HNWIs still love luxury despite downturn
High net worth individuals are still chasing luxury despite the global downturn, according to the latest Merrill Lynch and CapGemini Wealth Report.
The Forbes Cost of Living Extremely Well Index, which tracks the year-over-year cost of a basket of luxury goods, rose 6.2% from 2006 to 2007, more than double the global rate of inflation.
Despite these significant price increases, various luxury segments reported record sales figures in 2007, testifying to the appetite for luxury goods at the top end of the market.
The 12th annual World Wealth Report, published yesterday, said that the pursuit of so-called "passion investments" has shown dramatic growth. Art , cars, yachts, sports teams, memorabilia, wine, luxury travel, and health and wellness are increasingly on the shopping lists of HNWIs. But allocations vary according to region and maturity of economy, said the report.
Private jets, custom yachts, high-end automobiles and other luxury collectibles accounted for 16.2% of passion investments among HNWIs as a whole, followed closely by fine art at 15.9%. Jewellery held third place at 13.8% and luxury travel ranked fourth at 13.5%.
These four categories –the most expensive of the passion investments examined in the report –together accounted for more than half of all luxury item expenditures among the HNW population.
Last year, wealthy individuals from emerging markets demonstrated significant influence in the global luxury marketplace, notably those form China, India, Russia and the Middle East.
“Even as financial market turmoil impacted the United States during the second half of the year, luxury goods makers, high-end services providers, and auction houses all found ready clients in the emerging markets of the world – most notably, China, India, Russia and the Middle East – thereby sustaining their own growth,” said Chris Gant, head of wealth management, Capgemini Financial Services UK.
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