China’s once enthusiastic real estate investors are turning their attention to luxury watches as a better stock of value in the face of slowing economic growth and President Xi Jinping’s intensifying campaign against housing speculation.
Several high-end watch resellers told the Financial Times that the business has started in recent months as wealthy individuals have stopped buying additional homes and instead spent their extra money on luxury watches such as Rolex and Patek Philippe.
Experts said the purchase contributed to a 40 percent increase in Chinese imports of Swiss watches in the first 10 months of this year, even as the wider economy cooled.
Camille Gaujacq, an analyst at Daxue Consulting, a Shanghai-based market research firm, said the downturn in the real estate industry, which was once an “investment” for China’s wealthy class, has prompted many to look for alternatives.
“Luxury watches can be the answer,” Gaujacq said.
Real estate has been a one-way bet in most Chinese cities since the country’s urban housing market was liberalized in the late 1990s. But Xi’s determination to fulfill “common prosperity”, as well as the collapse of China Evergrande Group and other investors with high financial leverage, has led to a rare fall in real estate prices in recent months.
Analysts and property buyers are increasingly expecting the decline to continue. The Politburo of the Communist Party of China recently reiterated Xi’s claim that they are “houses of life, not speculation” even as it takes steps to support the wider economy.
China’s central bank announced a five-point cut in its one-year year on Monday “Primary loan rate” to 3.8 percent, but left the five-year rate, which is used for mortgage prices, unchanged at 4.65 percent.
While consumer demand has been hit by the economic crisis, high-end watches have gained popularity among the rich. A study by CSG Intage, a Hong Kong-based consulting firm, conducted in October on 1,500 adult Chinese with more than RMB 500,000 ($ 78,370) in a household found that 88 percent of respondents plan to keep or increase spending on luxury watches, which cost 76,700 Rmb on average over the next 12 months.
“The top part of the watch market is very strong,” said Simon Tye, author of the study. “If you go to a Rolex store now, it won’t be enough for you [watches] sell to customers. ”
For many wealthy buyers, luxury watches are not only an indicator of social status but also protection against inflation.
In the eastern province of Jiangsu, Sam Yu, owner of a manufacturer of electric heaters and two apartments, considered his purchase of a 700,000 Rmb watch by Patek Philippe in August to be a “wise” investment.
“After two years, I can sell a watch for a small profit,” said Yu, who bought his last home purchase five years ago, “I won’t be able to do that with an apartment. Given the uncertainties in politics, it can take many months to find a buyer unless I offer a big discount. ”
According to Watchec, China’s leading online second-hand watch platform, a number of top brands have risen sharply in value in recent years. Popular models such as Rolex Submariners can now have as much as five times their original price.
“There’s a lot of demand and a lack of supply for certain high-end models,” said David Wang, a luxury watch retailer from Shanghai. “Prices are unlikely to soften in the foreseeable future.”
The third driver of the luxury watch boom is their portability, which provides wealthy citizens with an easy way to move their assets abroad when needed. Wang said some of his customers have spent tens of thousands of dollars an hour to avoid strict capital controls that impose an annual limit of $ 50,000 on remittances from individuals abroad.
“Customs officers will either not notice your watch or may not know how much it is worth,” Wang said. “It creates a safe and effective way to take your money overseas.”
Additional reports by Xinning Liu of Beijing and Tom Mitchell of Singapore