In its 2021 edition of the Global Wealth and Lifestyle Report (GWLR), which takes a basket of consumer goods and services that reflect the high net-worth individual (HNWI) lifestyle and analyses their prices in 25 key cities around the world, Julius Baer—the leading Swiss wealth management group—has focussed on Covid-19 and tried to gauge if the pandemic has fundamentally rewired the global consumer’s mindset.
Through 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 around the world. Basis this, investors can estimate the portfolio returns needed to preserve, or even grow, their purchasing power.
The key findings of this year’s Julius Baer Lifestyle Index 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. The report also captures developments in the ‘conscious consumption movement’, which is truly taking off as Covid-19 has raised consumer commitment to, and awareness of, buying ethically and sustainably.
According to Rajesh Manwani, head of markets & wealth management solutions for Asia Pacific at Julius Baer, while there were regional differences, overall the price of the basket that reflects the lifestyle of wealthy individuals around the world showed an increase of just 1.05%. “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,” said Manwani.
On a similar note, Nicolas de Skowronski, head of wealth management solutions and member of Julius Baer’s executive board, said that as in the 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, according to Skowronski, is to invest. Inflation and other factors such as exchange rates and local regulations can play a huge role in the purchasing power of HNWI wealth. “Secondly, adopting the right wealth management and planning strategies are essential to preventing a real-term erosion of wealth over time.”
Interestingly, in the 2020 edition of GWLR, a notable emerging global trend was the rise of conscious consumption. This year, according to Julius Baer, the movement has gone mainstream, becoming a central theme in nearly every sector. “Clearly, Covid-19 has raised consumer commitment to, and awareness of, buying ethically and sustainably,” Julius Baer said in a release.
The wealth management outfit also added that there is considerable evidence that consumption patterns and preferences are changing faster than ever before. 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 world’s consumers are definitely becoming more conscious, and the trend is truly taking off.”
And, the trend is also reflected in HNWI behaviour when it comes to managing their wealth. According to Skowronski, on an increasing basis, Julius Baer is seeing its clients trying to make their assets work for future generations. “Not just their own descendants, but potentially also for the world at large, be it through foresighted planning, impact investing, sustainable solutions, or philanthropy,” Skowronski explains. “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.”
Julius Baer says that if one were to look at the findings of the 2021 Julius Baer Lifestyle Index, one might be forgiven for questioning whether the pandemic had at all affected high-end consumption habits. Many of the underlying trends of the past few years—and even the past decade—have carried on into 2021.
The luxury goods and services markets have proved resilient and the most expensive cities on Earth continue to be in Asia, 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. While Tokyo and Hong Kong are the second and third most expensive cities respectively, the picture remains mixed with Mumbai still one of the places where wealth goes the furthest.
For 2021, the Americas are the most affordable region to live a luxury lifestyle, mainly due to the price of the U.S. and Canadian dollars falling against other major global currencies, and a sharp devaluation of currencies in Latin America. The report points out that Mexico City and Vancouver are amongst the most affordable cities in the index, while 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 U.S. is home to many of the world’s tech titans, Julius Baer adds.
When it comes to the most well-priced place for luxury in the 2021 index, Johannesburg has emerged at the top. Also, it is the only city from the African continent 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, the Middle East and Africa (EMEA) have risen up the rankings, buoyed by the strength of the Euro and the Swiss franc, except London, due to the uncertainty over Brexit.
According to GWLR, the Covid-19-led 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.
And when it comes to the luxury categories, those that have seen the biggest falls in prices in U.S. dollar terms are ladies’ shoes (-11.7%), hotel suites (-9.3%), and wine (-5.6%). The biggest gains are in business class flights (+11.4%), whisky (+9.9%), and watches (+6.6%).
Going forward, for the next few years, rising Asia in general, and China in particular, will be the drumbeat to which global wealth increasingly marches. The pandemic is a once-in-a-century event that has so far been shown to have little real effect on global wealth trends, it says.