Experts Still Bullish On Chinese Luxury Watch Collectors, Despite Recent Resale Scares

Fueled by the rise of social media and e-commerce platforms eagerly promoting luxury watches, China’s pre-owned market has seen sought-after timepieces changing hands at sky high prices in recent years. In the six months leading up to Shanghai’s most recent lockdown, the price of secondhand Rolex Submariners rose by 240 percent and affluent customers were happy to part with their money to secure one of these coveted watches, seeing it as a safer investment bet than property, and as a hedge against inflation.

How swiftly the situation has changed. After the boom of revenge shopping in late 2020, an economic turndown and the strict, sporadic COVID-19 lockdowns have somewhat shaken domestic consumer confidence. Now it seems the wealthy are cutting back on their discretionary spending and selling off their highly coveted Rolexes and Patek Philippes, prompting a rapid fall in prices.

According to The Financial Times, an industry portal for pre-owned luxury watches in China called Watcheco reported the price of those prized second-hand Submariners have dropped by 46 percent. However, as per prices on their website, secondhand unworn Submariners are currently discounted between 10 and 25 percent. Cash-strapped customers who only a few months ago were snapping up the most desirable models, rare vintage, and limited editions, which help the Swiss watch brands maintain their image and value, are apparently now queuing up to sell them.

The question is whether the bull market in secondhand luxury watches is cooling because collectors who bought Rolex watches are cashing out after big gains in the past two years, or because they need the money. Experts say that the shopping spree contributed to a 40 percent surge in the country’s imports of Swiss watches in the first 10 months of 2021. Now, several popular brands have lost between 20 and 50 percent of their value on the secondary market in Shanghai since the strict lockdown was imposed in March.

One re-seller in Nanjing reported to international media that he had purchased six Patek Philippe and 29 Rolex Submariner watches from distressed owners in July alone compared to zero Patek Philippes and five Rolex Submariners in the first quarter of this year. It suggests panic selling, but could the situation be more nuanced than that?

The Subdial50 index, which tracks the top 50 most traded secondhand luxury watches on the pre-owned market globally, slumped nearly 23.78 percent from a March 2022 high but it was still up 18.58 percent on September 2021. This indicates a correction across the market, including China. The value of a Rolex Daytona Reference 116508 might have slipped 3 percent in the last month, but it had risen in value 24.4 percent in the past year. Meanwhile, pre-owned Submariners internationally are still up between 8 and 13 percent on where they were a year ago, despite a recent dip of a few percentage points.

In certain models, there has been this big rise. But as Ross Crane, Subdial co-founder and data scientist who created the index, told Bloomberg: “they have come back down to probably a more sensible price where the true underlying demand was.” 

Justin Reis, CEO and co-founder of Watchbox, the world’s leading e-commerce platform for collectible luxury timepieces, has been watching what is happening in China. “We are seeing a steady stream of clients looking to sell watches, particularly pieces from brands’ core collections and those that fall under the umbrella of more ‘commodity’ goods,” he explains. However, he believes “a significant amount of this audience is looking to trade into more specialized product…looking for special, limited, rare, and exclusive watches more than anything else today.” 

Watchbox was founded seven years ago with offices in the USA, Hong Kong, and Singapore. At the beginning of next year, it will open another operation in Shanghai where Reis has seen the market uptick with clients researching and investing in luxury goods. “Once considered a niche hobby, the surge in interest in watch collecting has opened this world to a much broader audience,” he says.  

“Consumers new consumers in particular tend to gravitate to the most recognizable pieces. The Patek Philippe Nautilus and the Rolex Daytona are two such pinnacle models, for example, that have always attracted a significant audience because of their design, the recognition, and what they represent to these brands. As such, the market value of these pieces quickly escalated over the last two years.”

The Cosmograph Daytona is one of Rolex’s most popular models, made for the high-performance world of motor sport. Photo: Rolex

However, this is not a boom to bust situation more like a correction. Reis argues: “Across the secondary (pre-owned) market, the disparity between retail prices and what watches are actively trading for has come down from their early spring 2022 all-time highs, since stabilizing.” He sees this as a good thing to encourage more collectors into the market.

He continued that core models from Rolex (such as the last generation Submariner 116610LN) have also remained steady in both demand and value throughout this period, and complicated pieces from Audemars Piguet and Vacheron Constantin have also gained traction.

He continued that core models from Rolex (such as the last generation Submariner 116610LN) have also remained steady in both demand and value throughout this period, and complicated pieces from Audemars Piguet and Vacheron Constantin have also gained traction. 

The reported falls in mainland China contrast with robust auction watch sales in Hong Kong; Sotheby’s achieved its highest sale series in Asia in April of $43 million (297 million RMB). Even in the recent Hong Kong Luxury Edit sale in July, Sotheby’s Head of Watches Asia, Joey Luk says, “the company achieved the highest ever sales total for an online sale series.”

In April, Sotheby’s achieved its highest sales series for watches in Asia. Photo: Sotheby’s

That said, mainland Chinese are still spending in spite of the falls. “In 2021 we had the highest number of bidders from the mainland since 2015,” Luk says. In fact, to date in 2022, total sales from Sotheby’s mainland Chinese collectors have achieved a “68 percent increase compared to the entire 2021.” Top quality blue-chip pieces such as Rolex, Patek Philippe, and Audemars Piguet remain highly appealing to collectors, including those in China. “The market is constantly adjusting itself and we see cycles from time to time. Yet for the very top-end collectors, they are not easily impacted by the economic outlook and hence their demand remains strong for high-quality, rare timepieces,” Luk adds, namechecking two highlights at the Hong Kong autumn sale a Patek Philippe Skymoon 5002 and a Philippe Dufour Simplicity.

Questions on whether the local economy will further impact consumer demand for luxury timepieces and whether the price of pre-owned items will continue to fall still abound. In the immediate term, we will need to wait and see if the recent drop was simply a correction or stabilization of what was already a volatile market. 

Categories

Hard Luxury, Market Analysis