Low returns from turbulent markets have not dampened demand for luxury consumption and passion investments among Asia’s high-net-worth individuals (HNWIs) this year.
That’s according to data from Julius Baer’s latest Wealth Report, which shows that the cost of luxury living in Asia saw its best yearly growth in 2018.
The report tracks the luxury expenditure trends of HNWIs in 11 Asian cities, and measures price movements of luxury goods through the Julius Baer Lifestyle Index.
The index, which measures the cost for a basket of 22 luxury goods and services, rose 3.34% in local currency and 2.91% in US dollar terms in the first six months of 2018.
In both local currency and US dollar terms, the prices of 16 index items saw gains, led by cigars, boarding school fees and men’s suits.
Cigar prices rose on limited supply while boarding school fees increased due to a surge in demand from pupils coming from China, Russia and the Middle East.
Prices related to universities, golf club memberships, residential property and degustation dinners also saw a healthy increase of over 4.5%.
Jewellery and gems – among the most favoured passion investments of Asian HNWIs – saw a price rise of 1.6% this year.
Aside from high demand, government efforts to boost domestic consumption, price harmonisation by luxury companies and scarcity were other contributing factors to robust price trends, according to the report.
The report’s findings come at a time when Asia’s wealthy investors are shying away from turbulent financial markets.
In fact, Capgemini’s Asia Pacific Wealth Report 2018 has found that HNWIs in Asia Pacific excluding Japan increased their exposure to cash and cash equivalents by 1.3% to 26.2% in 2018, simultaneously reducing investments in equities and fixed income.
Looking ahead, China’s rising middle class, millennial and female consumers are expected to be major contributors to global luxury consumption.
In fact, according to the report, women across Asia are making their presence felt in the luxury space - be it through consumption or investments.
Asian women, particularly in Malaysia, Thailand and China, are increasingly becoming self-made millionaires and are controlling the deployment of their assets.
‘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,’ said Jimmy Lee, head Asia Pacific at Julius Baer.
Not only are rich women spending on designer handbags and costly perfumes, but they are also spending more on products traditionally viewed as masculine domain, such as cars.
What’s more, women now account for half of Chinese luxury spending, up from 10% in 1995, according to Bain & Company research.
Female millennial investors, especially in China, are also making their mark in luxury consumption due to the ease of online shopping and financial support from parents.
This has encouraged luxury brands such as Louis Vuitton, Cartier, Christian Dior and Gucci to use social media platforms WeChat and Weibo to connect with Chinese millennials.