July 1st, 2022
Have you heard the saying, ‘What goes up must come down’? Well, we are currently experiencing such a graph in the watch market, which is beyond anything anyone had expected. One thing that everyone can finally agree on is the volatility in the watch market.
The year started with a boom in the industry where the prices of expensive luxury watch brands like Rolex, Patek Philippe, Audemars Piguet and others rose unimaginably. However, in recent months everything appears to have had a splash of cold water where the prices are steadily swinging down. Even faster than it went up!
If you’re an avid watch lover, you must have heard the story of artificial shortages and the grey watch market. Given the current circumstances, it is safe to presume that a perfect storm is brewing between external factors like inflation in the global market with internal factors like artificial scarcity and secondary watch market investors. We shall discuss this in the later section.
At a glance, everything might sound bad and devastating. This is because many had invested in luxury watches like Rolex, which are now down by approximately 5%. But amidst all the chaos, there is one segment that is benefitting.
Collectors who were patient for 3-4 years are finally benefiting from this unprecedented fall. They are in the best position to buy watches like Rolex, AP and Patek Philippe, which otherwise seemed farfetched.
An average watch collector can now visit authorised watch shops or purchase pre-owned luxury watches at a feasible price.
Isn’t it funny how history repeats itself? As always, everything eventually corrects itself after a certain time.
The craze in the watch market was at its peak at the beginning of 2022. Some of the popular stainless steel Rolex timepieces were selling almost triple or double the retail. As for Patek Philippe, buyers were willing to offer 5/3 times the retail value to buy the stainless steel models.
Hence, the price fall indeed makes it a good time for enthusiasts and collectors to buy their favourite models.
Now, let’s explore the various reasons that have contributed to such an impact on the watch market.
The combination of various External & Internal forces led to this situation. Here we’ve summed up both.
In our opinion, the following are the external forces contributing to the fall of the 2022 watch market:
The confidence to buy an expensive Rolex or Patek Philippe comes only when you are secure about your financial situation. When the value of portfolios is severely declining for most people in the stock market, deciding to buy a stainless steel Rolex with a large sum of money becomes pretty impossible.
So, we believe that the condition of the Stock Market is playing a big external reason in the downfall of the watch industry.
During the pandemic, the government imposed strict restrictions across all nations. People couldn’t travel for vacations which meant that all the extra money was accumulating in their bank accounts. Hence, they evidently spent money on purchasing luxury goods.
However, now that the government restrictions are no longer applicable, people are travelling again. This is resulting in a decrease in the demand for luxury watches.
A person's ability or power to spend plays a role when choosing between needs and wants. As inflation goes out of hand, currency's value is less worthy. So, the choice between need and want becomes quite clear. In today’s watch market, inflation is playing a big role.
The various monetary relief programs gave away free money to many people who weren’t really in need. This portion doesn’t include those who desperately needed it but that larger segment of people who received the relief funds unnecessarily.
All that free extra cash resulted in inflation, including in the watch market.
Here’s a list of the Internal Factors that caused the 2022 Watch Market to fall:
Since the start of 2022, you must have heard about big brands creating artificial shortages. Watch shops, jewellery stores, and other outside investors were doing the same that is restricting the supply of several popular watches. This must get you thinking about why someone would do that intentionally?
The reason is to maintain the watch demand by restricting their supplies. If a model is restricted, the prices will rise with the hope that the watch is now rare and can be considered an investment timepiece.
However, in reality, watch dealers were doing it to increase the prices. As a result, the prices of stainless steel watches increased threefold in various authorised watch shops. Now that the prices are decreasing, the dealers are trying to release their inventory.
So, naturally, the prices are getting low.
During the lockdown and pandemic situation of 2020, several investors were looking out for alternative places to gain a stable return on investment. As people weren’t allowed to spend money in other ways, the luxury goods market became a lucrative sector. Many outside investors who so far didn’t care about the watch fraternity invested in it, hoping to draw some profitable return.
Now that the market has fallen, the outside investors face a serious drawback and may have to give up on their inventories to minimise the losses or tackle the upcoming obligations. This typical economic behaviour is leading to the falling prices of the watch inventory.
After having said the factors leading to this steep fall, it’s time to conclude. Do you think this is a bad or a good thing? Let’s find out.
Yes! Not every fall is bad, and the steady fall of the watch scenario is good because the increasing prices were not sustainable. Collecting luxury watches turned into investing, which in turn escalated the prices. All this made it further difficult for an average collector or enthusiast to buy the watches they wanted without waitlists and an inflated price.
Therefore, from their perspective, they much needed this crash. We can all go back to collecting and purchasing luxury watches smoothly.
Honestly, seeing the graph and how things are heading, you can expect a fall in watch prices in the next few months. However, in the long term, you can expect brands like Rolex, Patek Philippe and Audemars Piguet to resume their depreciated value, even if it is slower.
So, hold on until things get a little better if you want to sell your investment timepiece.
The resale market of luxury watches has been on fire since early 2022. The market required drastic correction, which finally happened with the sharp price fall. Various factors have contributed to this outcome. We have mentioned them all above.
Even though the collapse takes a toll on the investors, it is a great period for collectors and enthusiasts to buy the watch they love at a reasonable price. This is our prediction and our take on the situation. However, there will always be a market for used luxury watches, and the secondary market will always help buyers get their desired models!
You can check out The Luxury Hut’s vast collection of pre-owned luxury watches, including brands like Rolex, Patek Philippe, Audemars Piguet and others, available at great prices. Maybe you will end up finding your dream watch at an unmissable price!
Also Read: Rolex Watches Go Missing From Shelves, What Is The Reason?
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