Many watch enthusiasts know that the retail prices of some popular watches are just reference points. In the secondary market, these watches often command premiums.
For example, the retail price of a Rolex Submariner (Black) is approximately $12,500, but in the secondary market, it can be traded for over $15,600.
So, what factors determine these premiums on watches?
The following content will answer this question, providing strong guidance for future watch purchases.
1. Factors determining watch prices
Law of Supply and Demand
The market outside of authorized dealers operates as a free market where prices are determined by supply and demand dynamics.
Simply put, the prices people are willing to pay result from the intersection of supply and demand.
For instance, Rolex Datejust watches have lower premiums due to higher production volumes, while Rolex GMT-Master II "Pepsi" watches, with lower production and higher demand, fetch higher premiums.
Not only premium watches but also watches with low demand and high production volumes can see price decreases.
For example, certain Franck Muller watches priced around $25,000 at retail might only fetch 40% of their original price in the secondary market, highlighting how demand plays a crucial role in price determination.
In essence, high demand, low supply, and extreme demand fluctuations are primary determinants of luxury watch prices.
Speculative Investment and Artificial Scarcity
During economic fluctuations, many people hoard watches as investments. High-quality and scarce watches not only serve as art pieces but also as jewelry items.
Watches made from hard currency are good stores of value and can appreciate rapidly. Prices can rise due to speculative buying and hoarding, as seen in the price surges of 2022.
Historical References and Watch Stories
Most watch enthusiasts evaluate the value of a watch based on historical references to similar models.
For example, the value of an Omega Speedmaster Professional Moonwatch largely depends on comparable models from the same era.
In 2017, the discovery of a vintage Rolex Daytona by the Newman family significantly increased its auction price, subsequently elevating prices for similar vintage Rolex Daytonas.
Auctions and antique watches have a significant impact on the value of current models being sold.
2. How to choose a watch that retains its value
Once you understand how watch values operate, consider the following guidelines when selecting a watch:
- Choose recognized and scarce brands: Opt for brands recognized by most enthusiasts and avoid lesser-known brands, even if they have high specifications.
- Reference models known for retaining value: Look for models within a series that have proven value retention potential. For example, the Rolex Submariner (Black) has been a popular model for over a decade and is likely to remain a hotly traded item in the next ten years.
- Focus on limited editions: Even if a brand overall has poor value retention, limited edition watches with low production runs can have strong value retention potential.
Omega, for instance, generally has lower overall value retention, but limited edition Moon Landing, Snoopy, and Ultraman watches are exceptions.
Given that modern watchmaking has reached its peak in terms of craftsmanship, mechanical watches have seen little technological progress over the past decade, relying on techniques inherited from the last century.
Therefore, a watch's final value is determined by its brand and historical significance.
New watches are hard to find at a low price, and there is an endless flow of premiums. It is worth paying more attention to the secondary market.
By understanding these factors, you can make more informed decisions when purchasing watches in the future.
Whether for investment or personal use, these guiding principles can help you find watches that are more valuable and have greater potential for retaining their value.
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