Over the past five years, particularly following the end of the COVID-19 crisis, the luxury watch sector has experienced a significant upward trajectory. According to the 2023 Knight Frank report, luxury watches saw one of the highest 12-month relative price increases at 18%. Despite this growth, recently, well-known commercial brands like Rolex have encountered notable price declines in the secondary market due to a market slowdown.

In contrast, the realm of high-end luxury watchmakers remains robust, undeterred by the general market's downturn. This underappreciated segment of the investment world continues to offer unique opportunities for discerning collectors and investors. Looking ahead, this niche market is poised for promising growth, driven by the rarity, craftsmanship, and exclusivity of its offerings. Dominic Khoo, CEO of WatchFund, sheds light on this evolving landscape, suggesting that now is an opportune time to invest in these exceptional timepieces, which offer more than just aesthetic appeal but substantial investment potential.

Unveiling the Value in Rarity

Rarity significantly drives value in the luxury watch segment, aligning with the basic principles of supply and demand. Yet, understanding rarity in an industry often dominated by revered brands like "The Holy Trinity" of watchmaking requires a deeper look. Although Rolex, for instance, produces approximately one million timepieces annually and maintains extensive waiting lists, the sheer volume of watches in circulation challenges traditional notions of rarity. This makes true rarity a less straightforward concept in a market flooded with high-demand pieces.

What does this mean for investors?

Market downturns often trigger a "financial panic" where investors hastily sell off assets, exacerbating a market's decline as supply outstrips demand. Investors may question the rarity of their assets, especially when widely perceived rare watches are abundantly available. Dominic Khoo clarifies, "The true value in high-end luxury watches isn't found in well-known commercial brands but in the exceptionally rare pieces targeted at an exclusive audience, which demonstrate significant potential for appreciation."

These high-end watches, crafted by lesser-known or independent watchmakers, often maintain or increase in value due to their extremely limited production runs, customization options, and meticulous craftsmanship. Such watches are typically acquired through private sales and auctions, where their scarcity commands a premium. "Some watchmakers might only produce ten pieces annually" Dominic notes, highlighting the stark production contrast between high-end luxury watches and mass-market offerings. In markets catering to discerning collectors, "financial panic" is less likely to impact market prices due to the sustained demand for genuinely rare timepieces. Dominic further highlights a surge in demand within the high-end luxury watch sector, noting a significant shift in the market dynamics:

“[…] many independent brands that previously had so-called, ‘not-so-good business’ ten years ago now all of a sudden find that their order books are filled.” […] Other (independent) watch brands that had five or six-year waiting lists have announced that they are not accepting any more orders”.

This trend illustrates the growing interest in unique, artisan watches over mass-produced models, signalling a robust market for niche, high-quality timepieces.

The Shift in Market Dynamics

The luxury watch market is witnessing a shift away from the mainstream and towards unique, high-value pieces. Dominic Khoo says that collectors are increasingly looking for something different, something that stands out not just in design but also in investment potential. This shift is driving up demand for watches that promise exclusivity, thus bolstering their desirability and subsequent value.

The Craftsmanship Behind the Investment

Craftsmanship is at the heart of high-end luxury watches. The meticulous attention to detail and dedication to the art of watchmaking distinguish these pieces from mass-produced models. "Each of these watches tells a story, not just of the brand, but of the artisans behind them," says Khoo. This aspect of storytelling and heritage contributes significantly to the investment appeal, as collectors and investors are not just buying a watch, but a piece of history. Most recently the WatchFund and Dominic Khoo curated a rare Breguet Anniversary Tourbillon WG valued at $160,300 for the Konvi community and its investors.

The Investment Outlook

Looking ahead, the outlook for high-end luxury watch investment is robust. The growing interest in private sales and exclusive auctions highlights the market's shift towards higher-quality, artisanal pieces. Dominic emphasizes and predicts that as long as the mass market follows the mentality of seeking rare and exclusive watches, the market is going to face an upward trajectory.

What Watches Does WatchFund Source?

Shifting away from mass market trends and potentially volatile investment opportunities Dominic explains and highlights that the investment philosophy of WatchFund follows two main strategies.

• Acquiring watches that money cannot buy
• Purchasing watches below the retail price

Dominic notes that the watches falling into the first category include unique pieces or extremely limited editions crafted by prestigious watchmakers. These are not accessible to "normal" consumers, who lack the necessary connections to acquire such exclusive timepieces. Leveraging his extensive industry network, accumulated over more than 20 years and bolstered by his status as the only certified watch expert in Southeast Asia, Dominic is uniquely positioned to secure these rare and exclusive watches for WatchFund’s investors. In 2023 Dominic Khoo was even selected as the Best Alternative Investment Manager for Greater China 2023

Conclusion

The high-end luxury watch market represents a compelling opportunity for those looking to diversify their investment portfolios. With insights from industry experts like Dominic Khoo, investors are better equipped to navigate this complex and lucrative field. As the appreciation for unmatched craftsmanship and rarity grows, so too does the potential for these watches to become highly profitable investments.

As we move forward, the high-end luxury watch industry is set to captivate the attention of collectors and investors alike, promising not only the joy of ownership but also the thrill of a wise investment.

Note: this article only engages the opinion of its author and does not constitute financial advice.