1% of watches in circulation), most sought-after watches will continue to break record prices.

Katja: Indeed, there has been a significant increase in the number of collectors across the board for many luxury collectibles such as art, wine, whisky, and watches. Can you speak about the primary and secondary marketplaces for luxury watches?

Sean: Currently, the primary watch market is worth about $50 billion, and the resale market is around $24 million, according to statistics gathered by Morgan Stanley’s annual report on the watch industry.

They project the primary market will grow an annual average of 4% in the next decade, and the re-sale market at 12% year over year. According to industry watchers, the secondary market is poised to surpass the primary market by 2033.

The watch auction market is actually young. Sotheby’s held its first watch auction in 1980, and Christie’s followed the next year. Osvaldo Patrizzi, a prominent watch enthusiast noted that there were about 300-400 collectors in 1978, and by 1983, there were probably 10,000 – 15,000 collectors. Now, the watch market is truly global, and that number has multiplied.

Also, there is an active new generation of buyers. Forty-eight percent of Millennials/Gen Y and 37% of Generation Z say that it is “very likely” that they will purchase a pre-owned/secondhand luxury watch in the next twelve months, according to Deloitte research. Pre-owned watches are attractive to this group for the price sensitivity and sustainability.

Katja: You mentioned you’re wearing a Rolex, obviously a beloved brand here in America. I can’t help but ask if Paul Newman catapulted the brand and the price by wearing a Daytona Rolex while racing cars?

Photo: Patek Philippe Nautilus Ref. 3800; image courtesy of Hindman Auctions

Sean: Yes to both! The record price for a Rolex is for the one Paul Newman owned, called the Rolex “Paul Newman” Daytona. It was auctioned at Phillips in 2017 for $17.8 million. Of course there are a variety of other Rolexes that are in the collectible category, such as the early Rolex Submariner such as the Ref. 1680, Patek Philippe ‘Calatrava’ Ref. 96, or even some limited-edition Richard Mille, like the Felipe Massa RM005.

Katja: Rolex has been a brand with staying power. I’ve noticed a lot more watch advertisements in newspapers and magazines. Some brands boast famous athletes while others merely show pictures of the watch. Has there been a shift in marketing approaches for luxury watches?

Sean: Yes, today there is really a battle between the “classic” brands, and the “rebel” brands. All the brands really lean into their brand DNA, which is visible in the type of marketing they have.

Classic watches such Jaeger-LeCoultre, Patek Phillippe, Vacheron Constantin, etc. could be described as: chic & formal; tradition & heritage focused; conforms to social norms.

The other watch style is rebellious/edgy. This includes brands such as Breitling, Hublot, Richard Mille, etc. They could be described as: urban & cool; risktaker brand ambassadors; edgy design.

Katja: The parallels to the art market are interesting – there are Picasso collectors (Classic), and Contemporary art collectors (Edgy). And there is a global marketplace for both. As a collector, you need to do research and consider best practices when buying on the secondary. Can you discuss some best practices for watch buyers?

Photo: Richard Mille Felipe Massa RM005; image courtesy of Hindman Auctions

Sean: Condition, condition, condition! Look at the condition of the entire watch – the case, the dial, the movement, crystal, and bracelet. Does the watch have the original dial, or a restored/aftermarket dial? Does the watch keep time? When was the watch last serviced? The crystal is the dome that protects the dial. Is it scratched or dented? Is the case engraved? If so, this will typically decrease the value, unless it is signed by a famous person.

It’s important to become familiar with the design of brand watches, as you don’t want to mistakenly buy a “Frankenwatch.” This is the industry term for a watch that does not have all its original parts, or faked components. For example, I’ve seen a watch where the case was a submarine bezel, but the dials had Mercedes and Explorer hands. Remember that fake or non-original components could also be inside the watch, and invisible at first sight. That is why you always buy from a reputable seller.

Also, as a buyer on the secondary market on more modern watches, always look for as much of a full set as possible. This includes the original box, authenticity card, accessories, extra links that have value, booklet, service receipt, and original sales receipt. This helps provide authenticity and elevate the value of the watch.

Katja: Timepieces have a long history, and every few years there is some new technology that impacts the industry. Lately, the buzz has been around blockchain technology. Breitling announced “digital passports” for new timepieces. Any thoughts on this?

Sean: Breitling has been leading the way in developing fully traceable watches through blockchain technology. This segment of the industry has the potential to revolutionize the pre-owned market, but no one knows exactly how it will impact demand, collectability, pricing, etc. I personally don’t believe that these watches will see high demand as their segment is still in very early stages, and it is hard to imagine people paying a premium simply because it’s traceable. Some collectors may think “so what?” and would gravitate towards non-traceable watches. Time will tell (no pun intended!) how the market will react to blockchain in the watch industry.

Katja: Sean, merci beaucoup for spending your precious time with us. Readers, for a more thorough overview of the luxury watch market, check out our In-Depth webinar with Sean here.

Berkley One is a Berkley Company.