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Asset Management / Wealth Management
Hong Kong now most expensive city in Asia for HNWIs
Hong Kong now ranks as most expensive city in Asia to buy luxury items, according to Julius Baer's Lifestyle Index for HNWIs
Janette Chen 19 Oct 2017

HONG Kong is now considered the most expensive city in Asia to buy luxury goods and services, with Shanghai and Singapore ranking second and the third, respectively, due in part to the high cost of residential property in Hong Kong, according to Julius Baer’s Lifestyle Index.

The index looks at the prices of luxury items and services, such as business class flights, watches, handbags, residential property, cigars, lawyer’s fees, and others, and weights them appropriately into an index. “This year, the Hong Kong Lifestyle Index has risen by 1% (y-o-y),” says Pearlyn Wong, Julius Baer’s executive director of markets and advisory solutions for Asia, noting that the price for most indexed items stood stable this year.

However, residential property comprises 30% of the weighting of the index, says Bhaskar Laxminarayan, Julius Baer’s chief investment officer for Asia. The high housing price of Hong Kong has driven the city to jump two places, becoming the most expensive city for consuming major luxury items, according to the private bank’s analysis on a price-weighted basis in US dollar terms.

Source: Julius Baer Wealth Report Asia

The findings should be taken with a pinch of salt, however, as the rise in the Hong Kong’s Lifestyle Index is only 1%, and is slightly lower than the rise of 1.42% for the Lifestyle Index for Asia and also below rise of 2.4% for the Singapore Index, even though Hong Kong overtook Singapore in terms of ranking. The Shanghai Index fell by 1.7%. The new ranking is explained, in part, by a revised weighting methodology and the high weighting of residential property:

“On an equal-weighted basis, Shanghai remains the most expensive city in Asia to buy our luxury index items with six items (lasik, wine, jewellery, botox, cigars, skin cream) with a top ranking. To add another dimension to our index this year, we now reflect our city ranking on a price-weighted basis. From this perspective, Hong Kong takes top spot given the higher cost of buying property which is the largest ticket item in our index. Hong Kong is also the most expensive city for fine dining and business class flights,” says the report.

In other words, HNWIs in China might still be right to flock to Hong Kong for items such as luxury handbags and skin cream.

“Hong Kong continues to be the most expensive place to buy property in Asia,” says Wong. The maximum housing price of Hong Kong is US$51,595 per square meter, while the average price in Asia stands at just US$19,150 per square metre. “It’s more than twice or even three times more expensive than the region on average,” Wong adds.

Despite the government’s efforts to boost residential supply and suppress housing demand, Hong Kong’s housing prices remain on the rise. The regulator’s announcement in April this year of a 15% stamp duty levy on first-time homebuyers purchasing multiple flats in one go is not expected to drag down house prices, as these transactions make up less than 5% of total sales.

The momentum of Hong Kong’s housing price tends to be maintained, says Laxminarayan, predicting that Hong Kong will stand firmly as the most expensive Asian city to buy a property.

“Our outlook for Hong Kong’s economy is still quite positive,” says Wong, highlighting a bullish perspective for Hong Kong dollar. Julius Baer projects GDP growth of 2.5% for Hong Kong this year, and further improvements in economic activity next year.

Julius Baer recently released its latest Wealth Report, Asia which tracks luxury expenditure trends of Asia’s HNWIs. Issued on a yearly basis, the report looks into major Asian cities including Hong Kong, Shanghai, Singapore, Taipei, Tokyo, Seoul, Bangkok, Mumbai, Manila, Jakarta and Kuala Lumpur.

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