Prices for the most popular pre-owned Rolex, Patek Philippe and Audemars Piguet watches will fall further as the market has been flooded with supply, analysts at investment bank Morgan Stanley said in a report.

After surging in 2021 and during the first quarter of 2022, an index of the most popular models from Daytona chronograph maker Rolex tracked by platform WatchCharts has fallen by 21 per cent since the market peak in April.Prices for the most popular Nautilus-maker Patek Philippe references are down an average of 19 per cent on the secondary market, while those for Audemars Piguet – the maker of the Royal Oak – have declined 15 per cent since the peak.

Prices are likely to keep falling because of a “dramatic” increase in supply, Morgan Stanley analysts including Edouard Aubin said in the report.

“We have noticed a significant increase of watch inventory in the secondary watch market year to date as a result of second-hand watch dealers and individual watch investors offloading their stocks,” Morgan Stanley said.

“Given the current watch inventory for sale and the worsening macro backdrop, we would expect second-hand prices to contract further quarter over quarter.”

The most in-demand models of the “big three” – Rolex, Patek and Audemars Piguet – account for a significant 71 per cent of the total traded value of the secondary luxury watch market. Prices for the WatchCharts overall market index, which includes other brands, fell by nine per cent in the third quarter this year compared to the second quarter.

An example of the decline is the Vacheron Constantin Overseas reference 4500V/110A-B483. The steel sportswatch model, made by the Richemont-owned brand with a retail price of US$22,500, peaked at US$39,900 on the secondary market in April. It can now be bought for about US$30,900, which is still a significant premium over retail.

Secondary market prices for watches have declined less than many other asset classes during the past 18 months, according to the report.

While second-hand prices of the 30 most traded Rolex watches fell eight per cent this quarter, they are still up a cumulative 21 per cent since January 2021. This compares favourably to the S&P 500 stock market index, which is flat, and to bitcoin, which is down 34 per cent during the same period.

The report identifies a few Swiss watch brands that are bucking the price decline trend. Even as Rolex and Patek prices fell, LVMH-owned Bulgari models rose one per cent, Richemont’s A. Lange & Söhne increased three per cent and Girard Perregaux, a brand that was bought in a management-led buyout from Kering this year, climbed five per cent.

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