Luxury Swiss Watches as Investments Storms Back Onto Center Stage
Written by admin on January 19, 2011 – 7:46 pm -by Nazanin Lankarani
PARIS — Luxury watchmakers are flying high again, buoyed by a spectacular recovery in sales last year, and the optimism reflected in a flood of new models on show at the Salon de la Haute Horlogerie in Geneva this week is also palpable in vintage watch salerooms.
For many, last year marked a full recovery from the global crisis that hit the market in 2008.
In the new watch sector, figures tallied and estimated by the Federation of the Swiss Watch Industry indicate that the Swiss industry’s export sales for the whole of last year probably reached 16 billion Swiss francs, or $16.5 billion, their second-highest level ever and just short of the record 17 billion francs achieved in 2007, according to Jean-Daniel Pasche, the federation’s president.
In the reseller’s market, the global auction houses also had an impressive year.
For Christie’s, global watch sales in 2010 reached $91.2 million, the highest ever reported by an auction house in the watch category, topping the previous record of $88 million, set by Christie’s in 2007.
“This was quite a spectacular year, proving that watches are as hot as ever,” said Aurel Bacs, international head of watches at Christie’s, in an interview from Geneva.
“Regardless of the state of world economies, watches have increased in popularity among the planet’s population,” Mr. Bacs added.
For Sotheby’s, global sales topped $40 million, nearly doubling the previous year’s total of $20.6 million, in line with what Geoffroy Ader, European head of watches, described as a stellar year for auctions in all categories.
“We were fortunate to catch the interest of collectors from around the globe, with timepieces for every taste and every type of collector,” Mr. Ader said in Geneva.
Smaller, more specialist houses, in contrast, fared less well. Antiquorum ended 2010 with $45.8 million in global watch sales, down nearly 30 percent from $65.2 million in 2009, despite holding the same number of auctions.
“Antiquorum restructured on a global basis in 2010, resulting in a temporary, and expected, downturn in turnover,” said Charles Tearle, a director of Antiquorum New York.
Still, Mr. Tearle said he shared the general optimism about current trends. “Now the restructuring is complete, and we expect to see an increase in global results for 2011,” he said.
Also on the downside, Patrizzi & Co. Auctioneers, the house created by Antiquorum’s former owner, Osvaldo Patrizzi, ended operations in Geneva and New York in late 2010, undone mainly by problems with its online bidding system, a core part of its competitive strategy.
Mr. Patrizzi plans to resume operations in Hong Kong sometime this year, focusing on the Chinese market, said Leo Verhoeven, its chief financial officer.
One brand, Patek Philippe, was overwhelmingly responsible for raising watch sale revenues last year, auction house tallies show.
Christie’s reported that it sold five watches last year that fetched more than $1 million — two more than in 2009 and all of them Patek Philippes.
The highest grossing lot last year was a 1943 Patek Philippe reference 1527, a gold perpetual calendar wristwatch that sold in May at a Christie’s Geneva sale for 6.25 million francs.
Sotheby’s did well in the historic watch category, selling a Cartier desk timepiece dated 1926 for £79,250, or $125,000 — 10 times its estimate — in London in December. It also sold a Rolex “Paul Newman” Daytona stainless steel wristwatch, estimated at 60,000 to 80,000 francs, for 464,500 francs in Geneva in November.
The relatively swift recovery of the watch market demonstrated that the earlier slide reflected more a generalized loss of confidence during the financial crisis than a serious crisis of overvaluation, Mr. Bacs said, explaining that starting in autumn 2008, the global economic downturn dampened sellers’ confidence, with consignors hesitating to part with their timepieces.
“After a difficult fall 2008, marked by Lehman Brothers’ bankruptcy and later the Madoff affair, we were faced with serious seller hesitation to consign,” he said. “No one knew how badly things could turn out.”
Despite a difficult second half of 2008, Christie’s managed to end the year with $70.2 million in global watch sales, against Sotheby’s $43 million. The downward trend continued in 2009, with $67.2 million at Christie’s and $20.6 million at Sotheby’s.
“Still, there was never any indication of waning buyer’s interest even during the crisis,” Mr. Bacs said.
While financial markets remained in turmoil, Christie’s managed to obtain the consignment of several important private watch collections, including the “Connoisseur’s Vision” collection secured in the summer of 2009.
“The decision to sell that collection was made by the owner in 2009, based on that year’s half-year results, while the world was traversing a severe financial crisis,” Mr. Bacs said. “The spring of 2009 was a definite turning point in our market.”
The Connoisseur’s Vision collection, sold in a four-part auction starting in autumn 2009 and culminating in the record-breaking sale of the Patek Philippe for $5.7 million last spring, achieved a total of $19 million, making it the most valuable private collection of wristwatches ever sold at auction.
For Christie’s, that consignment, by itself, was a sign of the independence of the watch market from global economic conditions.
“There is correlation between the watch market and the economy — but not necessarily parallel behavior,” Mr. Bacs said. “In some instances, the worse the economy is faring, the better certain markets will do. When confidence is undermined in the financial markets, investors take a closer look at art, watches, diamonds or real estate as an alternative investment class.”
Last year, the highest increase in demand for new watches, according to the Swiss watch industry figures, came from Greater China, with Hong Kong’s share of Swiss watch exports exceeding 2.8 billion francs in 2010 — an increase of about 46 percent compared with 2009 — and mainland China importing watches valued at over 966 million francs, nearly 55 percent more than the previous year.
In the resale market, as reflected in the major auction houses, a similar phenomenon occurred.
“Whatever the impact of the global crisis, we were more than compensated by the demand that came out of China,” said Mr. Bacs, of Christie’s.
For Sotheby’s, too, “the largest growth in demand for auction watches in 2010 came out of Greater China,” Mr. Ader said.
Bidder registrations allow auction houses to assess the geographic provenance of buyers and bidders in a sale.
“Ten years ago, there were no Chinese bidders at watch auctions,” Mr. Bacs noted. “At Christie’s last Geneva auction, of the 800 registered bidders, 50 percent were Asian, and a quarter from mainland China. Our Hong Kong sales have an even a higher percentage.”
Mr. Tearle of Antiquorum reported a similar trend. “We have seen a 20 percent increase in Asian bidders over the last two years,” he said.
To accommodate the increase in Asian participation, Antiquorum held two Hong Kong auctions last year, up from just one in 2009, posting a sales total of $10.3 million in that venue, double its results in the previous year.
This year, Antiquorum plans to add one more Hong Kong sale to its calendar, while also continuing to preview its New York and Geneva sales in Asia.
If economic predictions are accurate, the upward trend in the watch market should continue beyond this year. The retailing and consumer products sectors, including watches and other luxury goods, will remain “strong and steady” in Asia, according to a report issued in December by PricewaterhouseCoopers, which predicts an average 6 percent growth in those Asia-Pacific markets through 2014.
“For many collectors, parking their funds in a fine timepiece is an intelligent choice,” Mr. Bacs said. “With a fine Patek Philippe, an exceptional Rolex, a rare Lange & Söhne, in limited series and good condition, how wrong can you go?”
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