Earlier this month I reported that London’s luxury commercial property market was heating up. The trend continues to this day. But now it is being helped by a spike in London’s luxury home prices, which is seeing the highest price increase since March 2008.

BusinessWeek has more:

The value of houses and apartments costing more than 1 million pounds ($1.5 million) rose 3.2 percent from January, the London-based property broker said in an e-mailed statement today. The annual increase was the largest since the market peaked in March 2008 and compares with an 11.5 percent advance in January.

Overall this is good news for the luxe market both in the UK and abroad. But read a bit further in the article and you’ll see the emergence of a trend that I referenced in a previous blog post about Chinese Lambda personalities buying Western art and vintage wines, something that is somewhat uncommon in Mainland China:

The pound’s 22 percent decline against the euro in the past three years attracted purchasers from Russia, Italy and Greece, in particular, Bailey said. Foreigners bought 45 percent of properties sold for more than 2 million pounds in the past year, according to the broker.

Theta personalities typically own numerous properties across their homeland, and perhaps one or two smaller properties in other countries. Those properties are likely to cost <$1 million. So when we see that 45 percent of properties sold for >£2 million ($3 million), this tells us that these foreign buyers are likely Lambda personalities. Owning a luxury property in London is seen as an accomplishment, both personally and professionally.

Consumer confidence in the UK is on the rise, which helps to explain why this is happening now. Things aren’t great, but they’re better than than they were. Lambdas are seeing an opportunity to re-assert their dominance and be among the first to polish their images with spashy purchases.

Watch for similar trends in more traditional luxe markets such as Paris and Berlin. London could just be the start of a the new European luxe revival.

Signs of life  in the beleaguered luxury market continue. First it was in Europe’s yacht docks, where mid-sized yacht sales are picking up steam.

Then in Silicon Valley, where luxury vehicles are seeing month-on-month increases in sales. And more recently across America’s upscale department stores, which are seeing sales jumps of around 7 per cent.

Now in London there are reports that the luxury commercial property market is heating up once again. The Financial Times has details:

The Royal Borough of Kensington and Chelsea has sold land overlooking Holland Park in London for more than £100m to a joint venture between the Duke of Westminster’s Grosvenor Estate and Native Land, underlining the scale of the recovery for luxury residential property.

It’s important to watch what happens after this deal. Is this the start of a trend, or a one-off event? If it becomes a trend, then London’s luxury property market could recover quickly than most other luxe industries.

Following up on my previous post covering the Contemporary Art Auctions that took place in London in June, I can happily note that positive predictions proved accurate. Despite several pessimistic estimates by market pundits, outcomes are above expectations.

Prestigious auction house Sotheby’s sold 37 out of 40 lots for a total of £25,549,450 (almost $42 million). This is 92.5 per cent sold, a sell-through percentage which, according to Sotheby’s contemporary art expert Cheyenne Westphal, is “one of the highest ever”. The auction’s top price came for Andy Warhol’s Tunafish Disaster, which sold for £3,737,250 ($ 6.1 million). Ten of the lots at the auction sold for over $1 million.

At Christie’s 35 out of 40, or 88 per cent, of lots were sold for a total of £31,063,350 ($31,778,604). This minimal failure rate of 12 per cent compares with the auction house’s best performances, when the market was on its height. Peter Doig’s Night Playground went for £3,009,250 (ca $5 million), fetching the highest ever action price for the artist.

Phillips De Pury & Company sold 30 out of 39, or 77 per cent, of their lots for a total of 7,396,700. It set the sales record for an astonishing 18 artists including Jack Goldstein and Ashley Bickerton.

However, despite these delightful outcomes, sales results of auctions are still substantially below what contemporary art auctions achieved when the art boom was at its height.

As one could expect, this is not necessarily the fault of bidders, but largely due to consignors, who are unwilling to sell high-profile, high-value pieces in a weak market. Auction houses have also shown an unusual unwillingness to guarantee sellers minimum prices on lots.

