IS LUXOFLATION SET TO SURGE IN 2013?

Posted by Leonard Steinberg on January 3rd, 2013

Bloomberg reported that the worlds billionaire’s net worth surged in 2012, some by as much as twenty percent. Does this imply a sharp escalation in LUXOFLATION, our measure of the pricing inflation we have identified in the super luxury markets?

I think it’s very likely. ¬†Already we are witnessing clear evidence across the board where luxury real estate pricing across the globe has surged in the past 18 Months. The price of a Rolls Royce, Birkin bag from Hermes, Patek Phillipe watch, plush hotel room, high end restaurant tab, etc have all risen at a pace that certainly surpasses the average rate of general inflation. The huge dilemma facing the makers of luxury products is theirs maintain their exclusivity. Is an Hermes Kelly bag really such a luxury when you know THOUSANDS are being sold just like it all around the world? Does that elevated price alone make it so luxurious?

The ultimate luxury is one that has collector value, some element of rarity or scarcity about it. I always refer to “collector qualities” in Manhattan real estate…….that something that makes a property so unique it is difficult to replicate it…….or preferably impossible to replicate it. That will be the huge challenge for all luxury product ¬†creators moving forward as the audience for super luxury grows dramatically across the globe.

And yes, I anticipate massive pricing escalation over the next few years as some luxury makers and buyers will automatically believe something is luxury just because it has a high price. They may learn the hard way that this is simply not true. Then again, the world looks to the Kartrashians and the likes for style direction……