Luxury Watches as an Investment

Only the best watches increase in value over time. Here's how to tell the difference between the collectible and the merely expensive

By Katya Kazakina

As a rookie collector, George Saviano bought watches because they fascinated him with their intricate mechanisms, not their potential price appreciation.

Since 2004, he has bought about 30 timepieces. Some increased by 50%, others would make him pennies on the dollar, he says. As he gained experience and knowledge about watchmaking and the watch market, he has become more selective.

"I saw that if I limit myself to buying fewer, more expensive and more exclusive pieces, I enjoy them more, and they are also a better investment," says Saviano, 58, a cardiologist who lives in East Brunswick, N.J.

Like BMWs and iPhones, most watches—whether they cost $500 or $50,000—drop in value as soon as they leave the store. The question: How to select the winning models that will hold value or increase in price over time?

Resales at Auction

"To invest in watches, you either buy vintage, or you buy incredibly rare and special pieces," says Adam Lindemann, New York-based collector and principal shareholder in Ikepod, Swiss maker of timepieces designed by Marc Newson. "I bought them all: Paul Newman, Steve McQueen, James Bond," he says of vintage models nicknamed after film stars. "That was the fun part. Then I sold them all, and I made money."

At auction, the resale value of vintage watches skyrocketed between 2004 and 2008. "It felt as if people were buying pieces for one price and selling them a month later for a 10% profit," says Aaron Rich, Sotheby's (BID) department head of watches in New York.

When the speculative bubble burst in the summer of 2008, some pieces that had been fetching $100,000, dropped to $30,000 to $40,000, Rich says. That led to a temporary paralysis when sellers didn't want to sell and buyers didn't want to buy.

The mood changed in the second half of the year. In December, Christie's held its strongest New York auction (an earlier sale in Geneva set 12 world records). "We had clients tell us, 'I am not earning any money in the bank, so I'd rather put it into something I can wear, enjoy, and that's holding its value,'" says Sam Hines, a Christie's vice-president and head of watches in New York.

Well-preserved, rare vintage pieces by Patek Philippe, one of the top Swiss watch manufacturers, led all watch auctions at Christie's last year. The most expensive lot of the year was a 1942 model in 18-karat gold, featuring a perpetual calendar; it fetched $2.77 million, almost doubling its high presale estimate.

Lower-Priced Opportunities

Although you do need a discretionary income to collect watches, being a Saudi prince or Russian oligarch is not a prerequisite.

Holly Savino, a stay-at-home mother of two from New Jersey, found a "tremendous amount" of investment possibilities under $50,000, she said. She favors Patek's men timepieces from the 1940s and 1950s because of their attention to detail and iconic designs. She hasn't sold her vintage Pateks yet but has been able to sell non-vintage men's Pateks at a profit.

Contemporary ladies' watches, as she recently discovered, don't make good investment. She lost money on a Patek with a diamond bezel. "Most ladies' watches are seen as pieces of jewelry," she said. "They don't fit into the history of horology, I don't care who the maker is."

A select group of contemporary men's timepieces make good investments if they are produced by one of the top brands and are extremely complex mechanically and limited in number, Sotheby's Rich says. Companies that manufacture these limited-edition collectible models include Patek Philippe, Vacheron Constantin, Audemars Piguet, Breguet, A. Lange & Söhne, and independent newcomers, such as F.P. Journe, Richard Mille, and Greubel Forsey.

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