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Auctions outperform the financial markets

Auctions outperform the financial markets

Wednesday, 16 December 2009
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Christophe Roulet
Editor-in-chief, HH Journal

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4 min read

The autumn season of auctions in Geneva ended on a more than high note, with results that bode well for the year to come. We take a behind-the-scenes look at the bidding.

While most investors have kept their eyes riveted on share prices during this roller-coaster year, the auctioneer’s gavel could just as easily have galvanized their attention. The autumn season in Geneva ended with exciting results for all three houses to have presided over sales this November, as Antiquorum, Christie’s and Sotheby’s gleaned no less than CHF 36.3 million (€24 million). “Sales in May already took place in a more favourable climate than expected,” commented Aurel Bacs, International Co-Head of Christie’s Watch Department. “But when in July one of the world’s most important collectors indicated he was prepared to part with ten Patek Philippe watches, collected between the 1970s and 1980s and with a total estimated value of CHF 3 to 5 million [€2 to 3.5 million], I knew there and then that the November sale would be a major event.”

Safe investments

Indeed, only a dozen of the 381 timepieces proposed by Christie’s went unsold. As for value, with a pre-sale low estimate of some CHF 10 million, the evening closed with a final result of CHF 19 million (€12.5 million). “This proves that enthusiasm for this type of watch hasn’t waned, crisis or no crisis,” Aurel Bacs observed. “It’s extremely important that the watches we propose at auction are exceptional timepieces and that no unsympathetic work has been carried out on them, as connoisseurs are extremely demanding. Their number is growing too, particularly in Asia, as these two examples show. We noted close to 900 active bidders at the November sale for just under 400 lots. As for our online watch catalogues, five years ago we could expect between 50,000 and 100,000 visitors. Today between 250,000 and 300,000 people consult them on our site.”

Aurel Bacs goes on to quote the World Wealth Report, published by Merrill Lynch and Capgemini, which recorded 364,000 High Net Worth Individuals (HNWIs) in China at end 2008. These people, who are defined as having financial assets excluding their primary residence of at least US$1 million, are increasingly drawn towards watches in general and collectable watches in particular. According to the report, “Jewelry, gems and watches attracted the third largest share of passion investment overall (22%), and the top allocation in Asia and the Middle East. HNWIs certainly devoted proportionately more to this category in 2008 than the 18% allotted in 2006, before the crisis, suggesting HNWIs were more likely to perceive jewelry, gems, and watches as “safer”, tangible investments that might retain long term value. Watches were the only category in which healthy sales growth was evident (9%), and that increase was largely due to emerging-market demand. “The report goes on to quote record sales at Sotheby’s Geneva last year.

Watches outperform shares

As Aurel Bacs concludes, “It’s as though a hundred tourists pulled up outside a restaurant with just twenty seats. And tourists who aren’t in the habit of eating dry bread!This is why the frequent comparisons with the stock exchange aren’t entirely accurate. Compare the current level of the Dow Jones with the same period in 2007, and you’ll see a loss of 3,000 points, more than 20%. It’s quite a different story for collectible watches. We have experienced crisis, true, but we have also witnessed an increase in both the number of connoisseurs and appetite for these timepieces. This has meant collectible watches have clearly outperformed the financial markets.”

Geoffroy Ader, European Head of Watches at Sotheby’s, couldn’t agree more. “Look no further than our sales in May and November this year, and in particular Rolex which is a financial barometer for auction houses such as ours. A Daytona sold for CHF 18,000 [€12,000] early in the year whereas the exact same model went for CHF 31,000 [€20,500] a few weeks ago. Two identical Paul Newmans sold for CHF 50,000 and CHF 90,000 respectively [€33,000 and €59,500]. The legendary Patek Philippe Ref. 2499 in gold, which was unsold in May, went for CHF 310,000 [€205,000] in November. Calling this confirmation of a trend would be an understatement. There can be no doubt that enthusiasm and confidence have returned.”

Patek Philippe, Ref. 2499, in gold © Sotheby’s
Patek Philippe, Ref. 2499, in gold © Sotheby’s

For Geoffroy Ader, auction prices and share prices are heading in the same direction but not at the same speed. While the same Rolex models gained 72% and 80% between May and November, the Swiss share index posted an increase of 20% over the same period, as did the Dow Jones. In financial terms, as an acquaintance of Geoffroy Ader leads us to believe, anyone who put their money in the collectible watch market in May this year made a wise choice.

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