Prices of typical luxury goods and services for the ultra-wealthy based in London surged by 4.9% in the 12 months ended April 2013, marking a significant increase in price inflation, following a 1.6% decrease the previous year, according to Stonehage Group.
This increase, measured by Stonehage’s Affluent Luxury Living Index (SALLI), which the company uses to analyse the true costs of living for its clients, and uses as a benchmark for investment purposes, compares to an average inflation rate of 2.4%, measured by the UK Consumer Price Index (CPI) over the same period.
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According to the report, the rise was fuelled predominantly by a 14.8% increase in the price of ‘investments of passion’, including high end cars, watches and jewellery.
Improving stock market conditions have also left wealthy investors with more disposable income to spend on these luxury items, the report says.
The culture and entertainment category was up 4.2%, and demand for elite concierge services in particular rose among new groups of rich émigrés relocating to the UK from countries such as France, Russia, India, and Italy. The category also saw a 4.1% increase in the value of high-end art, the report revealed.
The consumables category also rose by 5.3%, with the cost of dining at some of London’s top restaurants increasing by an average 6% in the last 12 months. The category for sports and recreation rose by an average 4.4%.
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By GlobalDataStonehage report noted a growing divergence between corporate and private buyers, as demand for executive seats at major tennis events went down, reflected by a price fall of approximately 8%, while the cost of beauty and fitness club memberships and shooting equipment rose.
However, in the housing and family category, costs of rental property (in Kensington and Chelsea) fell by 0.5%, as the continued influx of overseas buyers, who are in the main absentee landlords, led to an increased supply of rental properties over the last year, thereby limiting the scope for rental growth.
Private education in the capital registered 3% rise, supported by the arrival of international wealthy families seeking the best education for their children in London. Demand from French expats also led to the opening of a fourth French school in the capital last month.
Travel costs rose by 4.4%, as the cost of private and first class aviation rose, reflecting an appreciation of the Euro which also supported price inflation of approximately 5% at Europe’s luxury hotels.
Ronnie Armist, executive director at Stonehage Investment Partners, said: "The increase in SALLI shows that consumer confidence among the ultra-wealthy in London has risen, following a surge of wealthy families to the capital including those from countries where relatively harsh tax conditions, together with economic and political pressure, are having a negative impact on their lifestyle."
