Julius Baer publishes Global Wealth and Lifestyle Report 2021
In a wide-ranging index, Julius Baer tracks prices and consumer behaviour around the world to gauge the price inflation of a basket of goods and services representative of the HNWI lifestyle in cities around the world. With this, investors can estimate the portfolio returns needed to preserve, or even grow, their purchasing power.
A focal point in the latest edition is the impact of Covid-19 on high-end consumption: did the pandemic fundamentally rewire the global consumer’s mindset, or did it accelerate trends that were already set in motion? The findings of the Julius Baer Lifestyle Index 2021 show the continuation of many of the underlying trends of recent years, with COVID-19 impacting prices sharply in specific travel-related areas such as flights and hotel suites.
Rajesh Manwani, Head Markets & Wealth Management Solutions APAC of Julius Baer, comments: “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.”
Nicolas de Skowronski, Head Wealth Management Solutions and Member of the Executive Boards of Julius Baer, says: “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. Knowing your local or even personal inflation rates and secondly adopting the right wealth management and planning strategies are essential to preventing a real-term erosion of wealth over time.”
A notable emerging global trend mentioned in the previous edition of the Global Wealth and Lifestyle Report was the rise of conscious consumption. This year, the movement has gone mainstream, becoming a central theme in nearly every sector.
According to the report, Covid-19 has raised consumer commitment to, and awareness of, buying ethically and sustainably. There is considerable evidence that consumption patterns and preferences are changing faster than ever before. The world’s consumers are definitely becoming more conscious, and the trend is truly taking off.
Even when it comes to high-end goods and the premium services sector, consumers in the most expensive cities of the different continents are moving towards more conscious choices, which may result in fairer prices for the producers.
The trend is also reflected in HNWI behaviour when it comes to managing their wealth, according to Nicolas de Skowronski: “More and more, we are seeing our clients trying to make their assets work for future generations – their own descendants, but potentially also for the world at large, be it through foresighted planning, impact investing, sustainable solutions, or philanthropy. It is our role as a wealth manager to support this positive shift by helping them to make educated choices and better understand the broader implications of their investments.”
The report highlights how Our Lifestyle Index is changing to reflect the evolving world of high-end consumption. This year's changes to the basket of goods and services have largely benefited those living in Asia-Pacific countries, where the new items tend to be cheaper.
Despite this, Asia remains 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. 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 – yet the picture remains mixed with Mumbai still one of the places where wealth goes furthest.
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 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 EMEA have risen up the rankings, buoyed by the strength of the euro and the Swiss franc, except London, due to Brexit uncertainty.
The collapse of global tourism in 2020 has had a significant impact on this year’s index. 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 USD 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).