An introduction to the luxury watch market and Rolex pricesThe last 24 months have been a roller coaster ride for the luxury watch market. First, we had to deal with Covid-19 which initially had a negative impact on the price of luxury watches but it was soon followed by a dramatic boom in prices where prices soared to new heights and in some instances doubled in value in a matter of months.
This crazy bull run led to an unsustainable market and an overwhelming amount of demand. People were hearing about the easy profits being made and everybody wanted in on the action. The bull run started in 2021 and continued to pick up pace through winter and into the start of 2022 but once the war with Russia and Ukraine started, it was the begging of the end for luxury watch prices soaring.
When Rolex watches stopped increasing in value, the demand started to fall which was quickly followed by prices dropping and a lot of panic selling. The number of people that had invested in watches to make a quick profit was eye-watering and it had made things difficult for true watch lovers and collectors because they had been priced out of the market.
The summer of 2022 was a rough period for luxury watches, there was a huge sell-off which was causing prices to plummet, and lots of people and companies lost money, including us. Thankfully, prices started to stabilise towards the back end of summer and watches began to become accessible again for collectors. We can confidently say that as we write this blog the price of Rolex watches and luxury watches is stable and demand is increasing once more.
Are Rolex's prices crashing?Rolex prices are not crashing and never will. The company and its products are tried and tested, they have proved themselves over many years to be innovative, reliable, and effective. In our opinion, the recent dip we have seen in the market is down to many economic factors such as the war in Ukraine, Covid-19, and the fall of other asset classes such as stocks and crypto.
In the wake of Covid-19, lots of governments were printing more money to help boost their economy. In the UK there were many loans, grants, and other incentives to help rebuild businesses. Stamp duty was slashed open property purchases and interest rates were at the lowest point in history. These factors resulted in excess cash and increased demand for luxury assets.
When the war in Ukraine started, the media started to report on the cost of living going up. At the same time, the crypto market crashed, the stock market crashed and so did the Rolex bubble. Although we call it a crash, it's far from it. The majority of Rolex watches are still up year-to-date and in most cases by around 15% but some were up 100% in 3 months at the start of this year.
The outlook for 2023 is uncertain when it comes to global economics but there will be plenty of people that don't feel the pinch of a recession and they will buy the dip and sell when prices reach new highs.
Are Rolex watches a good investment?Rolex watches are like property, they can fluctuate in value in the short term but over the long term, they always increase in value. Rolex watches were so overpriced at the start of the year that now you can buy your dream watch for a much more reasonable price. We have seen Rolex watches drop in value before but every time it's happened they soared to new heights afterward.
Our advice is, don't try and time the market, buy what you like and buy for the right reasons. Are the days numbered for flippers? I believe so. Rolex wants to stop people from reselling their watches for a huge profit and I'm confident they have the plan to make it happen, is flooding the market part of that plan?
Is Rolex selling more watches and flooding the market?Rolex doesn't share any information with the public about how many watches they supply to different regions of the world or the number of watches made for each model. Whilst Rolex doesn't share their numbers with us and Rolex's remain very difficult to acquire from an authorised dealer, there are a few tools available to help us guess.
Rolex's marketing strategy has to be one of the very best in the world, somehow they manage to mass produce their watches whilst making them extremely difficult to purchase new and demand continued to grow with new money being made and emerging economies gaining an appetite for luxury.
To buy a desirable Rolex watch from an authorised dealer, you have to have a buying history and more often than not, you have to buy multiple pieces of jewellery and other watches you don't want just to be in with a chance of getting your desired timepiece. This fuels the reseller market as people have to sell those watches they bought to build a relationship as they don't have infinite cash flow. In some cases, by the time you get your desired watch, it's increased in value so much that you can't afford to keep it and people choose to cash in on the quick profits that can be made.
Whilst Rolex authorised dealers are cashing in on the rise in demand, we believe Rolex are increasing supply but making it no easier for your everyday person to acquire them. As long as you're buying their less desirable pieces, the desirable pieces will remain hard to get and the less desirable pieces will now be much easier for them to sell because some salespeople will sell those less desirable pieces with a promise that you will get that desirable piece you have always wanted later down the line.
So, in our opinion, Rolex is not going to make it any easier for you to buy a watch and they will blacklist you if you're caught selling your new watch within an unacceptable timeframe. But, despite Rolex watches still being very difficult to buy brand new, they are managing to sell more than ever before.
How do we know Rolex is selling more watches than ever before? Have a look on Chrono24 and search for a current model, you will notice that there are pretty much double the amount of 2022 watches compared to 2021 watches available, and in a lot of cases there will be double the amount of 2021 watches compared with 2022. The proof is in the numbers.
We know that Rolex has just consolidated most of the movements in their timepieces, which means they all share the same movement. What is the benefit of this for Rolex? It means they can now make more movements with the same amount of factory space. It's much more efficient for them.
We know that Rolex has just opened the 5th factory in Switzerland. What this factory does is anybody's guess but we do know that it will be involved in the production of their watches which will further propel supply.
If you're a Rolex fan, we would love to hear your thoughts on the current market. Share your opinion below or get in touch with us for some one-to-one watch talk.