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What are the spending habits and lifestyle trends of the wealthy?

Wealth is no guarantee of health or happiness, as the pandemic has proven. Now, as the world attempts a return to normality, how affordable are high-end lifestyles – and how have prices and habits changed in the last year? Discover our Global Wealth and Lifestyle Report’s key findings here.

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Covid-19 has impacted society’s spending patterns. However, as we revealed in last year’s Global Wealth and Lifestyle Report, the consumption habits of the wealthy have been impacted less than other consumers.

In our first Lifestyle Survey of high-net-worth individuals (HNWIs) around the globe, we assess their consumption, lifestyle, and financial intentions for the year to come. Meanwhile, our Lifestyle Index shows us that, this year, markets for the luxury goods and services that the wealthy consume are recovering due to pent-up demand, and it evaluates the world’s most expensive cities.

Wealth of choices
Our research shows that the pandemic has  influenced the spending habits of high-net-worth individuals (HNWIs), with some distinct regional differences emerging.

While many HNWIs still have considerable demand for petrol cars, they are increasingly interested in greener methods of transport like hybrid and electric vehicles. This is a good example of the HNWI green consumption dichotomy – as our survey reveals, the wealthy are more likely to use private vehicles but, encouragingly, they are also likely to be environmentally conscious.

This conscious behaviour links to wellbeing and health, both areas that have seen, and will continue to see, growth in expenditure for medical and fitness reasons as the pandemic further recedes.

When it comes to sentiment, our research shows that HNW Europeans tend to be less optimistic about their financial and professional situations than other regions surveyed. This has led them to invest more and spend less during the last year. As a result, they now seem to want to spend more on leisure and pleasure, such as wine, fine dining, and travel. Further insight into spending intentions among HNWIs is available in our report here.

What are the most expensive cities?
Based on the cost of our Lifestyle Index of goods and services, Asia still dominates, as Shanghai remains in the top spot of our city rankings, while Taipei is at number three and Hong Kong is number four.

What is more surprising this year is that London, driven by strong increases in residential property and hospitality services, has risen to number two from number eight.

Its main competitor, New York, looks a bargain by comparison, being only the 11th most expensive city in the world according to our rankings. To see the full overview, download our Global Wealth and Lifestyle Report.

How do we determine our rankings?
Now in its third global year, our Lifestyle Index – the basis for our city rankings – looks at a basket of goods and services that wealthy individuals buy and use. These range from residential property to lawyers and ladies’ handbags, to which we added bicycles, treadmills, and technology packages last year.

Our index, available in full here, then costs and ranks them in 24 key cities around the world and examines the global, regional, and categorical changes on a yearly basis.

What makes this year unique?
One of the biggest differences this year is that inflation is back with a vengeance. Over the period covered by the last report, the overall price of our Lifestyle Index (in USD terms) rose 1 per cent; this year, it rose almost 7.5 per cent. Most items surveyed have gone up in price, some very significantly (technology and, curiously, lawyers lead the pack).

Which cities are more affordable?
Jakarta, Manila, and Mumbai are very affordable across the board relative to other Asian cities, and Johannesburg – an outlier in its region – offers good value in EMEA.

The Americas are the least expensive region overall and do not have a single city in the top ten, despite São Paulo surging nine places to 12th in the ranking. The relative affordability of the Americas was also true last time the Lifestyle Index was calculated – and this suggests the trend may be becoming entrenched.

A shift in focus for the wealthy?
The idea of the Western Hemisphere as ‘cheap’ supports the thinking that the 21st century is the Asian Century and, where the world was once centred around the North Atlantic, it is now orientated around the Western Pacific.

European cities, according to this thinking, remain attractive and relatively expensive because they’re good places to do business, pleasant places to live, culturally rich, and rather closer to cities in Asia than New York.

However, it’s increasingly possible to see that this idea of the Asian Century could change. Current factors that are influencing a potential shift in this thinking are outlined in our full report.

How are the prices of goods changing?
Some 75 per cent of goods and 63 per cent of services in our Lifestyle Index have experienced a price rise in the last year, with technology packages, lawyers, and bicycles experiencing the biggest rises. Discover what other changes Index items have experienced in our full listings here.

What do our findings mean for the future?
Overall, change will be still driven by Asia, but the story may be rather less straightforward than we previously thought.

As our Head of Research Christian Gattiker notes in the report, it is vital for investors to protect their purchasing power. He explains: “While the financial situation of many HNWIs has actually improved over the last year, the concurrent increase in the basket of goods and services that make up our Lifestyle Index means the money illusion of previous years still lingers, eroding the purchasing power of wealthy individuals.”

And looking to the long term, problems such as global warming haven’t gone away. Life will continue to be unpredictable and expensive for everyone, the wealthy included – while health and happiness increasingly become must-haves that money cannot buy. 

Would you like to discuss your wealth planning requirements with an expert?

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