This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on September 5 - 11, 2016.

The returns from luxury timepieces have risen steadily over the years despite the turbulent economic conditions. According to the Knight Frank Luxury Investment Index (KFLII), which tracks price growth in 10 luxury investment segments, luxury watches have seen a 3% to 5% price increase in the past four years.

The Malaysian market for luxury watches is growing steadily, says Bertrand Meylan, CEO of Swiss-based MELB Asia Ltd, which manufactures and sells high-end watches such as Hautlence and H. Moser & Cie.

There is also a burgeoning demand for vintage watches, observes Frank Hon, the second-generation owner of Hang Thai Watch Sdn Bhd. Hang Thai is a retailer of new, pre-owned luxury and vintage watches.

“Based on our sales, the demand for vintage watches has increased 50% from 10 years ago,” he says.

Hon, who is a collector of vintage watches himself, says the prices of these timepieces can appreciate substantially over time. “For example, my Patek Philippe Calatrava in solid gold, released around 1965, cost RM20,000 a decade ago. Now, it is RM50,000 to RM60,000.

“Another example would be my 50th Anniversary Rolex Submariner, released in 2004, which I purchased for RM15,000. It is not vintage. But as it is no longer in production, it is considered a rare collectible. The price has appreciated to RM39,000.

“As a collector, I own fewer than 10 vintage watches, mostly Patek Philippe and Rolex. The first watch in my collection was a gift from my father. The rest, I purchased from other collectors. I believe that my collection has appreciated more than 500%.

“However, the best profit I have made was not from my personal collection, but Hang Thai’s retail collection. I made a 1,000% profit from the sale of a Rolex 1st Edition Submariner (Reference 16800), released in 1954.”

Investing in vintage watches

Anantha Kishnan, a law practitioner and vintage watch collector, says there are three categories of investment-worthy vintage watches — the lower-end, mid-range and high-end.

“The lower-end are older watches from lesser-known watchmakers in the 1940s and 1950s. In my opinion, collectors and watch dealers [in Malaysia] usually focus on this range as it is not that expensive. For example, if you buy a watch for RM4,000 and sell it two months later for RM6,000, it is a substantial return on investment.

“Mid-range watches are recognisable brands costing upwards of RM15,000. [In Malaysia], serious collectors tend to purchase vintage watches in this price bracket. Dealers who purchase them have to consider the holding cost [as it is not as liquid as the lower-end vintage watches]. If they mark up a RM50,000 watch to RM65,000, they may find it difficult to sell.

“High-end watches, which cost several hundred thousand ringgit, have the potential to increase substantially in value. But it is difficult to say how much they will appreciate over the years.”

Anantha says not many Malaysians realise that they are able to purchase vintage luxury watches overseas at a bargain. “In Europe and the US, you may get a simple, hand-winding, time-only, good quality Patek Philippe or Vacheron Constantin for less than RM20,000. But when it gets to Malaysia, it becomes expensive because of the brand perception.”

Buyers, dealers and collectors should take into account several factors before purchasing a vintage watch, such as its condition, the brand or manufacturer, the materials used, place of purchase and whether it is a discontinued model.

Hon says, “In my opinion, first, it has to be a discontinued model [as limited editions command a higher price]. Second, you have to take into account the watch’s history — from its release to its discontinuation — and factors like how it has aged, what the competing brands are and how the price has fluctuated.

“Then, look at the condition of the watch. We do not want to see a vintage watch that has been refurbished. Never change the parts or movement, dial and hands, even if it is rusty. A serviceable watch [that has been oiled and tuned] is still acceptable.

“Pay attention to the brand or manufacturer (whether it is a blue-chip brand such as Rolex or Audemars Piguet), its origin, history and purpose of the product. These are very important. For example, why is the Rolex Submariner famous? It is because it was used in 11 James Bond movies. Thus, [because of pop culture,] the demand for and popularity of the model skyrocketed.

“Next would be the materials used. For instance, if you would like to purchase a sport model Rolex or Audemars Piguet, pick the steel strap, not the two-tone. Why? A sport model Rolex, such as the Submariner, is catered for divers. Hence, the watch should look appropriate for the function — you do not wear gold for diving.”

To determine the value of a watch, Hon recommends using Ashland Investments’ Complete Price Guide to Watches.

Anantha has a more detailed list than Hon. “First, you have to consider the brand, manufacturer or watchmaker. Brands such as Patek Philippe, Audemars Piguet and Vacheron Constantin, especially with complications [such as moonface, tourbillon or chronograph] are good buys.

“Second, consider the artistic effort of the watchmaker. For example, well done cloisonné enamels are rare. They are rare because they are difficult to make. The art itself is not practised by many and was only revived in the 1990s by the late Rolf Schnyder, who owned Ulysse Nardin.

“Cloisonné enamels come in various colours and are separated by gold partitions. They have to be baked several times in the oven. Each time they are baked, they run the risk of damage, such as cracks. Possibly only one out of 10 will make it out perfectly. Also, not many old dials survive without damage over the years. Thus, they can command good prices. Another brand that does this well is Vulcain.

“Third is the association of ownership. If you can prove that your vintage watch belonged to a famous person, you can command a good price. For example, watches that belonged to Malaysian royals are stamped with the royal crest.

“[Also,] most Malaysian collectors would like to have a clean [watch] dial, devoid of imperfections, or if aged, even discolouration. Most hard-core collectors do not like their watches polished as most polishing is inexpertly done.”

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