Despite the impact of inflation, rising living costs and increased geopolitical tensions on global prices, high net-worth individuals are still willing to take risks to realise higher returns, according to a new report.
The Julius Baer Global Wealth and Lifestyle Report 2024 found that HNWIs from Asia Pacific (APAC), the Middle East and Latin America have increased the risk level of their investments, although Europe and North America remain more conservative in their outlooks. In particular, Middle Eastern HNWIs lead the charge with 72% investing more year-on-year, followed by APAC (68%).
The region’s HNWI spending was concentrated on luxury goods such as designer clothing, jewellery and watches, but most significant of all was the demand for luxury residential properties. Meanwhile, Europe and APAC focus on hospitality and spending in the Americas seems to be “spread across all categories”.
All regions saw an increase in spending by HNWIs on travel and hospitality in the past year, with the Middle East and APAC showing the highest growth. The Middle East has witnessed a significant increase in business (65%) and leisure travel (67%).
How has the total value of Middle East’s HNWI’s assets changed in the past 12 months?
The most expensive cities
The report also included Julius Baer’s ranking of the most expensive cities and regions to live in. The ranking is based on the cost of a basket of goods and services representative of ‘living well’ in 25 cities around the world. Overall, price rises have slowed to 4% on average in USD terms during this year, growing faster for goods than services.
In 2024, Asia continued to dominate the cities list, with Singapore and Hong Kong ranking in the first and second spots. However, the overall APAC region dropped down the regional ranking to second place for the first time, due to lower rankings for cities like Tokyo, and a very strong return to prominence for EMEA.
While EMEA was the cheapest region to live well in 2023, it has now surged to the top spot. The rise was led by an increase in the cost of European cities (particularly London), as well as strong exchange rates vs. the US dollar (Euro +4%, Swiss franc +8%).
Dubai: the wealthiest city in the Middle East
Dubai was ranked the 6th most expensive city in the EMEA and 12th globally (down from 7th) owing to inflation and currency fluctuations. The region’s location at the crossroads of the East and the West provides it with a key advantage, further driven by its open policies towards businesses. The lack of income tax, capital gains, or inheritance taxes also makes Dubai a preferred wealth hub for many entrepreneurs and HNWIs.
According to the index and survey data, real estate is a key asset in the Middle East, with prices in Dubai up 16%. The city boasted “the world’s most active $10 million housing market in 2023”, according to Knight Frank, and both global and local demand is sky-high.
The region’s wealthy are spending the highest currently on luxury residential properties compared to any other region, amid strong economic growth and world-class infrastructure. More than half of wealthy Middle Easterners in the Julius Baer survey said they had spent more on residential property in the past 12 months, and planned spending is equally high, with 58% saying they will spend more in the coming 12 months.
“No other region comes even close to this,” the report highlighted. “The ultra-rich in Dubai and across the Middle East are bullish in their investment outlook with primary goals of wealth creation, increasing assets and boosting their portfolios.”
Moreover, Dubai is also emerging as a new financial powerhouse as prominent global hedge funds, asset managers, fintech companies, and family offices are establishing regional offices in the emirate.
What products and services have HNWIs in the Middle East spent more on in the past 12 months?
Emerging sectors
In addition to luxury products and real estate, the survey showcased shifts in consumption patterns and new investment trends amongst HNWIs, with a rising prominence of healthcare and sustainability.
“The trend for health as the new wealth is continuing to gain momentum,” the report found, stating that health spending featured in the top five for all regions when it came to spending intentions for the next 12 months. HNWIs, particularly in APAC, as expected to increasingly focus their investments on healthcare.
While personal enjoyment remains a key pursuit, sustainability plays a greater role in investment strategies in 2024, with the majority of HNWIs in the Middle East and APAC regions having reviewed their portfolio to understand the ESG impact of their investments However, sustainability still plays a minor role in actual purchasing habits.
“While HNWIs still want to indulge themselves, they are also seeking to empower themselves by prioritising health, aesthetics, and the acquisition of cutting-edge technology,” the report concluded. “They want to take long-term bets by acquiring property, particularly HNWIs in the Middle East. With demand still outpacing ethics, the challenge will be to encourage HNWIs to fully integrate sustainability into their life and investment decisions, in all markets.”