Index shows the cost of a safe haven currency
A life of luxury in Switzerland has become more expensive despite many high-end retailers cutting prices to tempt the wealthy back from shopping abroad, according to the Stonehage Group, the leading European multi-family office for ultra-high-net-worth families and entrepreneurs.
The Stonehage Affluent Luxury Living Index (SALLI) – which measures price inflation on a range of luxury items from caviar to cars – increased by 0.85% over the past year, up from a 0.2% increase in 2011.
This compares to an average inflation rate of -0.4%, measured by the Swiss Consumer Price Index (CPI) over the same period.
The SALLI index measures a basket of luxury goods and services regularly purchased by ultra high net worth clients. The basket consists of approximately 50 goods and services on a ‘per use’ weighted average basis. It includes items such as annual tuition and boarding fees for two children, Zurich and Geneva rental costs for a family property and a family ski holiday to St Moritz.
Stonehage said that although the cost of fine wine, cars, handbags and diamond jewellery fell by almost a tenth over the past year, Swiss National Bank Policy driven devaluation of the Swiss franc against the major currencies wiped out approximately half of these savings.
Corresponding increases in the price of housing, household staff, opera, skiing and travel contributed to pushing up the overall cost of living for the ultra-wealthy.
Mark McMullen, executive director and head of Stonehage Private Clients & Trust, based in Geneva, said: “At Stonehage, we use SALLI to help us analyse the true costs of living for our clients to give them a total overall view of their wealth as a benchmark against their net asset base and peace of mind that they are living within their means.”
“This year’s findings show that it is slightly more expensive to be ultra-wealthy and many might rather travel abroad to get the best deal on some luxury items.”
Among other key indications from the Indes are that the ‘consumables’ category fell by 4.2%, driven by large decreases in the cost of wine (13.6%) and restaurant dining (17%), as domestic restaurant owners slashed prices in an attempt to sustain demand.
The ‘investments of passion’ category fell by 4.8%, with consumers looking to purchase high-end fashion items abroad for much of 2011, pushing domestic suppliers to decrease prices.
Luxury car brands dropped prices along with designer clothing and handbag providers, as buyers looked to take advantage of exchange rates by shopping in Germany, UK and Italy.
A 4.7% rise in the ‘housing and family’ category was supported strongly by significant increases in rental prices in Geneva and Zurich over the period under review.
Stonehage said the trend was a reflection of Switzerland’s strengths: a resilient economy, interest rates of virtually 0% and a high influx of wealthy migrants over the past year.
The ‘culture and entertainment’ category increased by 2%. This was primarily due to an increase in the cost of leisure activities such as skiing and fitness and tennis memberships. Switzerland’s opera and classical music festivals also increased in price.
In the ‘travel’ category, a fall in the price of first class transatlantic flights was offset by increases in the cost of hotel getaways to European destinations, as heightened demand for weekends in London, Paris and New York increased prices.
Stonehage, established in 1976, is owned by management and staff with 14 offices around the world. The Group currently employs over 400 staff and manages the affairs of over 1,000 client families internationally.