The higher they rise the further they have to fall. This has been story of prices for the hottest steel sports watches from Rolex, Audemars Piguet and Patek Philippe since the spring of 2022 when the market turned.
Every quarter since Q1 of 2022, prices have fallen furthest for waiting list watches from the secondary market’s big three, but there are signs that the slide has finally found a floor.
Morgan Stanley is reporting a quarter-on-quarter price fall — from Q4 of 2023 to Q1 of 2024 — of just 1.1% for Rolex and 1.4% for Patek Philippe.
Audemars Piguet prices actually ticked up by 0.1%, according to data compiled by WatchCharts and Morgan Stanley Research.
This near-term levelling out compares to a year-on-year drop in average secondary market prices of 8.6% for Rolex, 13.1% for Patek Philippe and 13.6% for Audemars Piguet.
Despite a significant drop in average prices, demand for the big three brands appears to be considerably weaker than a year ago.
Year-on-year, Morgan Stanley estimates that the volume of sales decreased by 19% for Rolex, 8% for Patek Philippe, and 10% for Audemars Piguet across major secondary market trading platforms.
After rocketing in 2022, inventory levels across secondary market platforms had been flat or falling slightly through 2023, but this trend appears to have reversed at the start of this year as sales cool.
Secondary market inventory for Rolex increased by 8% from Q4 of 2023 to Q1 of this year while supply of Patek Philippe and Audemars Piguet pieces were up by around 1%.
The research also found that watches are on average taking longer to sell, which is measured by the median age of inventory, or the duration for which purchased inventory is held before it sells.
Morgan Stanley Research points out that the big three are now the only major watchmakers (it does not track the low volume independents) that have watches trading at above recommended retail prices.
Averages, which span everything from ladies quartz watches up to grand complications can be a little misleading, but are worth tracking over time, as Morgan Stanley explains:
“We think value retention (VR), defined as the premium or discount that a watch trades on in the secondary market relative to its retail price (in USD), is a key metric to gauge brand
desirability. To be more precise, what matters more is the sequential change in value
retention rather than the absolute level.”
Even if traders can source brand new watches from authorised dealers and their fences, there is precious little profit in flipping the overwhelming majority of models today.
From an average retail price of $75,448 for a Patek Philippe watch, it can be resold for just a $4,000 profit. The potential profit for a Rolex is under $1,600. Audemars Piguet stock is currently the most profitable, with a $9,500 margin between average retail and secondary market prices. All margins have been narrowing over time.
