Luxury watches increasingly retail for tens of thousands, hundreds of thousands and even millions of pounds. Many only increase in value when sold second-hand. Is this simply because they are exquisitely made or are other forces at play?
Article by, Nicholas Hall, Investment Director, Rathbones
In 1974, while stationed in Asia, a US Air Force mine-clearing expert ordered a watch through his base’s post exchange, the standard conduit for servicemen and servicewomen wishing to obtain consumer goods. He paid $345.97 — roughly a month’s salary — and took delivery the following year.
His purchase was a Rolex Oyster Cosmograph, otherwise known as a Daytona. He had seen something similar adorning the wrists of several pilots employed by Air America, the airline covertly operated by the CIA during the Vietnam War, and he knew from the outset that it was a fine watch.
Ahead of his time
Abraham-Louis Breguet invariably features in experts’ lists of the greatest-ever watchmakers. He more often than not tops them. Born in 1747 in Neuchâtel, then a Prussian principality, he entered the world of horology at the age of 15 after his family moved to France.
His glittering career was punctuated by landmark breakthroughs, many of which are still used today. He invented the self-winding watch, the minute repeater and the tourbillon — a cage that protects against the possible negative effects of gravity by regularly rotating a watch’s entire movement.
His crowning glory, though, is indelibly associated with a revolution of another sort: in 1783 he was commissioned to produce a watch for Marie-Antoinette, the last Queen of France before the storming of the Bastille. It featured every known ‘complication’ — the term nowadays used for any feature beyond the registering of hours, minutes and seconds. Unfortunately, Breguet took 44 years to complete it, by which time the intended recipient had been sent to the guillotine.
The Marie-Antoinette, as it became known, eventually served as an exhibit at Jerusalem’s LA Mayer Institute for Islamic Art. But in 1983, along with a number of other Breguets, it was sensationally stolen by a burglar named Na’aman Diller.
It remained lost until 2007, when Diller’s widow revealed that her husband had stored it in a bank vault in Paris. He had immediately realised that it was too famous to offload on the open market. Subsequently valued at $30 million, it is now back at the LA Mayer Institute.
However, it quickly proved to be much more than that in his eyes. It was, he decided, simply too beautiful to wear. Unwilling even to remove the foil sticker from its rear casing, he eventually locked it away in a safety deposit box — where, with all its packaging and documentation, it stayed for the next four decades.
In January this year it at last re-emerged to appear on an episode of the American version of Antiques Roadshow, where it was duly hailed as probably the most original example of its kind and valued at up to $700,000. Amid gasps from onlookers, its owner — a man supposedly accustomed to bombshells — crumpled to the ground before slowly getting back to his feet and mumbling: “You gotta be kiddin’.”
How can a timepiece bought for a few hundred dollars nearly half a century ago be worth almost three quarters of a million today? More broadly, why are some watches so expensive and why do so many of them not only maintain their value but become ever more desirable?
The veteran’s never-worn nest egg may perfectly encapsulate the two sides of the explanation. On the one hand — no pun intended — it is a matter of tangibles, such as materials, engineering and craftsmanship; on the other, it is a matter of intangibles, such as prestige, self-expression and emotion.
Traditionally, of course, it is suggested that you cannot put a price on elements such as those in the latter camp. But the reality, as the ever-flourishing watch market’s many devotees will readily attest, is that we do.
Ticking all the boxes
One of the most fascinating things about an expensive watch is that, strictly speaking, it might not perform its primary function any better than a cheap counterpart. Rightly or wrongly, some sceptics would argue that it may even be inferior in this respect.
After all, humble battery-powered watches tend to be pretty precise — at least over the short-to-medium term — whereas mechanical watches, which are typical of the high-end bracket, require winding and might thus be more prone to losing a second or two. Meanwhile, automatic watches, which do away with batteries and winding alike, often still rely on components that legendary horologist Abraham-Louis Breguet first conceived more than 200 years ago (see Ahead of his time, page 36).
Luxury watches might therefore be viewed as distinct from, say, luxury cars or luxury hi-fi systems. A luxury car should handle better than a modest runabout; a luxury hi-fi system should sound more exquisite than a £10 pair of headphones attached to an iPad; but a luxury watch, for all its fabulously intricate ‘complications’, may not boast a time-telling ability conspicuously superior to that of a less celebrated alternative — or, for that matter, an ever-present smartphone. So what are you actually paying for?Most obviously, you are paying for quality. It hardly need be said that an 18-carat-gold, gem-encrusted masterpiece whose arcane inner workings have been painstakingly assembled by an artisan in Switzerland should retail for more than a stainless-steel, mass-produced model churned out at a factory in the Far East. In the words of Thierry Stern, CEO of Geneva-based Patek Phlippe, it is the difference between “buying a painting and buying a TV screen projecting the image of a painting”.
