Around the start of the year, the decline in prices of luxury items became significantly evident, and it was noticed in the resale/secondhand market.

The questions among many include, are luxury watch prices falling? Is the drop in prices significant? Is it temporary, or might it be a good time for those who collect for resale to quickly start selling to avoid losses?

Why is the watch market experiencing a decline in the prices of luxury watches?

A common saying is that “what goes up must come down.” This saying isn’t just attributed to the effect of the law of gravity on objects thrown upwards, but virtually anything from the price of merchandise to a person’s career, popularity, and so on. So, it’s not completely out of place that a price decline is happening in a specific market, even though luxury wristwatches are considered one of the most stable commodities out there. 

Economic policies

The CEO of SwissWatchExpo, Eugene Tutunikov, cited that the rise in interest rates for the second time caused some “hot air” to come out through the prices of many sought-after luxury watches. For example, the white dial Rolex Daytona sold at $46,000 may currently be found for around $35,000. He further explained that when interest rates were near zero, opportunity cost or trade-off decisions did not come into play as people did not have to let go of their desires (luxury watches) for their everyday needs.

The fear of economic recession

There is currently a panic that the world economy will soon plunge into a great recession. Situations like this often make people pedal down on big financial decisions, spending on things they may not need, and double-think before they invest their money on purchases like watches or jewellery. The result is that few buyers are left, demanding many goods. It’s a simple law of demand, when demand declines, prices also decline as sellers want to make the few buyers available to buy more.

Inflation

Inflation is always accompanied by an increase in the prices of commodities, especially essential goods, and it has the same effect as the first point above. Since inflation has remained high recently, more people are spending the bulk of their money on necessary goods and services.

This has left them with little to spend on things they do not need to survive but desire, e.g., wristwatches. Similarly, when fewer people buy, prices drop to lure more lovers in. While this may appear like a season where fewer people are buying, many people choose to value their watch and make a sale. This is because some collectors and enthusiasts are taking advantage of the drop in price to buy more. What’s more, those buying to resell at a later time are equally taking advantage of the season of dropped prices to stock up more.

Demand & supply principle

While the effect of external forces on the dropped price of luxury watches cannot be ignored, Tim Stracke, CEO of Chrono24, suggested that the price fall had more to do with the simple demand and supply principle. Stracke’s claim may have been supported by the fact that this decline in prices is not across the board, even at the preowned market. Sellers dropped the price for watches with low demand and shot up prices for watches with crazily high demand. 

For example, models like Girard-Perregaux Laureato are not falling at all and have experienced a jump in price because demand has been sky-high. Also, the Omega Speedmaster series has been experiencing a significant increase in demand with a corresponding price increase due to the successful collaboration between Swatch and Omega. 

Breitling and Cartier have also been enjoying high demand and a jump in their prices. Dealers in the preowned or secondhand end also confirmed that the price drop was only seen with selected models and that some luxury watches, even though they experienced a drop in value, were still trading well at values above retail.  For example, data from Chrono24 reported selling a Philippe Nautilus (Ref. 5711A), with a retail price of $35,000, goes for over five times its retail price at $190,000, even though it dropped from $240,000.  

Altogether, the price drop is not bad, especially for those who want to stock up or buy their favourite watches since they may now be more affordable. Also, collectors or dealers, especially of very high-end timepieces need not lose sleep over the current trend. For example, the Rolex series continues to sit at the top of the watch “food chain,” and most of its premier brands are even experiencing a significant rise in value, with some pieces currently at their all-time high price.