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.

While there was not doubt that Aston Martin is a brand aimed strictly at Lambda personalities, the recent product release by Aston Martin proves it anyways.

Coming optional with the purchase of a new Aston Martin Rapide is a $33,000 watch. And with this watch and your new Aston Martin Rapide, you can lock or unlock their car doors by simply touching the sapphire-crystal face.

Only a handful of individuals can afford to buy even the Aston Martin. Even fewer could afford the optional $33,000 watch. The timing of this is interesting, because while the global recession is receding, it is not completely over, yet.

Watches are a much-loved item amongst Lambda personalities, because they bestow status and are durable. They’re seen as investments and heirlooms.

During the worst pont in the recession, The Wall Street Journal published a column “How to sell a $35,000 watch in a recession”, which offers a look into the new methods that luxe retailers are using to keep sales moving.

After years of double-digit sales growth, sales of Swiss watches have fallen off drastically. Watchmakers like IWC—a 140-year-old company whose watches are considered collectors’ items and generally cost between $3,000 and $300,000—are having to re-learn the old-fashioned art of salesmanship.

The ‘old-fashioned’ art of salesmanship that is used is selling the experience as tantamount to the product itself. In luxe, people buy because it looks good, feels good and it makes them appear important.

He used PowerPoint to impart what he calls the “macaroon technique,” referring to the sandwich-like French macaron pastry. This can be applied to most any product (including, presumably, a Xerox machine) and goes something like this: “Madam, this timepiece (or diamond or handbag) comes from our finest workshop and it has a value of $10,000. If you buy it, your children are sure to enjoy it for generations to come.”

This tactic by Aston Martin to package the watch with the car is an extension of the salesmenship methodology talked about in the Wall Street Journal article: Show a Lambda personality how well their new, ultra-exclusive watch works with their new, ultra-exclusive car.

The expression also suggests the person will have a long family line, which causes them to envision their children and grandchildren as Lambda personalities, enjoying and cherishing this watch that their father, also a Lambda personality, purchased years ago and passed onto them.

A  true Lambda Personality won’t be able to resist it, and Aston Martin knows this.

Being wealthy is one thing, and being art-buying wealthy is another. Luxury Insider reports that ultra-rich Chinese are beginning to throw their considerable status and wealth around in nontraditional (for Chinese) markets such as art and wine.

The article features a very interesting quote by Kevin Ching, CEO of Sotheby’s in Hong Kong:

“We saw a big surge in Chinese buying in categories that they were not familiar with. We have now seen mainland buying – not in huge quantities – of Western, Impressionist and contemporary art.”

This tells us that wealthy Chinese people are buying items because of their real and perceived worth. They are seeking to become a part of the small circle of western art buyers who spend large sums on buying art. Essentially they are taking cues from the Lambda personalities who they count as their friends or colleagues.

The article also has some key figures that further illustrate China’s growth into a global luxe powerhouse, a crown that once belonged to Japan.

For the first time in Sotheby’s 10-year history in Hong Kong, mainland buyers accounted for nearly 40 percent of Sotheby’s Asian sales during last autumn’s auctions. That figure represents a two-fold jump from 18 percent in the fall of 2008.

Does this newfound interest in expensive art signal a dimming interest in diamonds in Asia? It’s hard to say at this point.

What’s certain is that China’s rapidly growing economy is major impact on the local luxe industry, and that impact is reverberating on the other side of the globe, causing a mad dash by Western’s luxe labels to get a foothold in this booming new luxe market.

Here’s an interesting interview in the Wall Street Journal with Carolina Herrera that I caught via Luxist. Like most in the luxe business, she, too, felt the pinch from a faltering global economy. But now she sees things changing.

I saw the impact in the beginning. I saw it with the women who used to come to the boutique to buy. They bought less. All the information in the newspapers makes them nervous. When you see a lot of people losing their jobs and they have children to send to school and other commitments, then you think [more before] buying.

…..

Lately, it has been better. At one point, I used to see the people who used to buy a lot, and they were a little concerned about buying. Now they are shopping again.

It’s good to see major players in the luxury scene express this level of optimism publicly, not just retailers. She explained a bit about what her strategy was during the worst of the recession.

During the downturn, she has had to walk a fine line, trying to cater to frugal consumers without damaging quality or image. … Ms Herrera responded by cutting prices about 10% and making tweaks to trim costs. She is also expanding her lower-priced CH Carolina Herrera line, adding 17 standalone shops this year to the current 48.

Her strategy speaks to an interest in not alienating a core Theta personality customer. If Ms Herrera had reduced her prices to 15% or 20%, her brand may begin to be seen as masstige. This would alienate both Theta personalities and any potential Lambda personality as a client.

Because she resisted that, her brand’s position is in good position to grow more as the recession fades.

