Investing in the Excess: Decoding VVHCOL Urban Spending and Consumer Discretionary Opportunities

In 2025, the world's most expensive cities—classified as VVHCOL (Very Very High Cost of Living) markets—have become laboratories for luxury innovation. From Basel's soaring grocery prices to Singapore's premium private education fees, these urban hubs are not just expensive; they are ecosystems engineered to cater to the ultra-wealthy. For investors, understanding the spending patterns of high-income households in these cities is critical to unlocking opportunities in consumer discretionary sectors.

The High-Income Household Budget: A Blueprint for Excess

High-net-worth individuals (HNWIs) in VVHCOL cities allocate significant portions of their budgets to housing, private education, and luxury goods. In Singapore, for instance, the cost of a private school education alone can exceed $50,000 annually, while a single-family home in Zurich commands a median price of $2.3 million. These expenses are not merely transactions but investments in exclusivity, signaling status and securing long-term value.

The Julius Baer 2025 Global Wealth and Lifestyle Report underscores this trend: Singapore remains the most expensive city for HNWIs, driven by its stable governance, world-class healthcare, and strategic location. Meanwhile, New York and London continue to attract global talent despite their high costs, with private education and luxury real estate serving as key differentiators.

Financial Sustainability in a High-Cost World

HNWIs in these cities employ sophisticated strategies to balance their budgets. Diversification across asset classes—real estate, private equity, and alternative investments—helps mitigate inflationary pressures. Tax-efficient structures, such as irrevocable trusts and charitable remainder trusts, are leveraged to preserve wealth. Additionally, advanced insurance solutions, including long-term care and umbrella liability coverage, protect against unforeseen risks.

The decline in the cost of a high-net-worth lifestyle in USD terms by 2% in 2025 (despite rising luxury goods prices) highlights the importance of strategic cost management. For example, while business class flights surged 18.2%, HNWIs offset these costs by investing in technology-driven productivity tools, which reduced operational expenses in their businesses and households.

Consumer Discretionary Sectors: Where the Ultra-Wealthy Spend

Three sub-sectors stand out in VVHCOL cities: home improvement, electric vehicles (EVs), and luxury goods.

1. Home Improvement: Aging housing stock and record home equity levels in cities like New York and Singapore drive demand for renovations and upgrades. Companies like Lowe's (LOW) and Lennar (LEN) benefit from this trend, as HNWIs prioritize modernization and energy efficiency.
   

2. Electric Vehicles: EV adoption is accelerating in cities with green policies, such as Singapore and San Francisco. Tesla (TSLA) and Aptiv (APTV) are key players, with HNWIs investing in EVs not just for sustainability but as a status symbol.
   

3. Luxury Goods: Despite global economic uncertainties, luxury consumption remains resilient in VVHCOL cities. LVMH (LVMHF) and Richemont (RICH) continue to thrive, with demand for high-end fashion, watches, and private jets outpacing broader market declines.

Investment Implications and Risks

Investors should focus on companies with strong exposure to VVHCOL markets. For example, Las Vegas Sands (LVS) has seen a 12% revenue increase in 2025, driven by Singapore's Marina Bay Sands, reflecting the enduring appeal of luxury travel. Similarly, Taylor Morrison (TMHC) and PulteGroup (PHM) demonstrate resilience in competitive housing markets through strategic incentives and cost management.

However, risks persist. Rising tariffs (projected to reach 15–20% in 2025) could impact import-dependent sectors like luxury goods and EVs. Additionally, interest rate volatility may dampen big-ticket spending. Investors must balance these risks with the long-term growth potential of VVHCOL cities, where demand for premium services and products is unlikely to wane.

Conclusion: The Premium Premium

VVHCOL cities are not just expensive—they are curated environments for the ultra-wealthy. For investors, the key lies in aligning with sectors that cater to the unique needs of HNWIs: exclusivity, convenience, and long-term value. By analyzing spending patterns and leveraging data-driven insights, investors can position themselves to capitalize on the next wave of luxury innovation.

In 2025, the most expensive cities are also the most lucrative. The question is not whether to invest in them, but how to do so with precision and foresight.