Considering this, as well the current financial climate, bidders were impressively keen, chasing artists rarely or even never seen at auction. Art advisor Wendy Goldsmith, quoted at Bloomberg.com, said that buyers “now focus on the available material. The market has stabilized. From now on things will improve”.

Photo by Ehsan Khakbaz

Contemporary art auctions are happening left and right in London this summer. Sotheby’s had one on June 25-26, then Phillips de Pury (June 29), and now Christie’s is running one (June 30-July 1).

Some have expressed pessimistic predictions on sales figures. The famous British art critic Ben Lewis, who made the documentary “The Great Contemporary Art Bubble”, is among them. He depicts the art market in a far from flattering way, describing it as a world of secret business and market manipulation, where unscrupulous art dealers inflate prices.

On September 15th 2008, the day Lehman Brothers collapsed, and the world finance market began its worst downfall in decades, Sotheby’s held auctions that sold art for a record total of £111m. Because of the critical standpoint Lewis had taken, Sotheby’s had banned him from these auctions, accusing him of a negative view of contemporary art. However, the art market was not shielded from the blooming recession, and eventually the art bubble also burst. Since it’s peak in September last year, contemporary art prices have dropped in price by up to 50 percent.

However, this may be about to change again, and Lewis’s predictions may prove to be overly pessimistic. If the outcome of the recent Art Basel fair is anything to judge by, auction houses could expect good results to come. The art fair experienced its highest visitor numbers ever, and according to the Wall Street Journal, organisers talked of “unexpectedly strong sales”, and many galleries were reportedly satisfied with their outcomes.

This possible resurgence suggests that buyers interested in timeless luxury still see the long-term benefits that art can offer even amidst the recession. Art gives them the chance to invest in an asset that they can surround themselves with in their homes or work spaces, rather than just put in stock portfolios, and which offers social status on a level incomparable to other commodities.

The Wall Street Journal quotes the Cologne dealer Gabrielle Ammann, from Art Basel’s parallel fair Design Miami/Basel, who stressed, “This year we have had really important collectors who are interested in beautiful and timeless design, not those who want quick money-making blue chips”.

Both Theta and Lambda types should be attracted by the benefits that buying art has to offer. For Thetas, who use socially-derived understandings of product characteristics as a basis for their consumption, the social status that owning art brings will be appealing. For Lambdas, a piece of art could be seen as the ultimate expression of individuality, and purchasing it fulfils their wishes to stand out as unique.

Photo by amandafarah

An index complied by Knight Frank LLP revealed that London has lost its number one position of being the ‘world’s most expensive location for luxury homes’. Monaco is the successor, with the average price of its most expensive houses and apartments increasing by 30% to £3,762 per square foot in the second quarter from a year earlier. London’s increase was a mere 1.8% to £3,291 in comparison.

Liam Bailey, head of residential research for Knight Frank, highlighted that this was due to job cuts by banks and the prospect of lower bonuses, was discouraging buyers. London’s property market has been in a steep decline, with even Buckingham Palace being affected to the tune of $100 million in depreciation.

Monaco’s luxury property market has prices reaching approximately $7,000 per square foot. Monaco is also home to the world’s most expensive street, Avenue Princess Grace in Monte Carlo, where an apartment costs tens of millions.
The top 10 locations:

1. Principality of Monaco
2. London, England
3. Cap Ferrat, French Riviera
4. Courcheval, French Alps
5. New York, USA
6. Moscow, Russia
7. Tokyo, Japan
8. Hong Kong, China
9. Sydney, Australia
10. Paris, France

With New York, London, and Milan Fashion Weeks behind us, the final Fashion Week is taking place at present in Paris. Amid the weakening economy and spreading insecurity, the fashion world must wait and see if the luxury consumer is still out there to purchase £10,000 dresses and £500 shoes.

