Increased spending by Hong Kong’s wealthy residents has pushed the city one notch higher in terms of the “cost of living extremely well,” making it the world’s second-most expensive metropolis, according to a Julius Baer report. Singapore retained the title, with London and Shanghai in third and fourth places, respectively. The Swiss bank’s report compared the cost of a basket of goods and services in 25 cities, analyzing the consumption patterns of high-net-worth individuals (HNWIs) – those with at least US$1 million of investible assets.
Julius Baer’s fourth annual global wealth and lifestyle report highlights the impact of economic recovery post-COVID-19 in mainland China and Hong Kong, where the demand for luxury goods and services has surged, driving up prices. Kenny Ng Lai-yin, a strategist at Everbright Securities International, emphasized the connection between economic recovery and increased luxury consumption. The report found that the global cost of living extremely well, which includes items like cars, property, whisky, fine dining, and jewelry, rose by 4% in US dollar terms this year, slower than the 6% increase seen in 2023.
In Singapore, owning a car remains the most significant expense, while in Hong Kong, the costs of legal services and fine dining are particularly high. Shanghai, on the other hand, sees high expenses in fine dining. Each city presents unique challenges contributing to their high costs. Hong Kong also witnessed a notable increase in luxury item prices: hotel suite rates surged by 22.9%, and ladies’ shoes by 12.7%, though the price of whisky fell by 18.8%.
Weaker currencies impacted the rankings of several Asian cities. Tokyo was notably affected, dropping to 23rd place from 15th due to the yen hitting its lowest level in three decades. Zurich, benefiting from a stronger Swiss franc, saw the biggest improvement, climbing to sixth place from 14th. This fluctuation underscores the significant influence of currency strength on living costs, as highlighted by Christian Gattiker, the head of research at Julius Baer.
Asia emerged as the second-most expensive region after Europe, the Middle East, and Africa, which Julius Baer consolidated into one region. The robust economic growth in Asia, driven by technological advancements in China and India and the strong economies of Southeast Asia, contributes to the region's resilience and growth. Mark Matthews, head of research for Asia-Pacific at Julius Baer, pointed out that Singapore is leading this digital transformation within a dynamic environment.
Healthcare is a top priority for HNWIs, with over 63% of respondents in Asia citing health and well-being as their main concerns. This focus on health reflects a broader trend among the wealthy to invest in personal well-being and quality of life. As pandemic-related travel restrictions have been lifted, wealthy individuals are spending more on travel and luxury experiences. In Asia, 74% of respondents reported increased spending on five-star hotels this year, and 71% spent more on fine dining, according to the report.
Investment trends among the wealthy show a strong preference for ESG principles. Seven out of ten wealthy individuals reported sizeable returns on their investments over the past 12 months, indicating a positive financial outlook and a commitment to sustainable investing. This trend highlights the growing importance of ethical considerations in investment decisions among the wealthy, aligning financial growth with social responsibility.
