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Between the anti-government protests and the COVID-19 crisis, the luxury market in Hong Kong is struggling. Is the Chinese Special Administrative Region, known as the Pearl of the East, succumbing? Or even worse, is it about to be replaced by its neighbor and competitor Singapore, the new “Switzerland of Asia”? The island’s quality of life, attractiveness and economic competitiveness all indicate that the city-state is the future luxury hub of the region, overtaking the reigning power of Hong Kong. So, is it just economic rivalry or a reconfiguration of the luxury sector in Asia?
Decline of Hong Kong, Singapore the new Mecca of luxury?
Pro-democratic demonstrations and the coronavirus crisis have plunged the Hong Kong luxury industry into an unprecedented slump.
The retail trade was particularly hard hit: sales fell by 42% in March compared to the previous year. The South China Morning Post reported that consumer spending in Hong Kong fell to a record low of 2.9 billion dollars (HKD 22.7 billion).
According to the Hong Kong Retail Management Association (HKRMA), about 25 percent of retail stores are expected to close by the end of 2020 and its president, Annie Tse, predicted a “very difficult” June due to the recent resurgence of protests that will make business very complicated. The American news agency Bloomberg even estimated that more than 15,000 Hong Kong stores could close without any rent relief in the following months.
It is mainly travel restrictions and the suspension of tourism that have weakened the luxury sector: the Hong Kong Tourism Board announced indeed that visitor arrivals in the city fell by 98.6% year-on-year in March.
But buyers from mainland China account for 70% of high-end purchases … Hong Kong can no longer rely on its Chinese tourists to support the city as a luxury centre. As a result, the American channel CNN reported that Hong Kong’s economy contracted by 1.2% and its GDP fell by 2.9% in the fourth quarter of 2019.
So is Hong Kong’s suitability for the luxury industry being questioned?
This is at least what the current economic situation leads us to believe.
In the face of what appears to be a deep and structural decline in Hong Kong, investors are increasingly turning their backs on the region and moving on towards other emerging financial and commercial centres in the region that could potentially replace it as a luxury megalopolis.
With an economic freedom score of 89.4 (making it the freest economy in the world) and tens of millions of tourists each year draining its luxury market, Singapore appears to be the ideal alternative and a strong competitor.
All the more so as Singapore applied less “destructive” measures during the coronavirus crisis, preferring furloughs to layoffs, thus attracting prestigious retailers and executives and allowing a more favourable economic recovery for its market.
In fact, wealthy individuals – both residents and non-residents – are very numerous in Singapore, and while the containment measures have not yet been fully lifted, luxury properties have already been massively purchased online by Chinese investors in recent weeks, as they see Singapore as a safe island to protect themselves against the inflation rates of high-end housing expected in Asia as a result of the epidemic.
But does this mean that the Asian Tiger will become the “new Hong Kong”? While Singapore has the potential to become a luxury hub in the region, is it in a position to develop a true luxury economy in Asia and dethrone Hong Kong as a leading regional luxury destination?
The fall of the Hong Kong luxury kingdom is not for tomorrow
If Hong Kong is losing momentum, it is difficult to imagine Singapore replacing it as the new luxury center in Asia in the future.
Indeed, the COVID-19 epidemic has left a strong imprint on the economy of the island city-state, raising fears of a market deceleration or even unprecedented recession.
And while finance, electronics manufacturing and logistics are among the sectors that have resumed operations after a two-month shutdown, most retail stores, hotels and restaurants are still banned in Singapore, causing luxury players to fear the worst.
The challenge of turning Singapore into a true “luxury hub” is all the more complicated since the luxury industry in Singapore is less developed than in Hong Kong.
Indeed, while Singapore has the glittering Esplanade Mall, The Shoppes at Marina Bay Sands, Louis Vuitton’s Island Maison floating house, and a range of skyscrapers and sumptuous buildings, Hong Kong elevates luxury to an even higher level. From its ultramodern, avant-garde shopping malls to the most chic and opulent hotels, Hong Kong has a level of extravagance that has yet to be equalled.
Singapore’s luxury economy is promising but still seems to be in its preliminary phase compared to Hong Kong: for example, it has yet to move upmarket on the experiential dimension of the luxury market and offer a true luxury experience rather than focusing on the simple consumerism associated with the sector.
At the present time, it therefore seems very unlikely that the City of Lion will supplant Hong Kong as the region’s leading luxury hub in the near future, although in the medium to long term it may become a major component of the Asian luxury market.
Read also > Luxury values down due to Chinese virus
Featured photo : Marina Bay Sands, Singapore © Wikipédia
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Between the anti-government protests and the COVID-19 crisis, the luxury market in Hong Kong is struggling. Is the Chinese Special Administrative Region, known as the Pearl of the East, succumbing? Or even worse, is it about to be replaced by its neighbor and competitor Singapore, the new “Switzerland of Asia”? The island’s quality of life, attractiveness and economic competitiveness all indicate that the city-state is the future luxury hub of the region, overtaking the reigning power of Hong Kong. So, is it just economic rivalry or a reconfiguration of the luxury sector in Asia?
Decline of Hong Kong, Singapore the new Mecca of luxury?
Pro-democratic demonstrations and the coronavirus crisis have plunged the Hong Kong luxury industry into an unprecedented slump.
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Between the anti-government protests and the COVID-19 crisis, the luxury market in Hong Kong is struggling. Is the Chinese Special Administrative Region, known as the Pearl of the East, succumbing? Or even worse, is it about to be replaced by its neighbor and competitor Singapore, the new “Switzerland of Asia”? The island’s quality of life, attractiveness and economic competitiveness all indicate that the city-state is the future luxury hub of the region, overtaking the reigning power of Hong Kong. So, is it just economic rivalry or a reconfiguration of the luxury sector in Asia?
Decline of Hong Kong, Singapore the new Mecca of luxury?
Pro-democratic demonstrations and the coronavirus crisis have plunged the Hong Kong luxury industry into an unprecedented slump.
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