This past weekend, the Financial Times published a report that gives some insight into the slow growth that is happening in the U.S. luxury and high-end retail industries:

Richard Hastings, retail strategist at Global Hunter Securities, said that roughly half of the 80 per cent of Americans fully employed were not affected by the depressed housing market and were now more ready to spend as they had become less concerned about their own jobs.

This could be seen as a a quickening of the pace of economic recovery in the U.S. I wrote previously that the trends happening in places such as Silicon Valley suggests that Americans with expendable income are regaining the confidence to spend it.

Tracey Travis, chief financial officer of Polo Ralph Lauren, said the change in climate has mean the company has “slowly begun to see the gradual return of our core luxury customer”.

Conclusions are being drawn from the release of January retail sales figures.

The monthly sales numbers offered further indications of returning demand for prestige and luxury goods, with Saks and Neiman Marcus, the luxury fashion department stores, reporting increases of 6.8 per cent and 7 per cent, respectively

….

Neiman Marcus, which operates about 43 luxury fashion stores serving the most affluent US consumers, said that its strongest categories included women’s couture clothing and precious jewellery.

This isn’t a return to form for the Lambda personalities. Rather, the Thetas are opening their wallets for the high end items that they denied themselves in the last year, whether out of frugality or a desire not to be seen spending lavishly while others suffered.

However a small up-tick in sales won’t be enough to level out the market to pre-recession levels. Only after sustained growth over a number of quarters would be it be wise to begin thinking that the luxe industry has begun a full recovery.

For that to happen, Lambda personalities will need to get in on the action. Reports suggest that may be happening soon. But, given the number of false dawns we’ve seen during the recession, real recovery must be seen to be believed.

If the statistics found in a Wall Street Journal article published yesterday are to be believed, then Silicon Valley in California may be the signal we’ve been looking for of a return to norms in the American luxe market.

According to the article, there has been a recent spike in the number of luxury and higher-end vehicles sold in the region.

Over the course of 2009, Silicon Valley’s sales of the priciest car brands rose, according to R.L. Polk & Co., which analyzes the auto industry. In November, for instance, 15 Lamborghinis, Bentleys and Maseratis were newly registered in the Bay Area, up from four in January 2009, notes Polk.

While not a bell-weather event, it is encouraging to see American luxe figures doing something other than nosedive.

Vincent Golde, general manager at Qvale Auto Group’s British Motor Car Distributors in San Francisco, also noted the up-tick in sales:

[S]ales of luxury brands improved in the second half of 2009 with his dealership—which handles Lamborghinis, Bentleys and others—particularly experiencing an increase in Bentley sales. Most of the car brands at BMCD start at $180,000 per vehicle.

What could this be attributed to? It’s possible that the region’s Theta personalities are regaining some confidence in the market and are feeling more comfortable spending larger sums of money, as the economy continues to slowly improve.

Mr. Golde said many of the transactions were for used vehicles rather than new cars as customers wanted to “let the [financial] crisis pass a bit.”

I expect that more recent figures will show that the market has continued to improve alongside the economy, which bodes well for the luxe industry across the country and even globally.

Thanks to the recovering global economy, the world’s wealthiest individuals have regained their mega-spending confidence. Evidence of this can be found in the sudden up-tick in the number of mega-yachts being sold.

According to this Bloomberg article, boats over 100 feet are selling “very strongly”. Simon Clare, head of marketing for Princess Yacht, spoke to Bloomberg about the phenomena:

“Boats over 100 feet are selling very strongly as the very wealthy feel the crisis less and tend to buy bigger and more modern boats”.

The recovery in sales is very welcome, considering the beating the yacht industry took the previous year. International Boat Industry magazine found that European yacht sales plunged about 50 percent in 2009.

But who is buying these yachts? Juergen Tracht, head of Germany’s aquatic sports industry association offers some insight:

“Typical buyers for these boat categories like medium-sized entrepreneurs usually pay them with savings, and they still haven’t reached the level prior to the meltdown during the crisis”.

At first look, it doesn’t appear these are the Lambda personalities who were freely buying mega-yachts before the recession. But look at it another way: Many are still trying to recover their financial footing.

The people who are buying now are the people who feel compelled to set themselves apart from their friends, even if the size and price of the items is less than in earlier years. That is the mark of a true Lambda.

The race for the hearts and minds of China’s luxe car buyers is on, as Aston Martin joins BMW and Audi in upping production and overall presence in China.

The China Daily reports that Aston Martin opened its flagship China showroom in Beijing this past week.

The store, located at 66 Jinbao Street, Chaoyang District, is more than twice as big as Beijing’s other two Aston Martin stores and is the largest in Asia Pacific. The 500 sq m showroom will display seven of the luxury vehicles each costing roughly 1.3 million yuan.

Given that Aston Martins are typically more expensive than BMW, Mercedes or Audi vehicles, this move suggests that the demand is outstripping supply. This points to a new opening in the market for the super-rich.

