For investors in Swiss watch brands — and all high-end watches for that matter — new data is showing that price declines in the secondhand, or used, market will continue.
And that's especially good news for shoppers of Rolex watches, which have been notorious for extreme supply shortages and long waitlists.
In a recent note to clients, Morgan Stanley reported that the WatchCharts Overall Market Index — which tracks a basket of 60 luxury Swiss watches across 10 brands in the secondhand market — fell for the ninth straight quarter in the second quarter ended June 30.
Prices have been falling since the pandemic peak hit in the first quarter of 2022. Current prices in the second quarter fell sequentially compared to the first quarter by 2.1%, and year over year by 1.2%.
“The secondary market decline remains broad-based, with few brands seeing positive performance in the second quarter,” Morgan Stanley analysts wrote in the report.
Morgan Stanley believes the downward pressure on prices will continue throughout the year.
Looking at year-over-year changes in the secondary market, only five brands saw prices rise, including Montblanc (+2.4%) and Hamilton (+2.2%) among the lucky few. High-end brands like A. Lange & Söhne (-5.3%), Breitling (-5.9%), Omega (-6.8%), Rolex (-7.2%), and Audemars Piguet (-12.5%) were among the worst performers.
Secondhand prices matter beyond being a marker of value for specific watches. They can affect prices paid in the primary market, where new watches are sold by authorized dealers (ADs).
Perhaps the most interesting trend to come out of the report: Rolex, the one brand that seemed immune to price and sales pressures, is starting to feel the heat.
It appears that Rolex watch “flippers” — dealers who buy new watches and flip them in another market that pays more — are facing headwinds. That is leading, Morgan Stanley reckons, to increased supplies of new Rolex watches to consumers at the primary, or AD, level.
Morgan Stanley used two factors in determining whether speculation in Rolex watches was abating: the size of the “gray market,” defined as current-production watches listed on the secondary market in brand-new condition, and wait times for specific Rolex watches at ADs.
The analysis found the number of Rolex watches in the gray market has been falling. The bank said declining gray market supply was due to rising retail prices for Rolex watches and falling prices paid for gray market watches, making flipping watches less profitable.
Second, Morgan Stanley and WatchCharts looked at wait times for popular Rolex models. Because data on wait times is limited and hard to tabulate, WatchCharts used data derived from the Rolex community on a subreddit to compute wait times.
Excluding the Rolex Daytona chronograph due to its small sample size, the analysis found improved wait times for certain Rolex sports watches. “The results of the analysis indicate that the Submariner, GMT-Master II, and Explorer collections all saw an improvement in waiting times so far this year, compared to 2023. Furthermore, the GMTMaster II and Explorer waiting times appear to have trended down since 2022,” the report said. Wait times for those models can be seen in the graph above.
In short, reduced gray market supply on the secondary market and improving wait times for popular Rolex sports watches means speculation in the watches is decreasing. And that may be good news for the primary market. It also means, after years and years of buyers being turned away due to lack of supply, that there might actually less demand from Rolex fans in general.
"We think there is generally greater [Rolex] availability on the primary market, and that primary market demand is waning as a result of both decreased speculative purchasing and decreased organic demand," WatchCharts founder and CEO Charles Tian said to Yahoo Finance.
All this means is there are more Rolex watches at the AD level for regular consumers. And for Rolex fans who aren't flippers, it may be finally possible get that 2024 Rolex Submariner in the near future.
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