Economic turmoil can be painful, but it can also create great opportunities.
For those with a hankering for one particular luxury item, the market is turning their way.
Cheap is hardly the word to use when describing a luxury watch that costs upwards of $20,000. Neither is bargain-hunting as, even when prices do drop and investors set in, those in the market for a Rolex Submariner or a Patek Philippe Nautilus have already made the decision to shell out five figures for the status symbol.
But, as anything else, the luxury watch market is also subject to the laws of supply and demand.
According to a recent note by Morgan Stanley analysts, first reported by Bloomberg, an oversupply of people looking to resell certain Rolex, Patek Philippe and Audemars Piguet models is causing a significant drop in prices.
So When Can I Get a Cheap Rolex?
Between April and October, prices for a range of popular pre-owned Rolex models fell by 21% on the secondhand market. Luxury watch tracker WatchCharts also reported drops of 19% for Patek Philippe and 15% for Audemars Piguet.
The three Swiss companies are considered to be 'The Big Three' of luxury watches although Vacheron Constantin also competes for a spot.
The drop in prices comes, at least in part, due to a number of luxury watch owners observing last year's value growth and placing their models on the market. Too many people doing it at the same time has led to more supply than buyers who have both the interest and the spending power.
"We have noticed a significant increase of watch inventory in the secondary watch market year to date as a result of secondhand watch dealers and individual watch investors off-loading their stocks," Morgan Stanley analysts write in the report, according to Bloomberg.
While an average price of $30,900 for a Vacheron Constantin Overseas sportswatch is still a significant drop from a $39,900 in April, the pool of people looking to shell out what for many Americans is an average annual salary is quite small.
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The retail price of the model is $22,500 but a years-long waiting list makes used models even more valuable than new ones.
During Tough Times, Many Still Seek Out Luxury
In general, the luxury market has not been particularly affected by events like inflation and the war in Ukraine. While it dipped somewhat during the early days of the pandemic, the global luxury goods market grew by almost a third to $198 billion in the last year.
Consignment and resale can be a popular way for many to secure popular designer goods. Looking at resale numbers on online marketplace eBay (EBAY) data, luxury watch company Chrono 24 found that Kering (PPRUF) 's Gucci was the most popular designer brand to sell second-hand — in the three months leading up to September, 23,939 used Gucci items were bought on eBay.
Rolex was in the top ten alongside LVMH (LVMHF) 's Louis Vuitton, Burberry (BBRYF) and Tiffany & Co. (TIF).
For those who know the luxury watch market and can wait out its ebbs and flows, a popular Patek Philippe or Rolex model is usually a pretty sound investment. While the 30 most traded Rolex watches fell 8% last quarter, they are still worth 21% more than in January 2021.
Current oversupply, however, means that the wait for prices to rise again may be long.
"Given the current watch inventory for sale and the worsening macro backdrop, we would expect second hand prices to contract further quarter over quarter," the note reads.
