salli | stonehage affluent london living index - Cubitt Consulting

4.2.2 NOTAbLE PRICE TRENDS
Price trends vary across the different items in SALLI, for
example, the price of a case of Lafite Rothschild 2000 has
risen by more than a factor of three from 2002-2007, now
standing at £9,250. Supply is constrained given that only an
estimated 15,000-20,000 cases were produced.
The main factor contributing to the remarkable increase
in price has been surging demand, due to increases in
wealth creation around the world. This is highlighted by the
substantial increase in the number of HNW individuals rising
from 7.3 million at the end of 2002 to 9.5 million by 2007 6 .
Other factors might include the growth of interest in wine
as an investment class. A number of indices have recently
launched such as the Liv-ex index 7 , which tracks the prices
of a large number of expensive wines and highlights wine
as an investment opportunity as well as investment funds
specialising in wine (Fine Wine Fund, Wine Investment Fund).
In addition, Lafite 2000 is in limited supply.
Table 5: Goods and services that have come down in price
Item
NetJets entry
level aircraft
Virginian Yacht
Charter
(1 week)
Hotel Villa del
Sol, Mexico
(2 weeks)
Price ($)
2002
Price ($)
2006
Price ($)
2007
10 SALLI | STONEHAGE AFFLUENT LONDON LIVING INDEX
Although, one could argue that most of the Lafite 2000 is
yet to be consumed, the ‘effective supply’ is likely to be low
since many individuals who have bought cases are storing
their supply to either sell or drink at some point in the
future. Another possibility is that some wine may be tied up
in the form of investment funds. In this case both increased
demand and restricted supply have put upward pressure
on its price.
Similarly, booming demand and restricted supply has driven
the enormous increase in price for Dom Perignon 1990. For
the purposes of the index, we chose to use the same wine
and champagne for 2002, 2006 and 2007, since substituting
wines would introduce further subjectivity.
The only three items to experience a price fall from 2002-
2007 were the NetJets entry level aircraft, Edmiston’s Virginian
yacht charter for one week and two weeks at Hotel Villa del
Sol, Mexico.
Price (£) 2002 Price (£) 2006 Price (£) 2007
375,000 400,000 400,000 248,508.95 215,517.24 201,511.34
262,500 290,000 294,000 173,956.26 156,250.00 148,110.83
16,380 19,600 21,000 10,854.87 10,560.34 10,579.35
6 Data obtained from Merrill Lynch Global Wealth Reports
7 The Liv-ex 100 Index is the fine wine benchmark index. It is priced off the mid-price as quoted on the Liv-ex platform and supply and scarcity
weighted. The Liv-ex 100 – Fine Wine Index “the wine world’s version of the S&P 500.” (Financial Times, Jun 07).The Liv-ex 100 index has gone up
from 94.96 in Jan 02 to 174.69 in Jan 07, representing an 84.0% (2sf) increase in five years.