The best entry-level luxury watches to buy in a falling market

It's time to buy that Rolex.

Well, if you really want a Rolex for the Rolex. If you're eyeing a luxury watch as an investment piece, things are a bit more complicated.

The luxury watch market is looking kinda iffy right now. Prices of big names like Rolex and Patek Philippe have been falling since the second half of 2022, and have now hit a two-year low on the grey market. And while these prominent brands are doing a bit of a limbo dance, guess who's sneaking under the bar? Yep, entry-level watches.

It's a curious situation — entry-level luxury watches are outperforming the usual top performers. This makes things a little tricky for the luxury watch investor. Do you buy that Rolex now that prices are low, with the faith that prices will increase in time to come? Or do you bank on the entry-level competitors and jump into the Cartier pool?

If you ask me, it's not about the brand so much as it is about the watch model. But don't take my word for it. I recently sought out MoneySmart's resident watch collector and watch hobbyist for a deep dive.

His name is… a secret. He's amassed years of knowledge and experience in the world of horology, but he'd rather keep his identity a mystery and let his insight do the talking. We'll call him John Lee. In a falling luxury watch market, these are John's top picks.

1. Watch prices are falling, and it isn't normal.

Before we get into which luxury watches to invest in in today's falling watch market, let's understand the "why". What's caused luxury watch prices to be on a downward trend?

Let's go into a brief history of luxury watch prices for the past decade or so. I was surprised to learn that up till about 2016, Rolex prices did not increase or decrease-they held pretty steady. From 2016 to about 2019, we began seeing a pickup.

The pandemic-driven rise in luxury watch prices

At the end of 2019, Covid-19 hit. The pandemic got a lot of people rethinking their bling game for two main reasons: an increase in disposable income, and stock market movements.

Let me paint the picture for you. It's a global health emergency. People are not only stuck indoors but stuck in their home country. Travel was highly impractical and risky from 2020 to 2021, and even going into 2022. That meant that the pot of money people might have spent on their year-end holiday sat unused as disposable income waiting to be spent.

"Typically, for a relatively wealthy consumer, they would allocate between $8,000 to $15,000, or maybe even $20,000 to go on a holiday," John says. "If they can't go on holiday, they can't dine out, what do they do with the money? Hence a lot was allocated to alternative investments or hobbies like luxury watches."

Secondly, Covid-19 also boosted the stock market, which peaked around mid-2022. Crypto was also on its way up and, bored at home faced with nothing but Netflix and social media, people started seeing other people getting rich. That's another reason people began turning to luxury watches as alternative investments.

"Secondhand dealers also started getting in on the action, because they saw an arbitrage opportunity — they can buy it and sell it for a higher price, especially for the high-demand models," John notes.

At this point during the pandemic, even the models that are usually more accessible were getting very hard to get, such as Rolex's Oyster Perpetual. Nearing the end of the pandemic, luxury watch prices hit their peak.

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The rich-cession

In May 2023, the pandemic officially ended. But truth be told, a lot of us were back in offices and travelling again even before the WHO made their monumental announcement. When we went back to the real world, we commuted to the office, we spent money eating out, we bought new clothes to fit our post-pandemic burgeoning figures, and so on.

With all these costs back on our plates, consumers had less disposable income to spend on things like luxury watches. In fact, some even began selling their pandemic buys in the grey market, either realising that they didn't really want that Rolex after all, or turning their investment into cash that they now needed.

"Some of them also are seeing that the prices are falling. So it's like a domino effect — 'oh, it's falling. I might as well sell now before it falls further,'", John explains.

"In essence, it's not normal. The reason why watch prices are dropping of late is because of the surge that we saw during the Covid period," John tells me. "The drop was so significant because the rise was also very significant."

Has this ever happened before? Not on the same scale. We haven't seen a similarly drastic surge and drop in recent times, but we did see a similar pattern before Covid-19. From the early 2000s to 2009, luxury watch prices were slowly increasing.

When the recession hit in 2009, demand fell. "It's very economically linked and correlated," John explains."When the economy is good, people will generally gravitate more towards luxury goods." And when it's poor, demand for luxury goods drops.

I want to highlight at this point that it's the prices on the grey market that have been falling-not the prices from official authorised channels. In fact, Rolexes are still very difficult to attain brand-new from official Rolex sellers.

It's much easier to get your hands on a Rolex via the grey market, albeit at higher prices. What's significant is the fact that these secondary market prices have been falling over the last one and a half years, narrowing the price differential between the grey market and the authorised dealer.

2. Why are entry-level watches outperforming the big names?

Turns out, the smaller guys are getting some limelight. Watches that don't cost an arm and a leg (maybe just a pinky toe) are in the spotlight now. According to Bloomberg, entry-level priced watches like Cartier and Omega are now outperforming juggernauts like Rolex and Patek. Yes, these lower-priced brands are still declining, but their decline is notably less than that of their more expensive rivals:

With watch prices falling left right and centre, why are less expensive brands hit less hard? Firstly, the obvious answer is affordability. As we've noted, buying a watch from, say, Tudor will cost you a lot less than buying one from its more prominent cousin, Rolex. "Tudor belongs to Rolex, and offers more affordable models that have the same value and quality as the higher-end Rolex models," John explains.

