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January 03, 2019
Watches As An Investment?
In times of financial turmoil, people often turn to physical, tangible investments. Bricks & mortar, precious metals and jewellery are firm favourites for those who shy away from the uncertainty of the stock market.
While long-term investments in the S&P 500 yield undoubtedly strong results, there is a growing investment trend that may be worth considering. The luxury Swiss watch industry has had its challenges over the years, with the ‘quartz crisis’ of the 1970’s and early 1980’s particularly perilous. But in recent years, there has been an acknowledgement that certain makes and models could, in fact, be a sound investment. Here, we look at some key factors to consider and analyse when looking to put your hard-earned cash into watches.
Demand is key
This may seem like a simple enough truth, but in the world of watches, high demand drives prices skywards. When a new model is introduced and generates buzz, its price can soar well beyond its RRP. Take the new model Rolex GMT ‘Pepsi’ edition (ref: 126710 BLRO) as an example. This model was released in 2018 to huge fanfare. With a UK retail price of £7,150, there was an immediate clamour from buyers – waiting lists in official retailers quickly exceeded 12 months (many retailers are no longer even taking orders). This model on the open-market now commands in excess of £15,000. This is a clear example of high demand driving the price to frankly ridiculous levels. It was clear early on that getting your hands on this model at a reasonable price, would be a savvy investment.
Predictable, long-term growth
Beyond hard-to-find, limited-supply current models, there are other models that are easier to find that offer predictable, stable long-term growth. Criteria to consider when identifying a potentially sound investment include a short production run (especially with Rolex sports models), discontinued models as well as models that may not have been popular at the time of production but have developed a loyal following subsequently. Examples that fit some or all of these criteria are the Rolex Submariner ‘Kermit’ 16610LV from late 2003-circa 2011, the Rolex Submariner 168000 (a production run of less than a year between 1988-1989) and the iconic Rolex ‘Paul Newman’ dial Daytona (this dial was originally viewed as undesirable and many remained unsold in shop windows for years). Do your research, and opt for a model that is under-appreciated and on the way up.
Know when to sell
With watches, as with fashion, trends are cyclical. Models that are popular today may not be tomorrow. Popular current models tend to be larger (40mm+), whereas in days gone by it was smaller watches such as the Rolex Day-Date (36mm) and Rolex ‘Bubblebacks’ (under 33mm) that were in high demand. The lesson here is, if a model has enjoyed years of consecutive and accelerated growth, and there are signs of a market downturn or shift in trends, it may be time to move your piece on. There is nothing more frustrating than having a watch of a certain value one year, that then drops 20-30% the next.
Know your market
As well as watch trends being cyclical, they are also often geo-specific. It is an undeniable fact that certain watches perform better in certain countries or regions. IWC, for example, performs particularly well in Germany and Austria, but less so in UK. Platinum Rolex models are hugely popular with enthusiasts in the Arab Gulf states but are less in-demand within Europe. So before buying a watch as an investment, be sure to study the market.
Watches can be sold tax-free
There is a little-known fact that makes watch collecting even more enticing. If you are not a professional watch dealer (i.e. you buy and sell watches infrequently and only as a hobby), your profit is not subject to capital gains tax*. Known as a ‘wasting chattel’ any profit you make on the sale of a watch is considered exempt from taxes, further adding to the profitability of investing in watches. It is important to note that the inverse of this is that no losses incurred when collecting/investing in watches can be used as a tax write-off.*Scale and intent are key in determining tax implications, so it is always a good idea to seek independent tax advice first.
Watches are meant to be worn
While it can be tempting to buy a selection of watches, lock them away and enjoy any gains years down the line, it's important to enjoy your watch. Most watches are robust, durable and functional so can be worn regularly and enjoyed without risk of damage. A major advantage of having a decent watch collection, is that they can be worn for years, thoroughly-enjoyed and then (presuming they were bought at reasonable prices) sold for profit. If they are not to be worn, it may be preferable to collect, stamps, wine, art or other non-consumable/wearable investments.
January 05, 2019
January 03, 2019
Bought my watch from you guys last February, nice too see you doing articles now.
Spot on (mostly). Not so practical to wear a fragile, radioactive 1950’s Submariner, but I get the point mostly.
Good to know about the tax-free bit.
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March 19, 2020
January 11, 2019