While the entire article is interesting, because it further illustrates the growth in luxury goods and demand in Asia, there’s one quote in particular that is quite revealing of the way luxe brands are thinking about China.

Matthew Bennett, regional director for Aston Martin Asia-Pacific, said the following:

“(Beijing) has a growing appreciation for luxury goods and an authenticity of a product, that’s what we’ve been seeing. … ”This is the place to be.”

The phrasing is interesting, too. The “authenticity of a product” suggests a targeting of the Lambda personalities, who prefer both high quality and an air of exclusivity to their purchases.

Another statistic worth noting is that about 80 Aston Martin vehicles were sold in China last year. Even upping that number to 100 would allow Aston Martin to retain its shine of exclusivity.

Here’s an interesting story about China’s pursuit of luxury goods. Agence France-Presse (AFP) is reporting that increasingly high numbers of wealthy Chinese people are traveling to luxury capitals such as Paris to purchase goods that are discounted.

I wrote previously that the global economic downturn has caused luxe companies and retailers to put products on discount in order the move product. It appears that the Chinese, who have become more involved in the Asian luxury market, are going where the deals are.

The AFP article offers more detail:

The Chinese bought tax-free goods worth 158 million euros (222.5 million dollars) in France in 2009. That was an increase of 47 percent from the level the previous year, according to Global Refund, a company specialising in tax-free shopping for tourists.

The article also notes that this has been part of a larger, growing trend:

Tax-free shopping by Chinese tourists has been increasing for the last two years, rising by 39 percent in 2007 and 23.3 percent in 2008. They now represent 15 percent of sales and 13 percent of transactions.

More Chinese people are going abroad to buy high-ticket items, which suggests a growth in the number of people who might be considered Theta personalities in China.

Year on year increases in the number of Chinese traveling abroad to do this kind of shopping suggest the figures will continue to grow. What will be interesting to watch is the impact this has on China’s burgeoning luxe market.

We are used to associating luxury with expensive cars, plush hotels and exotic resorts. However, once we understand what luxury means, we can find it anywhere, even in the Nazi concentration camps.

As a son of Holocaust survivors, I have encountered many people who survived because of the generosity of their mates who decided to share with them their own daily rations. Many of you might be familiar with the derogatory term “Muselmann”, which describes those victims in the Nazi concentration camps who had been broken psychologically and physically by starvation and life in the camps.

Some gave away their meagre food portions because they lost any hope, but many did so because they hoped to survive and wanted to bring that hope to others, even temporarily by helping them with a bit of extra food. While we have to hail this behaviour as heroic, from a scientific point of view, this is a very interesting example of a form of luxury behaviour.

Yes, luxury is behaviour. Contrary to conventional wisdom, luxury is not embedded in products or services themselves; luxury instead is a type of behaviour characterised by needlessly squandering assets. This activity seems irrational as long as we do not pay attention to the deep reasons behind it.

Research shows that people use luxury for enhancing their self-esteem. Two main schools provide alternative explanations along the Theta / Lambda dichotomy. The Terror Management Theory (TMT), a Theta school, claims that luxury’s role is to confirm one’s self-worth.

On the other hand, the Lambda school promotes the Self-Determination Theory (SDT) which argues that the role of luxury behaviour is to provide individuals challenges in order to grow and develop psychologically as well as to structure their life choices in alignment with their own perceived identity.

Overspending or squandering assets sends us the message that we are able, fit and worthy.  Amotz Zahavi, the Israeli biologist calls this phenomenon “the handicap principle” whereby one proves one’s abundance of assets by destroying them.

Understanding what is behind luxury behaviour, enhancing our self-esteem, demonstrates the importance of the role of luxury in our lives and saying bluntly that luxury is good for us. Nevertheless, Self-Determination Theory emphasises another key factor, that of choice.

When we spend on something because we need it, this behaviour will never be luxury. Luxury is based on a choice, when we do something even when we do not need to. Overspending is a choice that exemplifies the fact that there is a rationality behind the irrational behaviour of overspending in that it enhances self esteem. Spending needlessly enables us to express the element of choice.

When Holocaust victims were ready to share their food with their mates, they sent two messages. The first was that they did not need all of it, at least for the time being and that some of their food was excessive. Secondly, they had a choice between two, equally good options, either to eat up the food or to give it away. Either of these two aspects clearly define this behaviour as luxury.

The heroic behaviour of those Holocaust victims teaches us two lessons; one educational and the other moral. The first lesson is that luxury is beneficial to us and that we should search for it everywhere. It is important because in enhances our self-esteem. Life is full of choices and by identifying them and actually choosing between them we enhance our self-esteem.

Morally, it does not matter what we spend on as long as we act correctly. We do not need a heroic gesture of sharing our last piece of the extremely needed bread to tell us how worthy we are. There are many other, much more pleasurable means of sending this message.  Luxury is a choice of our own behaviour.