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07-06-13, 12:05
http://www.businesstimes.com.sg/archive/wednesday/premium/top-stories/luxury-goods-inflation-scratches-spore-rich-20130605
Published June 05, 2013
Luxury goods inflation scratches the S'pore rich
Risk-taking required for investment portfolios: Julius Baer
By cai haoxiang
[SINGAPORE] For those leading a high-end life, there is precious little to complain about conspicuous consumption - if they are spending Singapore dollars in Singapore.
An index created by private bank Julius Baer featuring 20 luxury goods and services found that Singapore had the lowest luxury goods inflation rate last year in its peer group of four Asian cities - Hong Kong, Shanghai and Mumbai being the other three.
Due to the strong currency here, inflation for the rich was just 4.8 per cent last year in Singapore dollar terms, compared to 5.4 per cent in the Chinese yuan, 7.2 per cent in the Hong Kong dollar, and 16.7 per cent in the Indian rupee.
In absolute terms, compared to 10 other cities in the region including Tokyo, Bangkok and Seoul, Singapore is more expensive than the typical city, but not overwhelmingly so.
The number one spot goes to Shanghai, where a gold Rolex Oyster costs US$42,204, Louboutin pumps cost US$883, and a bottle of Lafite Rothschild 2000, US$5,456.
In Singapore, by comparison, the watch costs around US$37,200, the shoes US$736, and the wine US$3,500.
The sheer ease by which Shanghai leapt over other cities underscores China's "pre-eminent position in wealth creation in Asia", according to Julius Baer emerging markets economist Stefan Hofer, who was behind the 2013 Julius Baer Wealth Report and Julius Baer Lifestyle Index.
"Our baseline view remains that by 2015, China will be home to almost 1.4 million high net worth individuals (with investable assets excluding property in excess of US$1 million), representing a wealth stock of US$8.7 trillion," he wrote in the report.
"With such a rapid increase in wealth underway, demand for luxury is well outpacing supply, especially in terms of non-traded, purely locally consumed services."
Julius Baer uses the index to track the rise in prices for items most applicable to its clients, who typically have more than US$5 million in investable assets.
The goods in the index's basket also include the cost of a wedding banquet for 500 people at a top hotel, a Steinway & Sons grand piano, a box of 25 Cohiba Siglo VI cigars, and a one-year membership at a top golf club.
The largest price jump occurred in the cost of an Oxford or Harvard education for one year. That rose more than 30 per cent year-on-year to over US$78,000.
Overall, in the four original cities used for comparison, the cost of luxury items rose 8 per cent year- on-year in the 12 months to April 2013. This is lower than 8.8 per cent in 2012 and 11.7 per cent in 2011.
Basic inflation hovered between 5 to 6 per cent in these three years - putting the "luxury premium" at two to three percentage points currently.
Mr Hofer said he expects the 8 per cent luxury inflation rate to remain in the years ahead, thus "the bar set in Asia is actually quite high".
Thomas Meier, Julius Baer's head of Asia operations, said this level of inflation "obviously requires some risk-taking" by the rich in their investment portfolios.
"You need the equity component," he said.
Singapore remains an attractive place for the rich to live in and park their money given its mature market and quality goods and services, Julius Baer bankers said.
And Asia remains the place to be for the private banking business, with wealth here growing faster than average, said Julius Baer chief executive Boris Collardi. "As a firm, we are investing more in Asia ... Japan still has the largest pool of high net worth individuals, and we just made a small acquisition there," he said.
Published June 05, 2013
Luxury goods inflation scratches the S'pore rich
Risk-taking required for investment portfolios: Julius Baer
By cai haoxiang
[SINGAPORE] For those leading a high-end life, there is precious little to complain about conspicuous consumption - if they are spending Singapore dollars in Singapore.
An index created by private bank Julius Baer featuring 20 luxury goods and services found that Singapore had the lowest luxury goods inflation rate last year in its peer group of four Asian cities - Hong Kong, Shanghai and Mumbai being the other three.
Due to the strong currency here, inflation for the rich was just 4.8 per cent last year in Singapore dollar terms, compared to 5.4 per cent in the Chinese yuan, 7.2 per cent in the Hong Kong dollar, and 16.7 per cent in the Indian rupee.
In absolute terms, compared to 10 other cities in the region including Tokyo, Bangkok and Seoul, Singapore is more expensive than the typical city, but not overwhelmingly so.
The number one spot goes to Shanghai, where a gold Rolex Oyster costs US$42,204, Louboutin pumps cost US$883, and a bottle of Lafite Rothschild 2000, US$5,456.
In Singapore, by comparison, the watch costs around US$37,200, the shoes US$736, and the wine US$3,500.
The sheer ease by which Shanghai leapt over other cities underscores China's "pre-eminent position in wealth creation in Asia", according to Julius Baer emerging markets economist Stefan Hofer, who was behind the 2013 Julius Baer Wealth Report and Julius Baer Lifestyle Index.
"Our baseline view remains that by 2015, China will be home to almost 1.4 million high net worth individuals (with investable assets excluding property in excess of US$1 million), representing a wealth stock of US$8.7 trillion," he wrote in the report.
"With such a rapid increase in wealth underway, demand for luxury is well outpacing supply, especially in terms of non-traded, purely locally consumed services."
Julius Baer uses the index to track the rise in prices for items most applicable to its clients, who typically have more than US$5 million in investable assets.
The goods in the index's basket also include the cost of a wedding banquet for 500 people at a top hotel, a Steinway & Sons grand piano, a box of 25 Cohiba Siglo VI cigars, and a one-year membership at a top golf club.
The largest price jump occurred in the cost of an Oxford or Harvard education for one year. That rose more than 30 per cent year-on-year to over US$78,000.
Overall, in the four original cities used for comparison, the cost of luxury items rose 8 per cent year- on-year in the 12 months to April 2013. This is lower than 8.8 per cent in 2012 and 11.7 per cent in 2011.
Basic inflation hovered between 5 to 6 per cent in these three years - putting the "luxury premium" at two to three percentage points currently.
Mr Hofer said he expects the 8 per cent luxury inflation rate to remain in the years ahead, thus "the bar set in Asia is actually quite high".
Thomas Meier, Julius Baer's head of Asia operations, said this level of inflation "obviously requires some risk-taking" by the rich in their investment portfolios.
"You need the equity component," he said.
Singapore remains an attractive place for the rich to live in and park their money given its mature market and quality goods and services, Julius Baer bankers said.
And Asia remains the place to be for the private banking business, with wealth here growing faster than average, said Julius Baer chief executive Boris Collardi. "As a firm, we are investing more in Asia ... Japan still has the largest pool of high net worth individuals, and we just made a small acquisition there," he said.