At the end of March 2023, Jacob & Co. put on sale the most expensive watch in the world: 20 million dollars (18.2 million euros at current exchange rates) for a Billionaire curdled with yellow diamonds, one of the rarest that nature spits. It did not take long for requests to arrive from five potential buyers, according to the brand, although none has yet decided to acquire it. Another story: a traditional jeweler in Marbella has sold a Patek Philippe this year for 2.4 million euros to a foreign client, a record for the current year of that trade.
There is a mystique about the wealth manufactured by soap operas, the reality shows of people who lead carefree lives and live in huge houses and the numbers that occupy the daily press rounding salaries of CEOs, Hollywood stars or footballers. But then there is super wealth, a world whose greatest privilege is precisely to remain invisible. A status that pulverizes any mark that the average citizen may have on what is expensive and that inhabits their own spaces. You will not coincide with them in restaurants, as they usually have private clubs where there is always a table for them. Nor in luxury stores, because the VIC (acronym for Very Important Client in English) have their own reserves and schedules. Much less in an elevator: a building whose tenants have immense fortunes has private elevators to access each apartment, which can occupy several entire floors. The real mystique is this: the world of these super-rich will never cross with that of an ordinary citizen... no matter how rich it is created.
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This is known by the luxury industry, which has in these unusual buyers but who spend stratospheric figures the origin of its increase in turnover in recent years. The 1% is the dream customer. "Watches from 20,000 Swiss francs [18,200 euros] are the best performing compared to other price levels," says Brian Lavio, Audemars Piguet's managing director for Spain and Portugal, as an example.
The 25 Club (million dollars)
Beyond the high-end watchmaking sector there are numbers that also dizzy. The Lamborghini car company has a waiting list and two years of orders for the Revuelto, its first plug-in hybrid supercar, which launched in March. Although the firm did not disclose its amount, it is believed that it will reach between 400,000 and 600,000 dollars, up to 30% more than its Aventador supercar. In the last Grand Prix of Singapore, dinner in a reserved restaurant Le Noir reached 70,000 euros. And at the Milan Furniture Fair that took place in April, the sections that brought together the highest priced products had more visitors than an Ikea at the beginning of the month.
'Skyline' of Dubai during a foggy morning. The city is currently a symbol of wealth. Naufal MQ (Getty Images)
There's more: Home sales over $10 million fell in 2022 from a year earlier, but still grew 49% from 2019. The ultra-prime market (that of houses over 25 million dollars) was dominated by New York and London. In this last city, the highest level of sales since 2014 of this type of residences was recorded, according to TheWealth Report 2023 prepared annually by the real estate consultancy Knight Frank.
In the classic car market, the wealthiest collectors have returned after the pandemic break, say experts from the Hagi group, which specializes in this sector. A €300 million Mercedes-Benz 135 SLR Uhlenhaut Coupé set a new record for the most expensive car ever sold in 2022. And in art, several single-owner collections, including those of Microsoft co-founder Paul Allen and U.S. investor Anne Bass, produced some $2.500 billion after auction, more than double collection sales in 2021. "With the provenance of a high-profile collector attached, blue-chip works routinely break auction records, and last year was no exception," reports The Wealth Report 2023.
And that 2022 was not an idyllic year for the ultra-rich. The wealth held by UHNWIs (Ultra High Net Worth Individuals) declined globally by 30% in U.S. dollars. But in 10 their number had increased by around 2021.9%, despite the pandemic.
Today, millionaires face an economic situation as uncertain as three years ago, with the war in Ukraine, the ensuing European energy crisis, inflation, interest rate hikes and global turmoil in the banking system in recent months. Too many black clouds on the horizon. However, more than half of wealthy investors envision portfolio growth this year, "with confidence driven by asset appreciation, perceived value opportunities and an expected economic rebound," they say in Knight Frank.
Everyone wants to be VIC
Thanks to these mega-rich, luxury enjoys an iron health. The industry enjoys an expanding customer base: the 400 million buyers in 2022 will be joined by 100 million more in 2030, according to the annual study carried out by the consultancy Bain & Company and the Italian association of manufacturers of premium items Altagamma. And the upper end of the market is also expanding, which last year represented around 40% of the value of the square (1.4 billion euros of turnover), 21% more than in 2021, "due to consumers eager for unique products and experiences, and by brands using VIC strategies to the fullest". VICs are mostly composed of individuals with high incomes and/or significant assets, and were a relevant contributor to luxury sales during 2022. Top 2% of customers are responsible for 40% of luxury revenue.
Chanel boutique in Singapore, another of the cities in the world where enormous wealth is concentrated. Didier NOIROT (Gamma-Rapho via Getty Images)
For now, the richest do not seem to flinch, but they are increasingly paying more for the luxury items they acquire, as prices have risen considerably. Chanel, for example, raised its tariffs several times in 2021 and 2022 to pass on changes in production costs, raw materials and currency fluctuations. That did not stop its parishioners: the firm reached all-time highs in all product categories in 2021, with revenues of 15.600 billion dollars, almost 50% more than the previous year. The company's operating profit rose almost 171% compared to 2020 and 57.5% compared to 2019.
Gucci, Hermès and Louis Vuitton have also stretched their retail prices at a steady pace without shoppers fleeing. And last year Rolex applied an increase of 3.4% on average in January and another of 5% in November. Is there less demand for Rolex now? Not at all.
Those with more comfortable pockets have made gold to the luxury brands, which in recent times have reported record sales figures. "However, the players of these brands continue to invest in their future growth, even in the face of high inflation and rising costs, so that their profitability is declining slightly, after an unprecedented increase in 2021," according to the study by Bain & Company and Altagamma.
10 years in line for a Rolex
The biggest problem millionaires face today is that they can't get what they want right away. It is difficult to sell them a Kelly bag from Hermès or a Daytona from Rolex without having signed up for a list of up to 10 years of delay in many stores. Because demand far exceeds supply.
"Precisely because we have been confined in our homes we have had time to learn new things, to inform ourselves. That's why many people have turned to buying objects such as high-end watches," says Brian Lavio of Audemars Piguet. "Watches have become highly coveted goods, along with automobiles and art. During the pandemic, people couldn't spend money on travel and events, so many switched to watches, and many more young customers started buying more expensive products," notes The Wealth Report 2023.
A passion for quality collectibles propelled the Knight Frank Luxury Investment Index (KFLII) up 16% in 2022, outpacing inflation, stocks and gold. Art (up 29%) and classic cars (25%) led the table, driven by record sales and some large and unique collections hitting markets. Looking ahead, the outlook is good for the top two categories, with 59% and 34% of UHNWIs, respectively, looking to invest in 2023.
"There has been a change: before someone made a jewel or a watch and they looked for the customer. Now it's the customer looking for the jewel, because they can't get it," says Miguel Gómez Molina, co-owner of Gómez y Molina Joyeros, in Marbella. "In the last edition of the Watches & Wonders watch fair I went to talk to a small manufacturer and they told me that until 2024 they had everything sold, to contact them again then," says Gómez Molina. "The average consumer profile, which is our base, is the same with covid. But every time comes a profile with a lot of money looking for very particular pieces that can not be sold immediately. They are, above all, Swedes, Belgians, Dutch, Norwegians and Central Europeans." The rich (and the mega-rich) also cry.
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