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June 28, 2014 12:01 am
The cost of living a life of luxury in London has fallen, reflecting a strong pound and keener prices for upmarket products such as Beluga caviar, fine wine and high-class travel.
Prices for a basket of goods and services favoured by the capital’s super-wealthy showed a 1.1 per cent drop in the year to April 2014, following an increase of 4.9 per cent the previous year.
The fall in the Stonehage Affluent Luxury Living Index (Salli) – published since 2007 by Stonehage Group, an adviser to wealthy families – compares with an annualised inflation rate rise of 1.8 per cent in the consumer price index in April.
But while the latter official measure of UK inflation takes into account basics such as frozen pizza, kitchen roll, bus fares and pasties, the Stonehage index bases its calculations on the playthings of the rich, such as yacht charter, Turnbull & Asser shirts and the cost of a day’s grouse shooting.
The fall in the index appeared not to be caused by a backlash against bling. Ronnie Armist, executive director at Stonehage Investment Partners, said currency movements were partly responsible.
“While the cost of living for the super-rich in London has fallen in the last year, this has been driven by sterling currency strength . . . we expect prices to rebound as global economic conditions improve over the coming year.”
The consumables category fell by 9.7 per cent, including a 37 per cent drop in the price of caviar, which has been affected by intensive farming methods. The cost of fine wine, as measured by the Liv-ex Fine Wine 100 index, has also declined over the year.
High-class culture and entertainment saw price drops of 4.7 per cent, after a 5.2 per cent fall in the value of high-end art. But this was offset by rises in the cost of theatre tickets, seats at top sporting events and members’ club access.
In the travel category, which keeps tabs on the costs of first-class air tickets, chauffeur services and luxury hotels such as the George V in Paris and the Hotel Byblos in St Tropez, prices fell by 2.5 per cent. Sterling’s strength also cut the cost of a shopping trip to New York or a spell in a Swiss ski chalet.
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London remains an attractive city for the super-rich, with a reliable legal system, a convenient timezone, English as the main language and a panoply of luxury goods and services.
While the influx of wealthy migrants from the eurozone during the financial crisis has eased, those from other regions are partly filling the gap. “A lot of the wealth that arrives in the UK comes from the Middle East, which is undergoing some turmoil at the moment, and also China, which is experiencing growth pains,” said Mr Armist.
Originally developed by Geoffrey Wood, an economics professor at Cass Business School, the index has tended to be more volatile than CPI, flipping from positive to negative over the past three years.
It does not include property prices, which in London rose by 18.7 per cent in the year to April, according to official data. But it does include the cost of rental property in Kensington and Chelsea, a favourite location for the ultra-wealthy.
This fell by 0.6 per cent as overseas buyers brought more properties on to the rental market. However, the cost of private education rose by 3.6 per cent, as international families competed for places for their children in the capital’s exclusive schools.
Expectations that interest rates could rise later this year – though played down this week by Mark Carney, Bank of England governor – were unlikely to have a big effect on ultra-wealthy spenders, Mr Armist said.
“A rate rise shouldn’t be too much of a shock. The wealthy client who doesn’t depend on gearing wouldn’t be too impacted unless there was a major correction in the market.”
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