‘Nobody’s immune to inflation’: These are the most expensive cities for the world’s wealthy

Shanghai has been dubbed the most expensive place in the world to be rich, according to a new report, which shows that even the uber-wealthy aren’t immune to inflationary pressures on their most prized luxury goods.

The Chinese megacity took the title for the second year running after recording major price increases across 16 out of 20 luxury items, Julius Baer’s Global Wealth and Lifestyle Report 2022 showed Wednesday.

It was one of four Asia-Pacific cities, including Taipei (3rd), Hong Kong (4th) and Singapore (5th) to round out the top five most expensive locations for high- and ultra-high net worth individuals.

London (2nd) was the only European outlier in the top five. The U.K. capital shot up six places this year amid rising residential property and hospitality prices.

By comparison, no city in the Americas ranked in the top 10. Indeed, they emerged as “relatively cheap” for the uber-wealthy, according to the report’s authors.

Swiss private bank Julius Baer’s annual ranking is based on the price of a basket of luxury goods representing discretionary purchases by HNWIs — individuals with $1 million or more in investible assets — across the 25 global cities.

The report found that the enduring effects of the coronavirus pandemic combined with challenging macro-economic conditions and supply chain disruptions led to price rises across the majority of the 20 items studied.

Inflation across the collection of items rose 7.5% over the year, compared with just 1% the year earlier.

The data was gathered between November 2021 and April 2022, capturing some, but not all, of the economic stressors inflicted by the war in Ukraine.

Three-quarters (75%) of luxury goods and almost two-thirds (63%) of luxury services increased in price over the year, according to the report. That was due to services being somewhat more restricted during the tail-end of lockdowns, delaying an uptick in demand.

Technology packages — which include an iPhone, iPad and MacBook — and lawyers recorded the greatest global price increases over the year, at 41% and 32.6% respectively. The report’s authors said that was a result of increased demand, supply chain constraints and a “continued search for high-quality talent” in professional services.

“Nobody’s immune to inflation,” Alan Hooks, head of private clients at Julius Baer, said at an event to mark the report’s launch Wednesday. He added, however, that HNWIs have a better “ability to absorb inflationary pressures” than many people.

“Clearly, this represents what we’re seeing in the broader economy,” Dawn Li Wan Po, executive director and senior portfolio manager at Julius Baer, added.

Inflation has been on a continued upward trajectory over recent months, raising the cost of goods and services and prompting a cost-of-living crisis in broader society.

Contrastingly, the report found that wine and health insurance recorded the greatest price falls globally this year, falling 26.1% and 24.4% respectively. The report’s authors said the reduced health insurance costs were a result of the rebalancing of prices following pandemic highs.

Still, staggeringly high luxury real estate and car prices — which account for a larger weighting in the report’s index — were the main contributors to Shanghai’s continued stronghold, rising 28% and 11% respectively from an already high base.

In second place London, it was again residential property prices, which rank 103% above the global average, and hotel rooms (162% above average), which accounted for the rapid rise from eighth place in 2021.

Tokyo, meanwhile, saw the greatest price falls over the year, dropping from the second most expensive city to the eighth, largely due to currency depreciation in the Japanese yen.

For the first time this year, the report also included a lifestyle survey, which asked the world’s wealthy about their consumption, spending and investment habits.

It found that wealthy people in Asia-Pacific were the most optimistic about their business and financial conditions compared to those in other regions.

HNWIs in Europe said they intend to spend more this year on leisure, while those in the Middle East, Asia-Pacific and the Americas said they would spend more on health insurance.