HONG KONG -- It is perhaps not surprising that Hong Kong, where even the top government official finds housing unaffordable, is the costliest metropolis in Asia.
The semi-autonomous region of China jumped two places to lead 11 cities in an annual ranking of luxurious consumption by Swiss private bank Julius Baer Group, despite seeing muted inflation in its overall basket of goods and services, at 1% between 2016 and 2017, versus its peers' average of 1.42%.
At $51,594 per sq. meter, Hong Kong's prime real estate is 2.7 times more expensive than other cities in Asia, according to the Zurich-based wealth manager, which also found that the city was the most expensive for fine dining and business-class flights.
The results were skewed by real estate, the biggest-ticket item on the spending behavior gauge, which is also known as the Julius Baer Lifestyle Index. It is calculated on a price-weighted basis in the U.S. dollar.
That also explains why Shanghai, against the backdrop of a depreciating yuan, came second, followed by Singapore, which saw a moderation in housing prices last year.
Kuala Lumpur, where the local currency weakened against the U.S. dollar by 6% between June 2016 and June 2017, displaced Mumbai to become the region's least-expensive city as the Indian rupee rose 4% against the greenback in the same period. The Malaysian capital offered the best bargains for five of the 22 items on the index among all competing cities.
The index's basket of goods and services -- typically consumed by high-net-worth individuals -- includes business-class flights, residential property, wedding banquets, hotel suites, lasik surgery, hospital rooms, golf club memberships, lawyers, watches, ladies handbags, wine, jewelry, men's suits, botox injections, pianos, cars, cigars, ladies shoes, skin cream, university, and epicurean feasts.
Cigars, men's suits and legal fees led in price inflation, rising 16.2%, 9.4% and 6.7% on the year, respectively. Hotel suites and tertiary education fell the most, by 5.6% and 4.3%, respectively. The latter was due to the depreciation of the British pound.
Through other lens, Shanghai takes crown
But on an equal-weighted basis, Shanghai remained the most-expensive city for the third consecutive year, having the highest number of the region's costliest items, namely hospital rooms, wine, jewelry, botox, cigars, and cosmetic products. Its high-end consumption gauge, if measured on a local currency basis, rose 1.9% on the year, versus a 1.7% decline in U.S. dollar terms.
Shanghai's rising lifestyle reading, according to the Swiss bank, reflected China's recovery in consumer confidence, which had been dampened by president Xi Jinping's anti-graft campaign and the stock market rout of the past few years.
It was also a result of the "reshoring" of shopping habits among mainland Chinese, who began to buy more of their luxury goods domestically as opposed to overseas.
Pearlyn Wong Pei-li, executive director at the Swiss bank, told reporters on Tuesday that the changing patterns were attributable to premium brands' efforts to harmonize prices of their products globally, as well as the Chinese government's crackdown on unofficial imports of luxuries through curbing the gray "personal shopper" market and lowering official import duties.
Wong also noted that the trend was driven by millennials' growing propensity to spend on experiences rather than capital-intensive goods. "For the ordinary millennial, what we've found, in terms of how they tend to spend their money, is obviously first on experiences," said Wong. "Secondly, they tend to spend more on things [in which] they perceive more value for their money. Thirdly, [it] depends a lot on what their peers say," she said, adding that association with their perceived identity plays a role.