Shanghai tops the charts of most expensive cities for HNWIs, while Tokyo shed some ranks as the yen dipped. Dubai comes in 14th. Image Credit: Agency

Dubai: Dubai was ranked the 14th-most expensive city in the world for high networth individuals (HNWIs) in 2022, down two places from 2021, according to an annual survey by the Swiss financial institution Julius Baer. The pandemic, rising inflation, and increased geopolitical tension have resulted in a sudden rise in prices worldwide.

This has ‘sharpened the need for investors to protect their purchasing power and, in the long-term, actively plan to preserve their wealth,” said Nicolas de Skowronski, Head of Wealth Management Solutions at Julius Baer, in the report. In terms of regions, Asia continues to be the most expensive, with China’s financial capital Shanghai taking the top spot again. Taiwan’s capital Taipei too moved up in the rankings, while Tokyo dropped six places to 8th, partly due to the depreciation of the yen. (The yen has been having a terrible week, dropping to record lows.)

The Americas is still the most affordable region to live well in as cars and residential property are far less expensive compared to other regions. Sao Paulo took 12th place on the list and was the biggest riser this year, mainly due to record inflation and high taxes. While New York has six of the most expensive items the rich would want and residential properties, Mexico City has the least expensive properties, 72 per cent cheaper compared to the regional average.

Europe, hit hard by the pandemic and the soaring energy prices, is seeing some of the highest price surges. The Julius Baer report noted that while flights in Europe were generally more expensive than in other regions, hotel suites are almost twice as expensive as in Asia. In London, which was ranked 2nd this year, hotel suites are 162 per cent higher than the global average.

Johannesburg has lost its rank as the most affordable place to live well in the 2022 Index. The only African city represented in the ranking lost this title to Mumbai, where residential property is almost 60 per cent cheaper than the global average.

Where are prices increasing

The enduring effects of the pandemic, which is still an ongoing crisis in some countries, combined with a challenging set of macro-economic conditions and supply chain disruptions caused price rises for 75 per cent of the goods and 63 per cent of the services in the Julius Baer Lifestyle Index. The weighted average of prices increased 7.46 per cent in the last year, compared to an increase of only 1.05 per cent in the 2021 report. Supply chains, already strained by the pandemic, were put under further pressure by the war in Ukraine, leading to a rise in commodity prices and shortages in key consumer industries.

Inflation is rising and affecting consumers’ purchasing power everywhere. In line with the trends observed last year, there was an increased focus on where HNWIs are located – stability, security, and cost of living have all become decisive factors, said the report. Additionally, HNWIs have a stronger desire to do more with their own wealth and go beyond purchases to have a positive impact on society, it added. “Sustainability, ESG and philanthropy considerations continue to grow in importance,” the report states.

Lifestyle choices

The Lifestyle Survey - a new addition to the report that asks HNWIs about their consumption, spending, and investment habits – found a strong intention to return to experiential spending on leisure activities and travel, but also a greater focus on areas that might enable them and their children to plan in the years ahead, such as health insurance, wellness, and education. HNWIs are also increasingly aligning their financial and investment decisions more closely with their personal values. “In all regions, sustainability is a very, if not extremely, important consideration for most respondents,” said the report.

Dubai comes out stronger
Dubai took 14th spot on Julius Baer's Index as activity in the travel and tourism sector clocked gains despite rising inflationary pressures.

When it comes to hotel rooms, EMEA is the outlier, with overall price increases of almost 50%. This is also due to room rate increases in Dubai, which were up more than 195% year-on-year for the second strongest increase after London. These were led by higher visitor numbers, staycation offers, and several major events staged in the UAE.

“Everybody wanted to visit Dubai during the pandemic, and this is a very encouraging sign,” said Omar Barghout, Head of Investment Advisory, Middle East, Julius Baer. “We are seeing a lot of talent moving here from Asia, because of their Covid policies. Because of the uncertainty in Europe, we're seeing a lot of family offices, banks, hedge funds, private equity, and very well-known names moving here.”

Despite differing pandemic restrictions Dubai continued to receive tourists during 2021 – driven by a combination of pent-up-demand as travel reopened, the effect of Expo 2020 Dubai, and increased staffing costs have driven price rises in accommodation. The city also witnessed 44% growth in residential property prices with short-term rentals and holiday homes on an upswing. Overall, Dubai’s residential market saw an increase in line with the trend in 2021 and properties were also relatively affordable, despite a significant rise in 2021.

Within the EMEA region, Dubai is the most expensive city to buy a car – 20% higher than the regional average - but also a men’s suit and a watch. “One of the biggest trends we are seeing with regards to investors in the UAE is an increased spotlight on succession planning,” said Barghout. “This has been exacerbated not only by the pandemic but also by clients being more conscious of the impending wealth transfer process.”