Inflation on luxury goods including the price of cigars and botox is more than double inflation on mainstream consumer products like cigarettes and NHS dental care
UHNWs celebrating a good year in the markets will be sobered by news that the price of luxury goods and services in London surged 4.9 per cent in the 12 months to April.
The increase, measured by Stonehage’s Affluent Luxury Living Index, compares to 2.4 per cent for the UK Consumer Price Index and shows that the cost of luxury living is rising twice as fast as the average.
Those wondering what SALLI includes will be amused to hear that the basket consists of 50 goods and services including Botox treatments, Westminster School fees, Purdey shotguns, Walbrook membership and Cohiba Siglo V Cigars.
The 2013 rise was fuelled predominantly by a 14.8% increase in the price of investments of passion, including high-end cars, watches and jewellery, which is attributable, says Stonehage, to Sterling depreciating against the Euro and the Swiss Franc.
Putting the 2013 SALLI in broader context, it appears that UHNW inflation is, as ever, much more volatile than the CPI, showing that it exceeds standard inflation in good times and falls short in bad times. With the economic recovery in London strengthening, SALLI is therefore likely to exceed the CPI in the short-to-medium term.
Ronnie Armist, executive director at Stonehage Investment Partners, says, ‘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.
‘These families also share a desire for certain aspects of British life, as reflected in the increased price of sport and club memberships and private schooling, as well as reservations for top restaurants and hotels.
‘It has therefore become more expensive for the wealthy to buy the products and services on which they spend their discretionary income.’