Watches as an investment
I set out to write a piece on alternative asset classes as a whole, in reference to the 2023 Knight Frank Luxury Investment Index report, a market performance index that tracks the value of a basket of 10 luxury assets. That was until, during my research I stumbled upon an article written by Sky Sit of SKOLORR back in August 2018.
In the article Sky discusses her experience within the watch industry and how she seldom hears collectors talk about investment values. Which seems to contradict my experience as a complete outsider who, despite my lack of interest in watches, has been recommended all kinds of Youtube videos over the past few years with investing in watches as their primary focus.
At the bottom of the article Sky left her email address, so I thought I’d get in touch, asking if her opinions has changed since writing it.
“It has most definitely changed since the pandemic. Unfortunately, I don’t have time to elaborate. I hope you will find out in your research.” — Sky Sit
A somewhat cryptic response, but it got me excited! So I set out to try and unravel the mystery.
My first stop was at Google Search Trends to see if there was any correlation between searches and the pandemic. Searches for “Investment Watches” has been consistently above 25 since May of 2020, peaking in Dec 2021 and Dec 2022. This does show a small increase in interest since the Pandemic, but mostly I think it highlights that people who are looking to purchase watches as a gift during the Holidays, are trying to make an informed decision about future values?
One factor that isn’t directly linked to the pandemic but could have an affect is the growing middle class in emerging markets. We know that Chinese shoppers have a love affair with luxury goods, LVMH reported a 17% increase in sales there during Q1 of 2023 alone! And I wrote recently about the lines that formed outside of fashion brand stores once they re-opened after lock down, a trend that was witnessed all over the globe, not just London.
Looking at the UK specifically though, a YouGov poll from March 2021 showed that 33% of Britons saw an increase in their savings during the Pandemic. With the top social classes showing a 38% rise.
“People in social grade ABC1, who tend to do professional work and who are more likely to be able to work from home, have been able to save the most. Among this group, two fifths (38%) have increased their nest egg.”
The reason this is impactful is that many of the most desirable collectible watches were and still are produced in limited quantities. The rise of emerging markets and the increase in disposable income closer to home, could well be the route cause for higher prices…but that doesn’t explain why watches? Why not Art? Jewellery or Wine?
To answer that the KFLII may provide the answer, and that is ALL of these alternative asset classes have seen larger capital inflows. Luxe Watches did some great research comparing luxury watch prices with other alternative assets, and found that many shared a similar inflow of capital during the period, but that certain watch brands outperformed.
My thesis on this (for what it’s worth) is that alternative assets tend to be ‘cheaper’ than traditional assets. For a fraction of the price of a home, you can start your watch investment empire, and although purchasing fractional shares in companies is an options, having a physical item is more fun. Being able to use and enjoy your investments, sharing images on social media and engaging in a community, turns saving for the future into a hobby. It’s certainly more attractive than rebalancing a portfolio once a quarter.
Let me know your thoughts, are you a recent watch investor? What was it that attracted you to them over other assets? and what are your predictions for the market going forward?
/Si
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