The Most Expensive Have Lost the Most: Monetary Policy Leaves Its Mark on the Luxury Watch Market

Luxury brands have proven resilient to crises over the past year, but it seems that the strict monetary policy of central banks has left its mark on the luxury watch market. This is evidenced by the fact that the WatchCharts index, which tracks the prices of 60 luxury watch brands, including Rolex, Patek Philippe, and Audemars Piguet, has fallen by 32 percent from its peak in March last year. During the same period, a special index for Rolex models alone fell by 27 percent.

The monetary tightening by the US central bank over the past five quarters is considered, of course, a key reason for the decline in watch prices, and higher interest rates have fueled fears of an economic downturn, prompting investors to ‘tighten their belts’ on luxury spending and increase savings, despite earlier claims that this would not happen. According to Bloomberg, the demand for watches has also been harmed by the decline in the crypto market.

The most expensive watches have suffered the largest declines. According to WatchCharts data, watches in the price range of $50,001 to $100,000 have fallen by over 15 percent in the last 12 months, while the group from $10,001 to $20,000 has fallen by 10.4 percent. The price range from $5,001 to $10,000 recorded a decline of 6.8 percent.

These are the worst results since March 2022 when the Fed began raising interest rates, and certain brands have felt the monetary tightening more than others. The Rolex market index, which tracks the 30 most valuable models, fell by 12.5 percent compared to the previous year, while the Patek Philippe index fell by 18 percent. Audemars Piguet recorded the largest losses, with a decline of nearly 20 percent year-on-year, according to WatchCharts data.

Long-Term Price Growth

Interestingly, these brands reached record levels in early 2022, after which the aforementioned decline began. Despite the decline over the past year, prices have significantly increased in the long term, outperforming the stock market. The Rolex index has risen by more than 55 percent compared to 2018, as confirmed by Boston Consulting Group (BCG).

‒ Luxury watches have performed well, especially in the long term, compared to traditional investment categories. From August 2018 to January 2023, average prices in the secondary market for top models of the three largest luxury brands, Rolex, Patek Philippe, and Audemars Piguet, grew at an annual rate of 20 percent despite the broader market decline during the pandemic – states the BCG report published earlier this year.

Swiss Record Holders

Analysts at Morgan Stanley, however, believe that the prices of pre-owned watches from these brands will continue to decline as supply remains high and demand decreases. Despite the drop in demand, prices in the secondary markets are still significantly above retail prices due to long waiting lists at sales points. The question now is whether brands will be able to maintain high prices if demand for luxury continues to decline.

Last year was certainly good for Swiss watch manufacturers, who achieved exports worth $25.7 billion, an increase of 11.6 percent compared to 2021, and the highest value ever. Champion brands and main drivers of export growth last year were stars like the aforementioned Rolex, Audemars Piguet, and Patek Philippe, as well as Richard Mille, Tudor, Breitling, Omega, and Cartier.