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Why people buy watches that are worth more than your house

Prototype Swatch watches are displayed during the Sotheby's preview on March 10, 2015. (Getty Images)
Prototype Swatch watches are displayed during the Sotheby's preview on March 10, 2015. (Getty Images)

Apple is a company that knows how to sell small shiny objects to its many devoted fans.

It only makes sense, then, that they’re using this expertise to sell the Apple Watch Edition, which sells for $13,000 to $22,000 in Canada, to the company’s fans who enjoy the finer things in life.

Apple’s basic watch starts at $449, but the ones at the high end of the range have an 18 carat gold case and a sapphire crystal. An extended warranty is available for an extra $2,000. None of the watches come with the necessary iPhone to use all the features.

Compared to some of the less technically-advanced watches out there, however, like the timepieces Nate Borgelt sells, they’re a relative bargain.

“I have clients who have $100,000 mechanical pieces, and wear their iWatch,” says Borgelt, Assistant Vice President, Specialist Watches & Clocks at Sotheby’s.

The computerized watches are a remarkable contrast to the rare masterpieces Borgelt usually handles at the elite auction house, where the prices for luxury timepieces generally start at USD$5,000.

The normal range for timepieces is up to $500,000-$600,000 at Sothebys, says Borgelt, adding that exceptional highlights can fetch far more.

“We have pieces that start at $5,000, all the way up to millions,” he says. “Last year we sold the Henry Graves Jr. Supercomplication [Patek Philippe], the most expensive watch ever sold, for $24 million.”

Henry Graves Jr. Supercomplication, the most expensive watch ever sold. (Sotheby's)
Henry Graves Jr. Supercomplication, the most expensive watch ever sold. (Sotheby's)

In the last year Sotheby’s has also sold an early Patek and a singing bird automaton made in somewhere in the late 1700s to early 1800s, both for around $2.5 million.

Why do people spend thousands of dollars on watches?

Collectors appreciate the aesthetics, the mechanics and the history in each timepiece, says Borgelt. There are three main types of buyers of high-end pieces:

The collector, who is looking for those factors; wearers, who will wear and enjoy it, have a personal connection and can use it on a day-to-day basis; and investors: “looking for the next big things, something they can put their money into, put it away for several years and make sure to get some money out of it later on.”

What are buyers looking for?

“Collectors are very brand-centric. Brands such as Rolex, Patek, Audemars, Vacheron these are the top brands and the first thing people are looking at,” says Borgelt.

“Additionally, there are complications – that’s what the watch does. If it’s time-only, minute repeaters, chimes the times, calendars, different types of calendars, chronographs which are stopwatches, these are all factors in valuing the timepiece,” he says.

In horology, the term “complications” refers to any feature of a watch beyond the basic time display. If a watch just tells the time, it’s considered a simple movement piece.

How could a watch be worth so much?

Borgelt says that he has seen a drastic change in the past couple of years, with the condition of the watch being a huge factor in pricing.

“The pieces that are really seeing these exceptional prices are the ones that are exhibiting exceptional condition — they’re the best of the best.

“That’s why these pieces have really shot up in price. There’s only a finite amount of them, and very few are being discovered and/or rediscovered, so a lot of the pieces out there are already known.

“When you do get something that’s fresh to the market, combines the condition, the rarity, the complications, the brand name, everything that’s checked and that’s what’s bringing the high prices.”

Do watches always maintain their value?

There are certain brands that keep their value better than others.

Borgelt likes to equate watches, especially the modern pieces, to cars. “You buy a modern piece at retail, you walk out the door and immediately the value goes down.” There are very few instant classics, he says.

How do you determine price?

“Knowing the market, seeing previous results at auction, if it’s something new to auction, it’s taking your experience and putting all of the different factors together.”

The condition, the brand, rarity, what similar pieces are selling for, all factor in when Sotheby’s determines estimates, explains Borgelt.

How did the recession affect the high-end watch market?

“We bounced back pretty fast,” says Borgelt. “The thing with watches is that they’re an easily mobile object of value, and it’s something that is universal across the world. If you buy a $5,000 Rolex in the United States, you could go to Hong Kong, you could go to Geneva, and it would be worth roughly the same amount. It’s a portable mode of wealth.”

Are watches an investment?

We do get buyers who invest in pieces, says Borgelt. “As an investment, it’s also a hobby, it’s a passion, it’s something where you can combine not only monetary value and personal value from appreciation of the piece. It’s the same as any of the luxury markets, paintings, furniture, watches — you can put money into, but you can also enjoy it.”

New models of the Apple Watch are viewed in an Apple store on September 10, 2015. (Getty Images)
New models of the Apple Watch are viewed in an Apple store on September 10, 2015. (Getty Images)

How will Apple Watches be remembered in the future?

“Over the years I think there will be an appreciation for the early ones,” says Borgelt.

He compares today’s technology to the early quartz watches, which were under a lot of scrutiny in the 1970s and 80s “because they were basically killing the mechanical watch market.”

He explains that now collectors are seeing those first quartz pieces as collectible pieces.

“I think there’s definitely a niche market for it within our segment of collectors, but I don’t think there’s a huge crossover in taking business away from us, versus the Apple Watch.”