Used Luxury Watch Prices Fall As Crypto Wealth Vanishes

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The cryptocurrency crash claimed its first luxury victim: the Rolex Daytona.

After hitting record highs earlier this year, prices for the most sought-after watches on the secondary market, including the coveted Rolex, have now fallen.

The used watch bubble has been fueled by a combination of cryptocurrency and stock market gains, stimulus cash and speculation. It is now falling apart.

So far, the demand for new watches and other types of luxury goods is holding steady. But what’s happening in the watch secondary market is a stark reminder that the bling boom, especially in the US, may not last.

In 2021, a combination of roaring stock markets and cryptocurrencies has boosted wealth and sparked broader interest in investing in alternative assets, whether non-fungible tokens or watches.

And when markets began to seesaw earlier this year amid rising inflation and geopolitical tensions, some investors were keen to put their money into more tangible stores of value, like a Rolex. .

Consequently, a new breed of young watch dealers joined the longtime collectors. Whether novice or seasoned, buyers have all hunted the same models.

In February or March, the three most fashionable watches – the Rolex Daytona, the Patek Philippe Nautilus and the Audemars Piguet Royal Oak – were trading at several multiples of their retail prices. Skeleton pieces produced by Richard Mille were also highly sought after.

With the S&P 500 flirting with a bear market and Bitcoin losing around 70% of its value since November, that demand is now evaporating.

Buyers are becoming more cautious. Higher interest rates, no stimulus payments and soaring inflation play a role. Blockages in China and fewer Russian buyers may also have increased supply.

The biggest reversals were seen in the Daytona, Nautilus and Royal Oak models – the models that saw the most dramatic gains. Prices are estimated to be around 25 percent below their highs. This however includes private transactions and may not be reflected in available market data.

Some brands fare better, notably Vacheron Constantin of Cie Financière Richemont and A Lange & Sohne, as some collectors have branched out beyond or been pushed aside from the more obvious names.

Some cheaper models, such as sister brand Rolex Tudor, have not seen the same increases as more expensive marquees. And there is always an appetite for truly rare pieces, as opposed to those perceived as merely rare.

While the aftermarket correction may make buying a Rolex a bit cheaper, it won’t necessarily make it easier to get a Rolex.

Waiting lists for many new models last at least two years, as not all aftermarket gains have been wiped out.

Buying a Rolex in a store always sounds like a good deal. Watches of Switzerland Group, which operates boutiques in Britain and the United States, also sees supply exceeding demand for some Cartier, Omega and Tudor models.

The secondary market for other luxury goods, such as handbags, is vulnerable to some of the same elements that have inflated watch prices. It has also seen an influx of new, younger buyers, for example. Still, it has held up so far, perhaps because even though prices have risen, it hasn’t experienced the same bubble.

Still, what’s happening in watches may be a taste of things to come in luxury resale and high-end retail stores.

Many of the same factors that drove watches also drove demand in the mainstream market for fine sports shoes, bags and jewelry.

Jefferies analysts estimated that cryptocurrency wealth accounted for 25-30% of high-end sales growth in the United States last year. Demand is also closely correlated to stock markets.

Upcoming results from major luxury houses will likely show strong U.S. revenues, but the second half of the year will compare to a period in 2021 when sales skyrocketed.

Many Americans are heading to Europe this summer to take advantage of the strong dollar, shifting their luxury spending to boutiques in Paris and London. But when they return home this fall, after perhaps dipping into their savings, they may be more inclined to pull their purse strings.

Add to that the possibility of a recession and the crucial holiday spending season looks more uncertain.

Of course, a revival in China could take over. Luxury stocks rose briefly this week after the country eased quarantine rules for inbound travelers.

But for the behemoths of bling, as in the watch market, time may be running out.

Updated: July 02, 2022, 07:06

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