Shanghai dethrones Hong Kong as most expensive city in Asia

Property prices in Hong Kong reached $424,042 psm.

Shanghai reclaimed its title from Hong Kong as the most expensive city in Asia on a price-weighted basis, according to Julius Baer’s latest Wealth Report Asia.

Hong Kong slipped from the top spot into third, whilst Singapore rose from third to second on the back of a stronger Singapore dollar.

“Our basket of goods and services rose by 2.2% in Hong Kong, with prices for most items stable YoY,” Julius Baer said in its report. “Hotel suites (10.6%), jewellery (9.5%) and ladies handbags (6.6%) were exceptions, experiencing strong inflation.”

Despite its reputation as one of the most expensive cities in Asia, luxury items such as skin creams, jewellery, wine, ladies shoes, watches and men’s suits were relatively inexpensive, the report found.

On the other hand, Hong Kong retained its top spot as the most expensive city to purchase a high-end property in Asia. According to the report, property prices continued to climb, reaching $424,042 (US$54,307) psm.

“Strict capital controls and changes in tax rules have not deterred Chinese capital inflows,” Julius Baer said in its report. “This, coupled with limited supply of luxury properties, led prices to rise.”

According to the report, Hong Kong is looking to introduce a 5% tax on properties left vacant for more than six months after the occupancy permit grant in an effort to address skyrocketing housing prices.

“However, its effectiveness remains to be seen and the tax is not expected to affect Hong Kong’s property prices significantly,” Julius Baer noted in the report. “The recent HIBOR hike could also affect property market sentiment negatively.”

In addition, travellers in Hong Kong will have to pay top dollar for business class flights to New York and London at an average of $5,909. Whilst the price is -20.2% lower compared to 2017, it is higher than the regional average of US$4,386.

Shanghai is the most expensive city to buy six out of the 22 items analysed by the report: hospital rooms, watches, handbags, wine, jewellery and skin cream.

“According to luxury auction house Sotheby’s, Asia clients account for about a third of global high-end jewellery sales,” the report noted. “China and India comprise two of the world’s largest jewellery markets, with a combined market share of close to US$160b.”

Meanwhile, Kuala Lumpur retains it claim as the least expensive city in Asia, with prices for property, hotel suites, wine, jewellery, pianos and cigars being the lowest out of the 11 cities measured in the report.

Hong Kong’s export growth is projected to continue its strong performance amidst headwings from the US-China trade dispute, whilst consumer prices are expected to increase 2.5% in 2018 before falling to 2% in 2019.

“On the economic front, we expect continued growth in 2018, estimated at 3.5%,” Julius Baer said. “This is expected to taper to 2.5% in 2019.”