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, where we discuss mechanical watches from an engineer's perspective, is now in its 47th installment.

"Why Did the Luxury Watch Bubble of 2022 Happen?"

This is the topic we will be discussing today.

Anyone who likes watches knows that the price of some luxury watches has risen "abnormally" in recent years.

Rolex, Patek Philippe, Audemars Piguet. Models that were trading at close to list price 10 years ago are now, before you know it, two or three times that. Many of you may have felt uneasy about so many watches being treated as investments. In particular, from 2020 to 2022, there was an increase that could be called a bubble.

Therefore, this time, I would like to explain the watch bubble in the early 2020s and the current market in an easy-to-understand way.

The COVID-19 shock was the trigger

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

・Factory operations stopped
・Logistics stopped
・Boutiques closed

In this situation, almost no new watches were available on the market. On the other hand, what happened to the wealthy?

・Couldn't travel
・Couldn't go to luxury restaurants
・Had no way to spend their money

As a result, money flowed into watches. Demand increased, but supply stopped. It was natural for prices to rise.

SNS excessively amplified desires

During this period, posts about luxury watches exploded on social media platforms such as Instagram, YouTube, and TikTok.

・"Completed the Rolex Marathon!"
・"I was able to buy it at an authorized dealer!"
・"The list price of 〇〇 yen has doubled!"

This was the moment when luxury watches were recognized as "assets" rather than "status symbols." Social media stimulates comparison and the desire for recognition.

"I want one too." "I'll miss out if I don't buy one soon."

These feelings further accelerated demand.

From investment to speculation

Since 2020, global interest rates have been ultra-low. Stocks, cryptocurrencies, trading cards—everything became an object of speculation. Watches were no exception and garnered attention as such.

The key was "liquidity."

Popular models from Rolex, Patek Philippe, and Audemars Piguet could be converted into cash worldwide. In other words, they were recognized as "liquid assets." It was also characteristic of this era that an increasing number of unworn watches were sold with "young warranty dates" rather than being worn.

Even niche brands became targets for speculation

The movements and exterior craftsmanship are exquisite, but these brands are not well-known in the general market. Examples include independent microbrands and small, established brands. While these watches are incredibly appealing in terms of watchmaking, most of them depreciate significantly when resold. However, at the tail end of the 2022 watch bubble, these watches also became targets for speculation, showing abnormal price increases.

But ultimately, in investing, "everyone knows" is the biggest weapon. After 2023, as interest rates rose, speculative money was withdrawn, and the market for niche brands collapsed significantly.

What the bubble taught us

What this bubble showed us is that:

・Luxury watches can be assets.
・However, they are not suitable for speculation.
・The essence is "can you understand the background of that watch?"

Whether prices rise or fall, choose watches whose true value you can firmly recognize.

Summary

How was it?

Looking at history, bubbles always end eventually.What remains in the end are only truly beautiful and long-loved watches.

Currently, while some popular models are seeing prices higher than in 2022, many wonderful watches are also being sold at very attractive prices.It might be an opportunity to choose a watch as a "tool for life" rather than an investment.

I hope this article has provided you with valuable information and sparked some interest in luxury watches! Also, 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.

Stay tuned for the next installment! See you then!