Plus, inflation has shifted the entry-level line for luxury watches. Everything has gotten more expensive, including entry-level watches. "I remember back in the day, you could get a Rolex Submariner for $3,500, or even $4,500," John says wistfully. "But now, the retail price is about $10,000! So whatever used to be entry-level has moved up."

John tells me that these days, many even consider Apple Watches as the entry-level watch to own. It's relatively affordable, functional, and suits the needs of Gen Zs and millennials — the latter of which has also been ageing out and is growing more focused on family building.

3. So, should I buy an entry-level luxury watch?

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Entry-level or not, investing in watches is definitely not for everyone.

"Watch investment is a very tricky thing," John warns me. "Generally, it's a depreciating asset, like cars. I wouldn't advise people to invest in watches as a means of getting instant gains."

Instant is out of the question, but there could be gold at the end of the rainbow for you if you're willing to play the waiting game. And play it well — you need to pick the right watch if you're in it for investment value. These watch models have appreciated well over the years:

• Rolex Daytona
• Rolex Submariner
• Patek Philippe Nautilus 5711
• Audemars Piguet Royal Oak

If you know a little bit about watches, these timepieces need no introduction. Otherwise, know that these watches are hype-models that are world-renowned for their design—decidedly not entry-level timepieces.

They're now pretty rare to own, and not easy to acquire. You're definitely going to pay a five-figure sum, save for that Patek 5711-this now discontinued model sits comfortably in the six-figure price range.

According to Chrono24, the stainless steel 5711/1A-010 with a blue dial was valued at around US$151,000 (S$201,116) in December 2022. It saw an incredible appreciation of 106 per cent from US$73,000 just two years earlier.

We won't elaborate on how to pick out a luxury watch to invest in right now but suffice to say that you need to consider the brand, value retention, market demand, and provenance or history. 

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For example, the Panerai Radiomir has a strong military history and connection to the Italian Navy. The name Radiomir refers to a special luminous compound patented in 1916, which enabled Royal Italian Navy divers to see in the dark. Panerai manufactured these Radiomir watches in secret for the Navy as WW2 approached, with such early Panerai models using Rolex movements thought to be superior in such tough conditions.

After discovering the radium-based compound was radioactive, Panerai replaced it in 1949 with a tritium-based one that was both safer and brighter. Thus was born the next Panerai range — the Panerai Luminor.

4. The best entry-level luxury watches

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If we've inspired you to purchase your first luxury watch-whether for wearing or for investment, here are John's top picks.

• Rolex Oyster Perpetual (From $8,000): "You can't go wrong with the Oyster Perpetual."
• Omega Speedmaster, a.k.a. The Moonwatch, the first watch on the moon (From $4,000): "They say that if you're a watch lover and you don't have a Speedmaster, you're not really a watch lover."
• Tudor Black Bay 58 or 54 (From $5,000): "You're getting vintage Rolex quality with an entry-level watch."
• Cartier Tank Must Solarbeat (From $4,500): "Very versatile, timeless Cartier designs, and it uses solar power," John says. Plus, it's Cartier, darling.

As far as entry-level goes, John also has a Rolex Explorer, which is the entry-level sports model in the Rolex range. "Some would say it's essentially a pimped up Oyster Perpetual!" he laughs. "I call it a "GADA" watch-Go Anywhere, Do Anything. You can wear it to a barbecue, wear it swimming, to a beach, a holiday, go hiking with it, or even wear it in the office or in a dinner setting."

The versatile Rolex Explorer isn't quite "entry-level" — at least not to me-but its price point (around $10,000) is not a lot higher than the Rolex Oyster Perpetual ($8,000 to $9,000). John actually purchased it years ago for less than $9,000, before inflation pushed its prices up to the five-figure mark.

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5. What's on our watch list for 2024?

We don't always get a heads-up when it comes to new luxury watch releases. Having said that, the annual Watches and Wonders event held in Geneva is one avenue we get to see new trends and timepieces. Some brands do show previews or drop hints in their marketing.

Otherwise, sometimes we just have to keep our eyes keen to spot unreleased watches on the wrists of celebrities — Daniel Craig was recently seen sporting an unreleased Omega Speedmaster with a white dial. Yep, the Omega Speedmaster is the Moonwatch-the first watch on the moon.

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But bringing us back down to Earth, John suspects that the downward trend for luxury watches will continue. In the current economic climate, and in light of the fact that the impact of inflation hasn't quite hit our bank accounts yet, we aren't expecting an uptick in the luxury watch market.

"Luxury watches are still a first-world interest and a wealthy man's hobby," John says. "But if newer models are released that are interesting and that captivate me emotionally, I may consider breaking my bank account."

The world of luxury watches is full of surprises. And while treating them as investments is a bit like playing the stock market (but with prettier dividends), there's never a dull moment. Perhaps you're in it for the investment, perhaps the prestige.

Or maybe you just can't resist a shiny object (we've all been there). But remember: the world of luxury watches is as much about passion as it is about precision. Whether you go big or start small, it's all about finding that perfect timepiece that, as John so eloquently put it, captivates you emotionally.

ALSO READ: A beginner's guide to investing in luxury watches

This article was first published in MoneySmart.