Luxury watches and handbags
Luxury watches and handbags
Designer bags and luxury watches are increasingly popular investment choices for UHNW individuals due to their impressive returns.
Chanel bags have increased in value by 16% year-on-year since 2016, while some of the Louis Vuitton Pochette bags have tripled – even quadrupled – in value since gaining cult status thanks to a certain Sex and the City episode. Hermès Birkin and Kelly bags regularly go under the hammer for eye-watering prices, with resale values often even outpacing gold.
Meanwhile, sales of watches at the big three auction houses totalled GBP488 million in 2023, with collectors increasingly chasing iconic and rare timepieces. A Rolex John Player Special broke the model record when it sold for GBP2 million at Sotheby’s in May 2023, double the price of a similar example sold at Phillips in 2021. For anyone investing in these luxury assets, understanding the volatility of the market and the importance of authenticity are vital.
Revenue in the handbags market is expected to show an annual growth rate (CAGR 2024-2029) of 7.34%, resulting in a projected market volume of USD30.36 billion by 2029.
Statista Market Insights, 2024
Designer bags: growth as an investment class
The popularity of designer bags and watches as investment classes lies in the fact that both have an ever-increasing gap between supply and demand for new items. The difficulty of sourcing the most desirable brands adds to their mystique.
Take Louis Vuitton’s Pochette, for example. The style was first released in 1992 and soon became the ‘It’ bag of the 90s and early 00s, retailing for USD165. The fashion house eventually discontinued the line, but demand remained at an all-time high. Over the next two decades, the style saw an average 379% surge in its retail price, selling for USD790 in 2021. The more limited its production, the more collectable the item and thus, the higher the resale value.
Demand for Hermès bags has also quadrupled over the last few years. Waiting lists often don’t even exist and, if they do, involve luck, knowing the right people and a very long wait. In fact, Hermès bags tend to skyrocket in value as soon as they leave the store because only a handful of customers actually get their hands on the most in-demand ‘quota’ bags in a notoriously hush-hush process (the subject of a class-action lawsuit in early 2024).
More than just status symbols, many buyers are keeping their purchases in storage for resale later, mirroring the process of other investments of passion, such as art and classic cars.
Luxury watches: the thriving second-hand market
As with designer bags, you’ll be met with lengthy waiting lists for the most sought-after timepieces from authorised luxury watch dealers. This has paved the way for a thriving second-hand market, particularly for models including the Rolex Daytona or AP Royal Oak.
The second-hand market is also often the only way for collectors to buy rare watches, since over 90% of watches aren’t in production anymore. The top ten most expensive watches to be auctioned in 2023 included a high proportion of independent watchmakers, such as Philippe Dufour, Roger Smith and Richard Mille, as well as rare Patek Philippe watches and classics from Cartier. Their total value was GBP42 million, an increase of 40% over the previous year.
An obvious benefit of both handbags and watches is that they can, of course, be used and enjoyed, so – with the appropriate care – an owner or collector can combine pleasure and style with increasing value. Another attraction for buyers is that acquiring these collectible luxury items contributes to sustainability because of their longevity. The resale market prolongs the lifespan of an artisan piece.
Key factors in value
Brands, models (and their scarcity) and materials are core factors in price. The main brands in the collectible handbag market are Hermès, Chanel and Louis Vuitton. The Knight Frank Wealth Report 2024 reports that bags such as the Birkin in Togo leather in classic colourways such as gold and black remain popular.
It’s also worth considering whether a bag has visible elements that are classic to the brand and increase the chances of it being considered a collectible – such as an identifiable logo or obvious signifiers that reflect the brand’s DNA.
Changing fashion trends can impact desirability and therefore value. For example, beaded bags from a century ago are now far less sought after resulting in a fall in value; it’s possible that changing attitudes towards the harvesting of rare animal skins could make certain items less valuable in future.
Meanwhile, the world of high-end watchmaking (haute horlogerie) rewards connoisseurship. The much-sought-after grandes marques, such as Audemars Piguet, Breguet, Patek Philippe and Vacheron Constantin produce in small numbers (Audemars Piguet only produces 44,000 pieces every year, compared with some highly collectible brands such as Rolex that produce over one million pieces every year) and are increasingly moving to a direct-to-customer sales model. This means their pieces are less available at retail, boosting value and desirability.
