Luxury CPI bounces back after financial crisis 

• Hurun Luxury      Living Index rises by 11.3%, more than double last year’s figure, and 8%      faster than CPI

• Luxury property      hike is key driver with prices increasing by 45.1% yoy

(12 June 2010, Shanghai) Hurun Report, best known for compiling the China Rich List, released the Hurun Luxury Living Index for the fourth year today. The Hurun Luxury Living Index compares the retail price changes of a basket of 58 luxury products from 1 June 2009 to 1 June 2010.  The Luxury Living Index grew to 11.3% in June year on year, up from a low of 4.6% last year, and nine percentage points higher than the CPI, which grew 3.1% year on year in May.

The announcement of the Luxury Living Index coincides with the release of the Hurun ‘New Aristocracy’ Threshold, the “cash on the table” required for a family unit to pursue a super luxury, or xinguizu, lifestyle in China. Driven by rising property prices, the threshold rose to RMB 106 million this year, a 22% rise on last year. For a family unit in Shanghai, this includes RMB 29.8 million, or USD 5.8 million, for a luxury villa and downtown apartment in Shanghai. According to the results of the Hurun Best of the Best Survey 2010, travel is the leisure activity of choice amongst China’s wealthy, and therefore it is no surprise to find that this year’s threshold includes a spend of RMB 7 million, or USD 1million, on a holiday home in Sanya, the most popular domestic travel destination amongst China’s rich.

“It is getting more expensive to buy one’s way into China’s elite inner circle,” said Hurun Report founder and chief researcher Rupert Hoogewerf, “Demand, driven by more wealth creators looking for ever more sophisticated luxury products, is far outstripping supply. The price of a luxury property in Shanghai, for example, has almost tripled in the past four years.”

 Luxury property prices rose 45.1% year on year in June, almost four times larger than the increase of any other category, after a fall of 1.8% last year. A 750 square meter luxury villa in Shanghai, for example, has jumped 90% in value over the past year, now costing RMB 71 million (or, US$13,860 a square metre), and up from a ‘mere’ RMB 28 million in 2006. Property has grown at a much more significant rate than any other category, rising by 13.9% and 29.8% in 2007 and 2008. The limited supply of luxury property in the face of strong demand, in the context of a generally buoyant housing market, was a significant factor in large increases such as these. One exception to the rule was the cost of buying an overseas retreat; the price of a 350sqm holiday villa on the Australian Gold Coast fell 4% in comparison with last year.

Whilst the strength of the yuan continued to drive down prices for international travel, there has been a luxury travel boom domestically, which has contributed to an overall price hike, up 13.4% after a 6.5% fall last year. A luxury suite in the Peninsula Hong Kong, for example, rose by 47% year on year.

Automobiles and yachts rose by an average of 1.5% compared to 3.2% last year, led by a 12% hike in the Rolls-Royce Phantom to RMB 9.2 million. The drop in sterling and the euro compared with the yuan, meant that a Sunseeker Manhattan 70 yacht, for example, saw its relative price fall by 10%.

Luxury drinks rose at a similar rate to last year, 9.1% as opposed to 10% in 2009. Fine Bordeaux reds and the top-end Chinese baijiu led the way with price hikes of thirty percent or more. Château Lafite Rothschild and Moutai 30 Years rose 36.6% and 29.6% respectively. Other imported luxury drink brands reacted to strong demand with prestige pricing strategies. A bottle of Louis XIII, for example, now costs RMB 17,580, up 17.4% year on year, and an average of 10% every year since 2006, when a bottle cost RMB 9800.

Executive education fees continued to rise, albeit at a slightly lower rate than last year, 5.3% as opposed to 9.5% last year. However, the fees for the well-considered Tsinghua University Executive MBA, for example, continued to outperform, rising to RMB 450,000, up 18.4% compared with last year and from RMB 250,000 in 2006.  Expect to see many more Chinese students studying abroad, as the continuing strength of the yuan made the cost of overseas courses cheaper.

Demand continues to be strong. There are now 875,000 individuals in China with personal wealth of RMB 10 million or more (equivalent to USD 1.5 million), up 6.1% over the past year, and 55,000 individuals with RMB 100 million (equivalent to UDS 15 million), up 7.8%, according to the Hurun Wealth Report 2010 released in April.

 In the year to 1 June 2010, the Euro fell 14.6% against the yuan, whilst the pound fell 11%.

Hurun Luxury Living Index 2010

Luxury Living Index & CPI 2007-10

About Hurun Report Inc.

Nobody Knows China’s Rich Better!

Established as a research unit in 1999 by British accountant Rupert Hoogewerf, Hurun Report Inc. has grown into a leading research house, media and lifestyle investments business based in Shanghai, China, best-known for its rankings of the richest people in China, India and the rest of the world.

Hurun Report Inc. has four divisions: Hurun Research Institute; Hurun Media; Hurun Conferences and Training, an active events division targeting entrepreneurs and high net worth individuals; and Hurun Lifestyle and Investments, with investments in education, interior design, horses, bespoke tailoring, media and retail.

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