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Pandemic Hits Some HNW Goods, Services - But Boosts Others - Julius Baer

Tom Burroughes

12 April 2021

The cost of goods and services used by high net worth clients worldwide rose slightly in 2020, with Shanghai the most expensive out of 25 cities overall, according to the Global Wealth and Lifestyle Report 2021 from . 

The bank, compiling an index of spending items across a variety of areas, said their overall price level rose 1.05 per cent over the past year from a year before, with some areas such as hotels falling sharply while business class flights surged, reflecting the turmoil caused by COVID-19. Data was collected from 20 types of luxury goods in a period between July and September last year.

The collapse of global tourism in 2020 has had a significant impact on the latest index of prices. In Asia, Bangkok and Singapore have both slipped down the rankings, while the dearth of travellers has also hit many European cities. The luxury categories that have seen the biggest falls in prices in US dollar terms are ladies’ shoes (-11.7 per cent) and hotel suites (-9.3 per cent). The biggest gains are in business class flights (+11.4 per cent) and whisky (+9.9 per cent), it said. 

Such studies can shed light on where HNW clients are most likely to be and where they may think of moving in future, helping wealth managers craft marketing and booking centre strategies.

“While there were regional differences, overall the price of our basket reflecting the lifestyle of wealthy individuals around the world showed an increase of just 1.05 per cent. Asia continues to be the most expensive region in the world for high- and ultra-high-net-worth individuals – a testament to the continent’s ongoing rise,” Rajesh Manwani, head markets and wealth management solutions APAC of Julius Baer, said. 

Rising, falling cities
In the Americas, Vancouver ranked at 24 (moving down); New York was ranked at 10th (down); Miami at 19 (down) and Mexico City at 23rd (down). Sao Paolo was at 21st (down). In Europe, Monaco was 4th (going up); Paris at 7th (up); Zurich at 6 (up); Milan is 13th (up); Barcelona is 15th (up); Frankfurt is 17th (up), and London is 8th, unchanged.

In Africa and Middle East, Dubai is 12th (up); South Africa is 25th (down); Moscow is 18th (up); Mumbai is 22nd (up); Singapore is 9th (down); Hong King is 3rd (down); Jakarta is 20th (down); Manila is 16th (up); Taipei is 5th (up). Shanghai is the top of the list for overall price level, and has risen; while Tokyo is in second place, also rising. Sydney is in 14th (up). 

Julius Baer said there had been some changes to the basket of goods and services in its measures, benefiting people living in Asia-Pacific countries, where the new items tend to be cheaper. But Asia is “the most expensive region partly because of the region’s swift recovery from the global health crisis, currency stability, and price resilience for the index items”, the report said.

Shanghai is now the most expensive city in the index, clinching the top spot from Hong Kong. Tokyo and Hong Kong are the second and third most expensive cities respectively, Julius Baer said. The Americas are the most affordable region to live a luxury lifestyle this year. This is mostly due to the price of the US and Canadian dollars falling against other major global currencies, and a sharp devaluation of currencies in Latin America. Mexico City and Vancouver are amongst the most affordable cities in the index. Just one US city – New York – remains in the top 10. This region is the most expensive place for healthcare but personal technology remains affordable, as the US is home to many of the world’s tech titans.

Johannesburg has emerged as the most-well-priced place for luxury in the 2021 index. This is the only African city represented in the index, and was one of few cities to experience significant price falls over the past year as the South African rand depreciated significantly. All of the other cities in Europe, Middle East and Africa have risen up the rankings, buoyed by the strength of the euro and the Swiss franc, except London, due to Brexit uncertainty, it said. 

“As in previous years, the data of Julius Baer’s Lifestyle Index 2021 points to two clear conclusions for those looking to preserve their wealth. The first is to invest; inflation and other factors such as exchange rates and local regulations can play a huge role in the purchasing power of your wealth,” Nicolas de Skowronski, head of wealth management Solutions and Member of the Executive Boards of Julius Baer, said.