Collecting vintages watches can be a fun, interesting and enjoyable hobby. It allows the owner the opportunity to purchase and wear something classic, unique and desirable. The watch becomes a talking point and the focus of attention.
And now, there is also an increasing trend of watches being considered an alternative investment, where collectors see vintage watches as part of a diversified asset portfolio.
What’s the appeal?
Ever since Peter Henlein, a German locksmith, produced the world’s first wearable timepiece in 1505, people have seen rare watches as potentially valuable collectables which can be handed down from one generation to the next.
Watches have long been seen as symbols of wealth and prestige. Collectors love them for their age, rarity and style or their association with famous people or designer brands such as Gucci and Hugo Boss.
In part this is a function of fashion. People have been turning away from expensive new luxury watches in favour of something vintage and interesting with innovative design features.
Many retail investors start trading watches as part of a hobby. However, buying the most sought-after watches can be an expensive past-time and most people will not have the available funds to build up a large collection.
Quite often they need to sell old items in order to make way for new. Very quickly they can see that watches appreciate in value and, before they know it, they are actively investing.
Building a collection
Two brands dominate the investment space: Rolex and Patek Philippe. Their names have become synonymous with luxury and wealth.
For example, Paul Newman’s vintage Rolex sold at auction for $17.5million. It achieved such a fantastic price because it enjoyed the benefits of being vintage, being from the world’s best-known watch brand, and having belonged to a Hollywood legend.
Not all Rolexes will be as valuable. The company sells watches at various levels starting from what, for them, is a relatively affordable £3,000 and moving on up to limited edition models which will cost £200,000 when new. The more common standard models may appreciate thanks to their brand association, but it is when you get into rarer lines where you start to see real growth potential.
Patek Philippe, on the other hand, is arguably one step behind. They have been investing heavily in marketing to get their watches viewed as heirlooms and luxury items, but they don’t get that same appreciation simply from brand association. For now, that belongs to Rolex, but the market is attempting to change that.
Dealers have witnessed the investment potential of watches and are working hard to promote lesser known brands such as Audemars Piguet as potential long term investment acquisitions. These are not quite as attractive as the market leaders; and while some of their watches can generate a following, they remain some way behind the brand recognition enjoyed by Rolex.
The right price
Like most alternative investments, calculating the true value of an investment-grade watch can be difficult. It depends on supply, demand, historic value and fluctuating trends. Anything that is rare, reputable or hard to find will always hold its value.
Newer brands can be volatile. Depending on trends, watch values could grow in value considerably or they may sink without trace. This is the world of future classics, where you buy modern day icons in the hope that you will make a profit some years down the line.
For example, an early Seiko Hi Beat watch can cost around £300 and they do have some potential to gain in value over the years. However, this may take quite a long time and you also need two things to happen: the supply to dwindle as it becomes increasingly rare, and the brand to gain in reputation among dealers and collectors.
Vintage watches are highly sought–after. Timex, for example, recently reissued their classic Marlin Watches from the 1960s. If you have one of these, in good condition, they could be a great option. They are also relatively inexpensive to buy. A Timex watch might cost between £20 and £100.
For vintage watches, much will depend on how their condition changes with time. Enthusiasts like to see signs of wear and tear as it confirms that they are pre–owned and have a history behind them, but it needs to be the right kind of wear.
Collecting vintage watches
You will often hear collectors talk lovingly about the patina of their vintage watches; a term used to describe the way a watch’s appearance changes over time. This might refer to a yellowing of the dial or the fading of aluminium bezel.
When valuing a watch this can be a delicate matter. Patina represents a visual representation of the life the watch has already lived, but too much can harm a watch’s value. There is a difference between wear and tear which comes as a result of the watch’s lived life and damage which will make it unappealing.
Specialist diving watches are increasingly being sought–after, especially vintage models. The Blancpain Fifty Fathoms watch, for example, is one of the most popular classic watches. First conceived in 1962, this was a dive watch designed for the French Navy. As the name suggests it could operate at depths of up to fifty fathoms or three hundred feet.
Where to buy vintage watches
The market for rare watches is changing. Traditionally they have been bought at auction or specialist watch shops. That is still the case. Sotheby’s and Christies regularly hold auctions of rare watches. Some useful advice on buying a watch at auction has been issued by the online auction platform, the Saleroom, and it can be read here.
Specialist watch shops can also be good outlet for collecting vintage watches. These have the advantage of being highly reputable and will be great places for enthusiasts. However, the internet has changed the market considerably.
The explosion of blogs and social media posts on Instagram have helped to spark a boom in watch collecting. More and more people are looking for items which are specialist or rare. This has helped to shift attention away from the new watch market and back to vintage.
The internet has made it much easier to find specific watches. Rather than looking through old shops, you can go online and browse hundreds of different products. At the same time, unregulated auction sites such as eBay can also offer a market to buy and sell, although it is difficult to know if you are getting the genuine article.
Would-be collectors and first-time investors should proceed with caution when making a purchase as the market is open to fakes and fraudsters so you should stick to trusted marketplaces such as Chrono24 to avoid some of the buying pitfalls.
Cost of ownership
If you are looking to buy investment-grade watches, you might normally expect to part with thousands of pounds. This can be quite an upfront investment commitment, especially given the uncertainties of market conditions. However, if you are on a smaller budget, there are still options.
The Swiss brand Swatch, for example, offers an affordable way for people to get involved. They were developed in the 1980s to save the Swiss watch market from the influx of digital watches from Japan. Deriving their name by combining the words ‘second’ and ‘watch’, they created a range of affordable, yet stylish watches.
This historic value gives them a certain appeal to the watch enthusiast. Collectors should look for complete sets and seek out ones which are still in their original packaging. Some models have been designed in collaboration with artists, so can be particularly valuable to certain investors.
Tax considerations
Collectable watches have a major advantage because HMRC views them as wasting assets or chattels. These are possessions which have a predictable life of 50 years or less and will be exempt from capital gains tax.
This might seem unusual because many vintage watches you buy could be expected to last much longer than 50 years if they are properly cared for. However, HMRC considers watches as machinery and takes a single view of machinery that it will steadily decrease in value over time.
However, if you do find yourself buying and selling watches in greater volumes, and at a profit, HMRC may determine that you are operating as a business and require you to register as a limited company or as a self-employed sole trader.
Anything else to think about
Investing in watches is a very popular hobby investment and you could find yourself buying in the middle of a price bubble; so, getting the timing of your purchase right is a very important consideration.
If enthusiasm and therefore demand for watches drops off, what impact could that have on prices. This is always a risk with any investment of course, but classic names such as Rolex have been shown to hold their value.
Investing in watches is an unregulated investment activity which means that should anything go wrong, you not covered by the Financial Services Compensation Scheme. Most investors, therefore, will look at this as a way to hedge, to use spare funds or secure a tax-free investment for the future.
Further information
Before investing in a watch, you can always go online for research and advice where you will find yourself in a very knowledgeable community. Blogs and expert review sites can help you to build your knowledge. Forums such as the Watch Forum offer a chance to ask questions and meet other enthusiasts.
