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London values: why nothing is guaranteed

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Knight Frank
London and Country specialist property buying agents
11 May 2018  |   Philip Eastwood

According to Knight Frank’s Luxury Investment Index, luxury watches went up in value by 5% over the 12 months to October 2017 and by 69% in the period between 2007 and 2017. These figures clearly suggest that luxury watches are a sound investment but personal experience tells me it’s not always so clear cut.

Ten years ago, I bought two watches from—a specialist online dealer for pre-owned luxury watches. The first was a Rolex GMT-master. One of the most successful lines ever produced by Rolex, it was made for Pan-Am Airlines after the company requested a reliable watch that could display more than one time zone at once—ideal for their pilots making trans-Atlantic or long haul flights. It was designed in the colours of PanAm and soon became a watch for wealthy members of society who frequently travelled; later it became a collector’s item.

The other was an Explorer II. This watch, also by Rolex, was first released in 1971, and also aimed at world travellers, it was an evolution of the original watch which Hillary used during his ascent of Everest.

Both watches cost me approximately the same amount of money and were bought at the same time. Both are built using identical mechanisms and are of the same size. The main point of difference is their face: one is black and the other white.

Recently, after some encouragement from my wife whose view is that we only need one wristwatch, I sold both of the watches. The results differed vastly: the Explorer II barely covered what I’d paid for it back in 2008 while the GMT tripled in value. What is it that has made that GMT soar in value? There can be only one answer: fashion.

In the same way that the value of watches can vary enormously between styles, the same is true of property. Indexes which track the value of luxury items often have a very blanket approach which obscures discrepancies. The same can be said of indexes which are produced by almost every leading estate agent and mortgage lender in the country. Of course, every buyer—even more so relevant to the top end of the prime central London market—wants to know that their investment is sound and will deliver a return. However, what no expert (or salesmen) can possibly predict is how a property or an area will be impacted by environmental, lifestyle or fashion changes 10 years down the line.

The moral of the story is that you can’t be too scientific when it comes to buying a property. The yardstick used most frequently to value a property today in London is by its price per square foot. At best, it’s a rather crude tool and doesn’t bring into the equation other aspects that might affect the enjoyment of the property including its position, its condition or the size of outdoor space, among other elements. Part of our role at The Buying Solution is to use our years of expertise to factor in these elements and advise our clients accordingly.

Yet, at the end of the day, no one has a crystal ball and no one can predict whether an investment will deliver an exact return. Far better, therefore, to buy sensibly, and armed with all the finest due diligence available, but also with the heart. When I think back to the purchase, I preferred the GMT-master out of the two watches but was persuaded by the salesman that Rolexes are always a safe investment. If only I’d followed my instinct and bought half a dozen GMT-masters!

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