Asia remains the most expensive place in the world to be wealthy, according to a new report, which found the region’s resilience to the Covid-19 pandemic is keeping high prices stable.
The world’s most densely populated continent remained the most expensive for high- and ultra-high net worth individuals (HNWIs) in Bank Julius Baer’s Global Wealth and Lifestyle Report 2021, as the rapid response to the global health crisis and overall currency stability are costing of luxury goods maintained in the region.
Four of the five most expensive cities for HNWIs – individuals with $ 1 million or more in asset investments – are now in Asia, the annual report said.
Shanghai, China jumped to the top of the ranking of 25 world cities and was voted the most expensive place to live as a wealthy person. Hong Kong, last year’s number one, dropped to third place, while Tokyo, Japan remained stable in second place.
Monaco, a small wealthy state in Western Europe, and Taipei, Taiwan completed the top five.
“Covid has not become an epidemic (in Asia) in the same way as the other countries in the index,” said Rajesh Manwani, Asia Pacific chief of markets and asset management solutions at Bank Julius Baer.
Europe and the Middle East came in second, with the majority of world cities in the region represented, supported by the strength of the euro and the Swiss franc.
Hardly hit by the pandemic, the Americas emerged as the cheapest region to lead a luxury lifestyle as the US and Canadian dollars fell against other major global currencies.
The new must-have luxury goods
The ranking is based on the price of a luxury goods basket that represents discretionary purchases by HNWIs in the 25 world cities.
This year saw major changes to the list as four of the 18 items were replaced as the pandemic changed consumer spending habits.
Personal trainers, wedding banquets, Botox and pianos were started up and replaced with bicycles, treadmills, health insurance and a technology package, including laptop and telephone.
“During a year plagued by global lockdowns, personal technology and treadmills have risen in popularity, while the price of women’s footwear has fallen sharply,” the report said.
“In the future, we think all of these items will continue to be on the list,” Manwani added, predicting that the pandemic-induced shifts would become permanent.
Overall, the luxury goods that showed the largest declines in US dollar prices were women’s shoes (-11.7%), hotel suites (-9.3%) and wine (-5.3%). Business class flights (11.4%), whiskey (9.9%) and watches (6.6%) saw the largest increase.
Asia prosperity trends to watch
Asia is expected to maintain its stronghold as the world’s most expensive region for the wealthy for years to come as economic growth continues at a rapid pace, the report said.
India – currently home to one of the region’s more affordable global cities, Mumbai – will be one of the countries to take the lead, said Mark Matthews, Asia-Pacific research chief, Bank Julius Baer.
“India’s growth rate will increase,” he said. “India is getting more expensive. Now it is a bargain.”
China, meanwhile, will remain the world’s leading luxury goods market as China’s affluent consumer gets a grip, he said. By 2025, China is expected to make up 47% -49% of the luxury goods market, compared to 16% -18% in America and 12% -14% in Europe.
Two other trends could change the way wealthy individuals spend their money in the coming years, but the report added: conscious consumption and a preference for experiences over goods.
“We believe that the conscious consumer lifestyle has really become mainstream,” said Manwani. As such, people can cut back on long-haul flights and start buying electric vehicles, changing their diet and rejecting fast fashion.
“Zillennials are excited about this trend,” he said, referring specifically to Generation Z consumers.
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