December Market Report

The market dips lower, but could interest rates provide relief?

It has been another tough month for the watch market. Prices in the Bloomberg Subdial Watch Index (GBP) have dropped 3% for the month to £26,912, with values down 10% for the year.

While this is not near the same scale of the 2022’s pullback where prices fell by as much as 40% in the space of a year, it shouldn’t be understated how much of a decline this is. A 10% decline in a market in the course of a year is significant. While there is relative calm compared to the previous year, to claim that we have stability feels a bit overly optimistic, not to say that it couldn’t be around the corner.

Almost every watch in the index has been down for the month. The Rolex Kermit was the biggest faller, down 4.6%. The yellow gold Rolex Day Date was one of the few gainers, and the best, up 1.3%.

Interest Rates

So, what’s next? As much as it has been a tough two years for watch prices, they cannot decline forever. The strongest cause for optimism comes from interest rates.

The initial decline in the secondary watch market correlates almost perfectly with the start of interest rate increases from US Federal Reserve. But the correlation actually goes even deeper. The period between April and August saw larger rate increases - and steeper declines in the watch market. There was then a brief respite in both before another period of rate increases (and corresponding price declines) going into the end of the year.

Optimistically, however, those rate increases look as though they may have come to an end. As we look towards 2024, the potential for a soft landing of stable and eventually declining rates is reason for optimism in the watch market.

Auction Season

We primarily study the secondary watch market with a focus on dealers and traders, where prices have been steadily declining over the past year.

But what about auctions?

Auctions represent (primarily, though not exclusively) the top of the watch market, and it is not uncommon for that upper echelon to be somewhat detached from the rest of trading. In looking further into this kind of sale, we should be able to get a better picture of what’s happening at the top end of the market.

There are a few notes of caution before we dive in. Firstly, auctions are of course single buyers. That means prices can be more volatile, and it doesn’t really represent a ‘market price’ - just what one person was willing to pay on that day. These are also all individual watches, with their own particular condition and provenance, which can affect price. Lastly, auction houses are beholden to what people are looking to sell, so no two auctions or two years of auctions are perfectly alike.

In all, these auctions paint a picture of slight declines across some of the more traded references, but with good strength still remaining in independent brands and extremely rare watches.

It is interesting to see the continued staying power of these small independent makers in the face of constant stories about the decline in prices of larger brands like Rolex and Patek. However, these prices are lower compared to the highs of earlier in the year, where this past summer a Philippe Dufour went for over 5m CHF at Christies or a Patek Philippe world time went for over 66m HKD (6.6m GBP).

Of course these highlights are great stories in and of themselves, but there is a larger picture to paint. To do that, let’s compare Sotheby’s annual auctions.

Every year Sotheby’s has a November Important Watches auction in Geneva. Looking at the relative performance of this auction in 2023 vs 222 is a valuable way to see how the auctionable watch market has changed over the last year.

In 2022, the in-person auction generated 13.7m CHF in sales. Only one watch (a pre-production FP Journe) managed to pass 1m CHF. In 2023, however, the value was only 11.3m CHF for the in person auction (similarly only one watch passed the 1m CHF mark). The auction also contained 10% fewer watches than the prior year.

Unsolds

Another major metric to consider is the unsold rate. Auctions like the OAK auction generated a lot of conversation recently for having a seemingly high rate of unsold watches.

However, when we look at the data for 2023 vs 2022, we see that the unsold rate has actually declined to 3% from 3.5%.

This, however, is a tricky metric to generalise as it depends on so many factors such as minimums and preselling. Clearly though, if you’re perhaps willing to lower your price, you can move watches.

Conclusions

Overall there is increased weakness being felt throughout the watch market, and auction houses are no exception. While there is some safe refuge for independent watchmakers, the stable big brands’ more tradable references are seeing a weaker watch market.

Though lots are still moving, when it comes to non museum level pieces, there is simply less competition driving up prices. That said, there is still the bright spot of historic items and truly unique pieces being able to fetch fantastic sums. The very very top of the market may be ok for now, but a pricing reset is quite widespread.

Market Update

The market dips lower, but could interest rates provide relief?

Bloomberg Subdial Watch Index

Interest Rates

Bloomberg Subdial Watch Index vs Interest Rates

Auction Season

Sotheby's Important Watches Geneva

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