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Luxury expenditure trends: KL most price competitive market in Asia

While Shanghai reclaims its title from Hong Kong as the most expensive city in Asia, Kuala Lumpur maintains its position as the most price competitive. This was according to Julius Baer’s eighth annual edition of the Wealth Report Asia, which tracks luxury expenditure trends of Asia’s High Net Worth Individuals (HNWIs).

Following a strong recovery since 2015, global luxury consumption is expected to moderate alongside a cooling Chinese economy. Yet the longer term outlook remains rosy premised on structural demand from Chinese Millennials and a more prominent female presence in the luxury market. Kuala Lumpur, nonetheless, remains the most inexpensive city in Asia notwithstanding an increase in its composite index of goods and services by 3.4% in US dollar terms. Residential property, hotel accommodation, wine, jewellery, piano and car are the most attractively priced in the Malaysian capital relative to other Asian cities.

Shanghai on the other hand, tipped Hong Kong to be the most expensive city on a price-weighted basis. The overall basket of goods and services in the Chinese city rose by 4.8% in US dollar terms, exceeding the gain in the overall index. Shanghai is also the most expensive city for hospital accommodation, watch, ladies handbag, wine, jewellery and skin cream. Singapore rises from third to the second position, boosted by a stronger Singapore dollar.

The Julius Baer Wealth Report Asia 2018 also introduces a new “His & Hers” Index to compare the cost of luxury goods for men and women, in relation to personal adornment. The findings corroborate studies that gender-based pricing exists even in the luxury space, with prices for items in the Hers index costing more on average than the His index equivalent. Seoul comes up as the most expensive city in Asia for both male and female luxury goods. This is largely owing to a special excise tax of up to 20% on certain luxury goods imports. On the other hand,

Jakarta ranks as the cheapest for men’s luxury goods, while Mumbai is the most price competitive for luxury female goods.

Women propelling growth

According to the report this year’s report shows that the cost of luxury living, as measured by the Julius Baer Lifestyle Index, rose 2.91% for its best yearly growth. The index continues to maintain its upward trajectory since its launch eight years ago, underscoring the strength in demand for luxury goods and services in Asia. Government efforts to boost domestic consumption, price harmonisation by luxury companies and scarcity were among the contributing factors to robust price trends.

Rajesh Manwani, head of markets & advisory solutions asia of Bank Julius Baer said: “Our Julius Baer Lifestyle Index rose to a record high, spurred by an improving global economy and sustained wealth generation in Asia. We expect the fundamental strength of the region’s economies to further drive the growth in the number of millionaires in Asia.”

This year, the report delves into the power of the female dollar – namely, Womenomics in Asia. Women now account for half of Chinese luxury spending. The purchasing power of women in Asia is increasingly gaining recognition, with more women in senior management positions and becoming more financially savvy.

Jimmy Lee, head Asia Pacific of bank Julius Baer said: “The rising economic status of women is perhaps one of the most important economic shifts in recent years. Women are creating and managing an increasing amount of wealth and their wealth management needs should be well served. At Julius Baer, we are committed to serving them with best-in-class advice and solutions based on their specific needs.”

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