There are then a number of less obvious under-the-radar brands with significant prestige and collectability – A. Langhe & Söhne, Jaeger-LeCoultre, Roger Dubuis, F.P. Journe for example – and a ‘new wave’ of aggressively contemporary and innovative brands such as Richard Mille, Urwerk and Hublot.
This new wave of brands is attracting new clients to the market using a combination of challenging contemporary styling, advanced materials technology, new levels of retail pricing and limited supply. But of course, the luxury watch market is anchored by Rolex, which remains the most collectible and value-predictable high-end watch brand.
The most expensive watch sold at auction in 2023 was a Patek Philippe gold two-crown world-time wristwatch, which fetched
USD8.5 million
at Christie’s Hong Kong in May.
A Hermès Himalaya Niloticus crocodile diamond Birkin 25 with 18k white gold and diamond hardware was the most expensive handbag sold at auction at Christie’s Hong Kong, reaching over
USD300,000
in November 2023.
Source: Christie’s
Luxury watches and handbags: when issues arise
Authenticity
The golden rule is ‘buy the dealer’, not the piece. To minimise the risk of buying a counterfeit, it’s best to purchase a collectible watch or handbag from industry-respected sources, such as auction houses like Christie’s and Sotheby’s or reputable specialist dealers.
For watches, these include Watchfinder & Co., the online retailer owned by Richemont (the owner of Cartier and several leading Swiss watch brands) and Chrono24, another recognised online dealer. Perhaps surprisingly, online sales already exceed those in physical locations. The demand for second-hand luxury watches has resulted in Audemars Piguet launching a pre-owned watch business and Rolex launching an authentication service.
Bags By Appointment operates as a concierge for clients seeking a specific luxury item and sources and authenticates bags from the likes of Chanel and Hermès, as well as watches from Rolex, Patek Philippe and Audemars Piguet. It also runs a personalised investment portfolio service for clients who wish to collate a collection of exclusive pieces as an investment. Other significant players in the luxury handbags market offering authentication promises include Vestiaire Collective and Collector Square.
It may be possible to prove authenticity with relevant original paperwork, receipts and packaging – but owners of vintage items may no longer have these available. Ultimately, it may be necessary for an expert to determine what is genuine; specialist auction houses will carry out authenticity verification checks and issue authenticity warranties.
Original parts
When it comes to the resale of luxury handbags and watches, condition alone is not enough. It is also essential to securing the best price that all the components of an item are original.
A good example of this is Bakelite watch faces, which fade over time. The value of a watch with its original Bakelite watch face – even if it’s discoloured and possibly slightly cracked – will be higher than one that has a shiny metallic replacement face, even if it’s an official replacement from the same brand. Authenticity is everything.
Likewise, a watch which has all the original internal parts will have a greater value than one which has had a part replaced, even as part of a service by the watch brand. Overpolished watch casings are also undesirable to a collector because of the wear this can cause. Watches that include genuine parts from different models of the same brand – known as ‘frankenwatches’ – will also have a much reduced value.
Maintenance
Looking after a piece in the correct manner will maintain and extend its lifespan and its resale value.
For luxury handbags, this may include moisturising leather as an example, and careful storage to avoid damage is also important. But the general rule for value retention? Don’t replace any parts.
For handbags that have suffered through wear or tear, or appear damaged, always go to the brand for advice first before undertaking any work. If an investment piece is tampered with, it may affect its resale value, so be careful who you trust to do any work.
Asset performance
According to the Knight Frank Wealth Report 2024, which tracked the performance of ten popular investments of passion, watches were among the few categories that saw positive growth in 2023, with prices increasing by 5% and with 138% growth over a decade. Meanwhile, handbags fell by 4% in 2023 but have still seen a 67% increase over a 10-year period.
Key points to remember
Authenticity is everything when buying luxury watches or handbags as investment assets
Always buy from reputable sources, including auction houses and specialist dealers.
Rarity and condition are core value drivers
Consider these before making a purchase. Does it have obvious signifiers that reflect the brand’s DNA that would help it be considered a collectible, and are all parts original?
Careful maintenance is important
Seek expert help on storage, security and repairs before undertaking any work, preferably from the brand itself.
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Paul Jarvis from Superculture
