Consider buying a Rolex now as luxury watch prices are at a two-year low post-pandemic.

Consider buying a Rolex now as luxury watch prices are at a two-year low post-pandemic.

The Changing Landscape of Luxury Watches and the Bursting of the Bubble

Luxury watches have long been a symbol of wealth and prestige. From billionaire Warren Buffett’s gold Rolex Day-Date to NBA star LeBron James’ extensive collection, these timepieces have been highly sought after by the rich and famous. However, recent trends suggest that the demand for expensive Swiss watches is waning, leading to a significant drop in prices on secondary markets.

According to the Bloomberg Subdial Watch Index, prices for luxury watches such as Rolex, Patek Phillippe, and Audemars Piguet have reached a two-year low. The index, which tracks the 50 most-traded pre-owned luxury watches by average price, has seen an 18% decline in the past 12 months and an 11% drop in the last 24 months. This sharp decline comes after reaching record highs in early 2022 during the pandemic spending surge.

One example of this decline is the Royal Oak Jumbo Ultra Thin model by Audemars Piguet, which has seen a staggering 49% decrease in value over the last 17 months. A watch that was once valued at $138,000 in February 2022 can now be purchased for less than $70,000. The falling demand for luxury watches can be attributed to rising interest rates and a slowdown in consumer spending on discretionary items such as electronics, furniture, and apparel.

Interestingly, this decline in demand for high-end Swiss watches has resulted in increased interest in mid-tier priced luxury watches. Brands like Omega and Cartier are experiencing rising prices, as buyers seek out “rare undervalued timepieces and, in some cases, smaller-sized watches.” This shift in preferences reflects buyers’ attempts to save money while still acquiring luxury items.

It’s worth noting that the bursting of the luxury watch bubble is not an isolated incident but part of a larger trend. The pandemic years saw a surge in consumer spending on various products, creating what some referred to as an “everything bubble.” Low interest rates and quantitative easing implemented by central banks like the Federal Reserve encouraged risky investments and unsustainable business models. This environment also fueled the luxury retail market, causing the value of items such as jewelry, handbags, and watches to skyrocket.

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For example, the Nautilus Travel Time model by Patek Philippe was valued at $272,000 in March 2022, according to the Subdial index. Today, it can be purchased for $126,000, less than half its pandemic-era value. This significant drop in value can be attributed to slowing consumer spending on luxury products, resulting in an oversupply of watches.

Thierry Stern, president of Patek Philippe, acknowledged this slowdown in an interview with Bloomberg in April, saying, “I see in the past two months, the market is a little bit slower than before.” However, he remains optimistic, emphasizing that the market is not in a dire state but simply experiencing a period of deceleration.

In conclusion, the landscape of luxury watches is shifting, with prices of high-end Swiss timepieces decreasing while mid-tier priced watches become more sought after. This change can be attributed to factors such as rising interest rates and changing consumer spending habits. As the market adjusts to the new dynamics, watchmakers are facing the challenge of matching supply with demand. The burst of the luxury watch bubble serves as a reminder that even in the world of luxury and prestige, trends and market forces can have a significant impact.