Living The High Life In Switzerland Gets More Expensive - Stonehage Index

Tom Burroughes

7 November 2012

A luxurious lifestyle in Switzerland became more expensive over the past 12 months, and efforts by the Swiss authorities to curb the strength of the country’s currency reduced potential cost savings that might have been made, according to Stonehage, the multi-family office.

The Stonehage Affluent Luxury Living Index, which measures price inflation on a range of luxury items from caviar to cars, increased by 0.85 per cent in the 12 months to 31 August, up from a 0.2 per cent increase in the previous 12-month period. This compares to an average decline of 0.4 per cent, as measured by the Swiss Consumer Price Index over the same period.

Although the cost of fine wine, cars, handbags and diamond jewellery fell by almost a tenth over the past year, the Swiss central bank’s move to curb the strength of the Swiss franc against currencies such as the euro erased around half of these savings, Stonehage said.

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, it 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,” Mark McMullen, executive director and head of Stonehage Private Clients & Trust, said.

The data comes at a time when Switzerland’s own banking industry, accounting for around 12 per cent of the country’s GDP, has come under international pressure due to concerns about its historic bank secrecy laws.

Among key findings from the SALLI index:

-- The “consumables” category of the index fell by 4.2 per cent, driven by large decreases in the cost of wine (13.6 per cent) and restaurant dining (17 per cent), as domestic restaurant owners slashed prices in an attempt to sustain demand;

-- The “investments of passion” category fell by 4.8 per cent, 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, the UK and Italy;

-- A 4.7 per cent 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. The trend was a reflection of Switzerland’s strengths: a resilient economy, interest rates of virtually 0 per cent and a high influx of wealthy migrants over the past year;

-- The “culture and entertainment” category increased by 2 per cent. 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.

The index measures a basket of luxury goods and services regularly purchased by UHNW clients. The basket consists of approximately 50 goods and services on a “per use” weighted average basis.