High street fashion stores are already beginning to feel the financial pinch, as witnessed by Marks & Spencer, who saw shares drop by 32.5% last Wednesday alone . Will the global economic slowdown have any effect on the luxury purchases made by the upper classes?

Some high-end brands have started to see a slow down in sales, as consumers become jittery. Milton Pedraza, CEO of the Luxury Institute noted:

The reality is that even at the highest levels of wealth, there is some pull back.

Even in areas where one would not expect money to be considered, changes are beginning to surface. Fashion bible Vogue, that specializes in luxury brands, has bannered “Value-Conscious Chic, When to Spend, Where to Save’ on the front cover of its US September issue and Araks Yeramayan, owner of Araks, reveals that many fashion companies have had to pay for alcohol, catering, makeup and hair styling for their runway shows, an expense that has previously been picked up by sponsors.

Despite these trends, Fashion Weeks do not seem to have been interrupted. USA Today notes that designers are still ‘spending up big’ on their fashion shows, with Patrick McCarthy, editorial director of W and Women’s Wear Daily speculating that “there will be at least as many shows this seasons as last year and maybe even a few more.”

Today marks the UK launch of Apple’s iPhone on the O2 network. Already a pricey proposition (with a £269 ($564) pricetag and minimum contract for £35 ($73) a month), those who want something to differentiate themselves from the masses sure to pick up iPhones today need not look further than London luxury retailer Selfridge’s.

The department store is offering a whole range of upscale ‘blinged’ versions of phones, including the iPhone, with options for exteriors in steel, 18 carat gold, or 18 carat rose gold, with or without diamond encrusting. The phones are offered through a partnership with Amosu–currently the pricest on offer is a diamond-encrusted Nokia N95 for £12,000 ($25,180). Earlier this week there was a diamond-encrusted iPhone for £20,000 ($41,968), but it seems to have sold out.

Selfridge’s has also partnered with several designers to create holding cases by the designers Christian Louboutin, Chloe, and Burberry.

The rise of luxury phones (see also the Vertu mobile phone series) shows how they have become an integral way in which consumers represent themselves.  Less a form of technology, more a fashionable accessory…

Experian’s annual poll of shoppers reveals that residents of Barnes, a leafy London inner suburb, now spend an average of £150 a year on mail order goods.

From a Press Association article:

Experian said the typical home shopper was now a wealthy, busy consumer who liked the convenience of buying “aspirational, lifestyle” items from mail order catalogues.

Shoppers in Barnes fell into the “cultural leadership” group of consumers who were mainly well-to-do professionals living in exclusive suburbs in traditional family units, the report said.

Described as “assured, secure and very discriminating”, they spent their wealth carefully on understated, classic goods and services and had little interest in the “brasher aspects of contemporary consumer culture”.

As home shopping has moved upmarket, wealthy consumers have flocked to internet and catalogue shops in order to avoid having to prolong their working day by spending time shopping. As commuters, they prefer not to stay in central London after work to shop, and, given their professional status, are unlikely to take formal lunch breaks.

Of course, this scenario isn’t unique to London, and so we can ask the more general question – how can the luxury retailer reach the people who don’t shop during the week, and who would probably prefer to stay at home at the weekend? Online and catalogue shopping might seem the obvious answer, but the Experian report implies that luxury items aren’t in the average Barnes resident’s online shopping basket.

So much of the luxury purchasing experience depends on touch, taste and smell – olifactory components simply impossible to recreate outside of a physical shop – that it is questionable whether online shopping will replace the high street as the preferred purchasing mode entirely. Nevertheless, the growing demand for ‘masstige’ products means that consumers will increasingly turn to the internet in search of lower prices.

The dilemma for luxury retailers, then, is this – do I sacrifice some of my physical customer experience in order to better serve the distance buyers? Or am I confident that my customers appreciate being able to touch, taste or smell my products, and so will always come to see me, even if it means getting a later train home or skipping lunch?