Invest in ‘time’ for high returns: Luxury watches have outperformed vintage cars, art, diamonds in the past 10 years

Remember Suhas from 3 Idiots? The price-obsessed engineer-turned-investment banker bought a luxury watch for his fiancee for Rs 4 lakh, in 2009. We don’t know the brand, but given that it was a limited edition model, this watch would be worth Rs 16-17 lakh now.

According to a Knight Frank study, luxury watches have delivered compounded annual returns of 9% in the past 10 years, outperforming other passion investments such as vintage cars, art and diamonds. While watch prices shot up 147% in this period, vintage cars rose 118% and diamonds clocked 13%.

While 9% return seems fairly decent, prices of luxury watches can be very volatile in the short term. During 2020, the WatchCharts Rolex index (which tracks the prices of 40 Rolex models) shot up 80%, beating the Nifty (29%), the S&P 500 (55%), and even gold (30%), by a wide margin. However, 2020 was an unusual year. In the long term, the growth in prices of luxury watches has not been so spectacular. The prices of pre-owned Rolex watches moved from $5,000 in 2011 to $13,000 in 2021, delivering about 10% annualised returns in dollar terms. The returns were higher at 15% in rupee terms as dollar rose nearly 50% (from Rs 49.50 to Rs 73.75) during this period.

Interestingly, luxury watches command higher prices in the secondary market. The retail price of a Rolex White Ceramic Daytona is Rs 13.2 lakh, but the grey market has priced it 136% higher at Rs 31.22 lakh. The Rolex Oyster Perpetual 41 with Celebration Dial has a price tag of Rs 5.57 lakh, but commands a 290% higher price of `21.8 lakh in the grey market. The Daytona and Oyster Perpetual may be outliers because they are in very high demand. Typically, new Rolex models fetch about 20% higher prices in the secondary market. The price of a model surges if it is rumoured to be discontinued.

How to buy a Rolex

The luxury watch market is driven by the simple law of demand and supply. An acute scarcity of watches and timeless appeal of these chronographs keep the prices high. Despite a long waiting period and hefty price tag, Rolex enthusiasts are ready to do anything to be able to own a watch.How prices of Rolex models have moved
Luxury watches command higher prices in the secondary market due to the high demand and low supply.

The high demand and hefty premium these watches command in the secondary market might seem like a great way to make money. You would assume that all you need to do is walk into a Rolex showroom, buy a watch and sell it at a hefty profit in the secondary market. But owning a Rolex is not easy. On visiting a Rolex dealership, buyers often find that the watch model is not available. They are put on a waiting list, which can extend for months, even years. When a buyer’s name reaches the top of the list, the dealership calls him and gives a deadline for the purchase. If he doesn’t act within the given period, the watch is offered to the next person in line. Getting into the hallowed waiting list is also not easy. Potential Rolex owners must pass stringent checks before they get in. Dealers choose buyers based on a checklist that scores them on various parameters, including their current financial status, occupation and intended use of the watch. While those with a history of luxury watch purchases are preferred, potential resellers are shown the door. Some jewellery stores are known to source watches for their well-connected clients, while others nudge you to purchase some other high-value items from the store to increase your chances of acquiring a Rolex. Divij Chopra of wealth management firm Waterfield Advisors stresses that indepth research, patience and access to the right supply are crucial for collecting watches.

How to cash out

For buyers, the big question is how to redeem their investments? While official Rolex CPO programs and grey market dealers flourish in Europe and the US, there are no such official channels in India. Although trusted dealers like Bob’s Watches exist online, international transactions can be daunting. Other global websites like Chrono24, eBay, and WatchBox can connect collectors with potential buyers, but domestic options like Ethos’ Second Movement don’t have Rolex’s CPO certification, though it offers a one-year warranty.

Other collectors can turn to esteemed auction houses like Christie’s, Sotheby’s and Phillips, who offer potential premium prices, albeit with a commission. Grey market dealers are an option, but as mentioned earlier, you need to have the right connections.