Notwithstanding Breguet’s enduring influence, you are also paying for research and design — as illustrated, for instance, by Richard Mille’s RM 001 Tourbillon. When it was launched in 2001, attracting high-profile ‘ambassadors’ such as tennis ace Rafael Nadal, it drew on innovative techniques more commonly found in Formula 1 and the aerospace sector, among them cutting-edge particle-binding processes and the use of titanium parts. An RM 001 sold for almost a quarter of a million pounds at auction in 2016.
Finally, you are very likely paying for exclusivity. There are precious few unworn Rolex Oyster Cosmographs — hence Antiques Roadshow’s vertigo-inducing appraisal. A Lange & Söhne Grand Complication, each example of which contains almost 900 moving parts and is fashioned over the course of a year at the company’s HQ in Glashütte, Germany, costs around $2.5 million. A unique iteration of Patek Philippe’s World Time, which displays 24 time zones simultaneously, fetched more than $4 million in 2002 and is reckoned to be worth substantially more now.
Cometh the hour...
As the market for luxury timepieces grows, watchmaking in the UK is experiencing a renaissance. A number of specialists, including the Great British Watch Company, Robert Loomes, Wessex and Garrick, are earning increasing acknowledgment in an arena long dominated by Switzerland and Germany.
Thomas Tompion (1639-1713) is widely regarded as the father of British horology. One of his students, George Graham (1673-1751), was responsible for several innovations before passing the baton to Thomas Mudge (1715-1794), who invented the lever escapement — still the most commonly used escapement today.
Arguably the most celebrated member of the current generation is Roger Smith, of Roger W Smith Watches. One of the few people to have mastered all 32 of the skills necessary to construct a watch from start to finish, he has often been acclaimed as the finest watchmaker in the world.
“It’s not a label I really think about,” he said when interviewed in 2019. “I just get up each day and try to make watches you can’t find anywhere else. Being a watchmaker is all I’ve ever done since I was 18, and that’s where I’m happiest.”
Like many of his British contemporaries, Smith sees low volume as a hallmark of excellence. “Companies tend to announce their annual increase in production as though it was a recognition of doing well,” he said, “but if I made 20 watches a year
“The way we interact with people about very sought-after watches is very important,” says Daniel Compton, UK general manager of Audemars Piguet, maker of the acclaimed Royal Oak. “Invariably, the question is: ‘What number am I on the list?’” Small wonder, perhaps, that in 2019 the annual global market for pre-owned watches, where sellers can register a tidy profit and buyers can jump a queue, was estimated to have grown to $16 billion.
The world is your Oyster
However, any aficionado will insist that this is only part of the story. As Antiques Roadshow’s resident specialist was quick to point out, a key reason for the Rolex’s jaw-dropping worth is that the Daytona is the stuff of cachet, history and even celebrity.
Paul Newman made the model famous — if not near-mythical for some enthusiasts — by sporting his own Daytona in Winning, an otherwise forgettable motor-racing movie released in 1969. In 2017, at an auction in New York, the watch was sold to an anonymous telephone bidder for a world-record $17.8 million. “Many people are saying this is the greatest watch on the planet," vintage Rolex collector Geoff Hess told Forbes. “It transcends watch-collecting. It transcends the watch community.”
Similarly, Steve McQueen, Newman’s fellow Hollywood icon, immortalised the Heuer Monaco while headlining another tale of on-track derring-do, 1971’s Le Mans. Having recently marked its 50th anniversary, the model remains the leading light in the rebooted TAG-Heuer line-up today. McQueen’s Monaco sold for almost $800,000 in 2012, and even battered examples of the rudimentary Benrus military watch that the ‘king of cool’ wore in Bullitt now go for hundreds of pounds on popular websites such as Chrono24. Such is the power of association. Factor in advertising, branding and other generators of kudos and you have what could be regarded principally as a status symbol.
One revered industry figure who might disagree with this slightly unflattering interpretation of the market is Roger Smith, who fulfils around a dozen bespoke commissions a year at his isolated workshop on the Isle of Man. He personally makes every part of every watch, and his prices range from £120,000 to £250,000. He insists that his clients, far from merely wanting to show off, are “very technically orientated”.
Smith does add, though, that a luxury watch is undoubtedly a “nice-to-have” — and this, above all, is surely what our lucky USAF friend told himself before making what would turn out to be his life-changing trip to the post exchange back in 1974. Ultimately, there is an innate satisfaction in owning anything nice. Moreover, should you somehow fall out of love with your extravagance of choice, the prospect of losing very little, recouping your initial outlay or even making a profit is likely to provide no mean comfort.
Nonetheless, it is vital to remember that not every luxury watch represents a guaranteed investment. Many lose value as soon as they are bought, just like countless other goods characteristic of what American economist Thorstein Veblen branded “conspicuous consumption”.
Remember, too, however bizarre the notion might seem, that it may pay to keep your prize possession well away from your wrist. As the Rolex’s dazed owner was gently warned when he had regained his senses: “If you wear it, it drops down to $400,000.” Hard times, indeed.