Dr. Ito's In-Depth Analysis of Mechanical Watches! Vol. 47 - Why did the luxury watch bubble of 2022 occur?

Good evening everyone!

This column talks about mechanical watches from an engineer's perspective. This is the 47th installment.

"Why did the luxury watch bubble occur in 2022?"

I will be talking about this topic here.

It's a fact that any watch lover knows that the prices of some luxury watches have risen "abnormally" in recent years.

Rolex, Patek Philippe, Audemars Piguet. Models that were traded at close to their retail price until 10 years ago have now doubled or tripled in value. Many people have felt uneasy about the fact that many watches are being treated like investments. In particular, from 2020 to 2022, there was a surge in prices that could be described as a bubble.

So, this time I would like to provide an easy-to-understand explanation of the watch bubble of the early 2020s and the current market prices.

The coronavirus shock was the trigger

As you all know, the luxury watch bubble started with the COVID-19 shock of 2020. Lockdowns occurred all over the world,

・Factory operations halted ・Logistics halted ・Boutiques closed

In this situation, new watches were almost non-existent on the market.

・Can't travel ・Can't go to high-end restaurants ・No way to spend money

As a result, money was concentrated in watches. Demand increased, but supply stagnated. It was only natural that prices would rise.

Social media amplifies desires excessively

During this period, there was an explosion of posts about luxury watches on social media platforms such as Instagram, YouTube, and TikTok.

・"I completed the Rolex Marathon!"
・"I was able to purchase it from an authorized store!"
・"The regular price of XX yen is now doubled!"

This was the moment when luxury watches were recognized as an asset rather than a status symbol. Social media stimulates comparison and the desire for approval.

"I want one too" "If I don't buy it soon, I'll miss out"

These sentiments further fueled demand.

From investment to speculation

Since 2020, interest rates have been extremely low worldwide. Stocks, virtual currencies, trading cards, and everything else have become targets for speculation. Watches are no exception, and have come to attract attention as targets.

The key point is "liquidity."

Popular Rolex, Patek Philippe, and Audemars Piguet models could be converted into cash around the world. In other words, they were recognized as "movable assets." Another characteristic of this era was the increase in unused watches that were sold while the warranty date was still young rather than worn.

Connoisseur brands also become targets for speculation

The construction and finish of the movement and exterior are excellent. However, the name is not well known in the general market. For example, independent microbrands and small, long-established brands. Although these are extremely attractive watches, most of them lose a lot of value when sold. However, at the end of the watch bubble in 2022, speculation turned to these watches as well, causing their prices to rise abnormally.

However, in investing, the greatest weapon is "what everyone knows." Since 2023, interest rates have risen and speculative money has been withdrawn, causing the prices of connoisseur brands to collapse significantly.

What the bubble taught me

What I learned from this bubble is that

・Luxury watches can be assets ・But they are not suitable for speculation ・The essence is "Can you understand the background of the watch?"

So, choose something that allows you to see the value of a good watch whether the price goes up or down.

summary

What did you think?

Looking at history, bubbles always end at some point. In the end, only truly beautiful watches that can be loved for a long time remain.

While some popular models are currently trading at prices higher than they will be in 2022, there are also many excellent watches being sold at very attractive prices. This may be an opportunity to choose a watch not as an investment, but as a "tool for life."

We hope that this article has been useful to you and has sparked even a little interest in luxury watches! If you have any questions, please feel free to ask us directly and we will be happy to answer them. We look forward to your visit and inquiries.

Please look forward to the next one!