Have vintage watches held value amid the volatile market?

The world may be in the midst of a pandemic and some shops may be shuttered, but rare jewellery and timepieces are still clocking demand.

To find out more about the world of investing in timepieces and watches, Rachel Kelly is joined by Ali Nael, Founder of 2ToneVintage.

Rachel Kelly: When did you start investing in luxury timepieces? 

Ali Nael: I started about 12 years ago when I first met an auctioneer coming to Singapore. I was showing an interest in buying watches but of course, I started in buying modern pieces at that time.

RK: Your background isn't in timepieces, what led you to start up 2Tone Vintage? 

AN: I was in the oil-trading business, which is a very intensive, time-consuming and stressful. I built a very sizable successful business at that time, but I had no time and place to put my money.

I was very interested in wearing my watches and enjoying them, so I started buying watches. I think for men, there are not many alternatives to enjoy our success or free time, so that was my hobby.

RK: So with no time, you decided to invest in time. Tell us more about your first timepiece - how much was it worth when you bought it and how much is it worth now? 

AN: The first serious piece goes back to 12-13 years ago. The first vintage watch which I consider as an investment grade for watches today was around 2013, I bought a rare Patek (Philippe) 2526 black dial, which is a rare watch, at an auction.

But it was an impulsive purchase, I didn't check the watch or inspect it. I paid US$42,000 (S$56,300) at the auction and when I got it, it didn't speak to me. 6 months later in another auction, I was physically there in Geneva, and I sold it to a dealer for US$60,000.

RK: What does one look out for when buying a watch for investment in comparison to buying it for passion? 

AN: The first rule is that you have to buy what you like, because it doesn't matter to you if it goes up in value if you buy what you like.

But as a collector, I focus on quality not quantity. It is not important how many watches you have, it’s important to buy the best quality vintage watches. Also, buy originality.

RK: How would you compare watches to other asset classes, such as stocks or commodities? 

AN: I come from the commodities world so I can answer this from the heart. It is a proven record that watches are investments that you can wear and enjoy.

Watches are very resilient to recessions, geopolitical uncertainty, inflation, deflation, and that has been demonstrated over and over again in the last three or four decades of auction records and transacted prices.

RK: Given where we are with the current global economic situation, how liquid is this market at the moment? 

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AN: The watch market is always very liquid, actually it grew during this pandemic. I think a lot of people are interested in watches but they didn't have the time, and time is the most important thing in life which didn't exist before the pandemic.

When people work from home, they have more time to read and learn about watches, they studied rare and vintage watches, they learned a little bit more about the importance of quality, and saw auction records.

So, actually watches are very liquid assets that you can cross the street and sell it anytime.

RK: What are the main avenues that investors could look at to resell their watches? 

AN: There are many avenues. People sell their watches on Instagram, Facebook, posting on websites, or they can go to dealers, shops or auctions.

It's a very liquid asset, unlike art or property which takes time to liquidate your assets. For watches, you can liquidate it within hours, but course not at a [exorbitant] price.

RK: For an investor who would like to enter this market, what kind of returns can they expect if they were to invest in an investment-grade watch? 

AN: Experts will advise to buy the right watch. Speaking from my own experience, I have a steady return of 10 per cent on my investments on the watches that I bought in the last 10 years.

RK: How do people who are looking to get involved in watches as an investment know that what they're going to buy is a good investment? 

AN: You can buy a very nice and important watch for US$5,000 to US$15,000. So, it's not about the amount but more about finding the right watch.

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In our circle in the watch world, we have a saying - we buy the dealer, not the watch.

It is important for you to buy it from a trusted source, like an auction house or a trusted dealer which can be in any continent worldwide, but they have the assets of the name so they can stand behind the watches and can buy them back when needed.

Although it is very important when you’re sourcing [for the watch], it is also important that you buy it because you like it first.

RK: You mentioned that during the pandemic, you saw an increase in interest. Do you think watches are increasing as a trend when it comes to investing in alternative assets? 

AN: Most definitely. If you look up on Google, you can see the online participants today on auctions. I see it in my business model, the growth is very big.

And as the new generation have much more access to information, they can see records, find articles online, so the amount of information available today is very big and anyone can learn quite quickly.

RK: What are some of the key areas that investors should be mindful of when they're looking to invest in watches? 

AN: From my experience, for purists like me, vintage watches are considered watches pre-1985 because it was before the machines, the AutoCAD and the computers were introduced to manufacturers.

But it doesn't mean that modern pieces are not a good investment. Some very special, rare or limited editions pieces can be great investments too. Everyone has to find what they love first, take your time and don't rush it.

Study the watch very well, ask for details, and get the opinions of 3 to 4 people before you buy it. Don't only listen to the person selling you the watch. Ask other people or reach out to famous people online, book writers or auctioneers and get their opinions.

This interview was broadcasted on MONEY FM 89.3 on 9 October 2020.

This article was first published in MONEY FM 89.3. All content is displayed for general information purposes only and does not constitute professional financial advice.