Monaco is a city of superlatives. The second smallest independent state in the world, it has the world’s greatest concentration of ultra wealthy individuals, the highest priced property values recorded by Savills on the planet, boasts the highest GDP per capita of any country, and offers among the world’s top standards of living. Bordering the Mediterranean sea, Monaco is surrounded on three sides by France, but occupies an area of just 202 hectares. Through land reclamation the state’s territory has expanded by 20%, with further expansion planned.

Monaco is a global hotspot with a distinctly Mediterranean character, home to residents from 128 different nations. The official language is French, although Monégasque, Italian and English are widely spoken and understood. Monaco offers its residents a cosmopolitan city environment, with all the characteristics of a ‘retreat’, providing beaches, marinas, shopping and restaurants, wrapped up in a low tax, business friendly jurisdiction that has sheltered it from wider economic turbulence in Europe.

Monaco may be geographically tiny, but it punches well above its weight in terms of its global presence. The world famous Monaco Grand Prix held annually in the streets of Monaco is widely considered to be the most prestigious of the F1 calendar. The Casino de Monte Carlo is known around the globe (and is a major source of the Principality’s income).

Monaco is governed under a constitutional monarchy, of which the Sovereign Prince of Monaco – Albert II – is head of state. Prince Albert has been instrumental in driving forward a new wave of development in the Principality, along sustainable principles, in a bid to cement Monaco’s position as a global centre of wealth and commerce.

Monaco’s residential markets did suffer in the global economic downturn, but rebounded quickly as the Principality benefitted from the search for safe havens by the global wealthy. Monaco is now performing on par with major world cities. This report explores Monaco’s residential markets in 
the context of wider trends in 
global wealth.

Economy

A net importer of labour, Monaco hosts 50,792 jobs to its 36,136 residents. 75% of Monaco’s employees live in, and commute from, France each day.

Finance is the city-state’s major industry and Monaco ranks 7th in the Y/Zen European Global Financial Centres Index. Monaco has also sought to diversify its economic base into services and industries such as cosmetics and biothermics. The Principality’s casinos are a major source of national income, the most famous of which is the Casino de Monte Carlo, founded in 1858.

Monaco is not part of the EU, but participates in EU customs and border controls, is part of the French customs zone, and uses the euro as its sole currency. The Principality does not levy any income tax, wealth tax or capital gains taxes, which has made it particularly attractive as a low tax jurisdiction to wealthy individuals. A comparison of the headline tax rates with other European jurisdictions is shown in Table 1.

Centre of global wealth

Monaco has the highest density of ultra high net worth individuals (UHNWIs) in the world (Table 2) and stands out as the sixth most important destination for this group’s direct real estate holdings, by value, in league with major world cities such as London, Moscow and New York (Graph 1). Monaco offers UHNWIs a European base in a low tax, business friendly environment.

The Principality’s rapid resurgence from the global economic crisis came at a time when private wealth had become increasingly important to real estate globally. Money has been focused on the global prime sector for ‘safe haven store of wealth’ with an eye on capital appreciation.

The number of UHNWIs topped almost 200,000 in 2013, with a combined wealth of almost $27.8 trillion. This is forecast to reach $40 trillion by 2020, according to Wealth X. Much of this wealth is finding its way in to real estate – particularly among European based UHNWIs where it totals 31% of all wealth.

Investment has been a largely urban phenomenon, and a disproportionately large amount (just under half) of world UHNWI real estate investment has flowed into the major urban enclaves of the world. With the characteristics of a major city, but also with the benefits of a ‘recreation destination’, Monaco has been a major recipient of this wealth but is also leading the way in the re-emergence of resort and retreat property; it benefits as both an urban centre and playground.

With such a lot of capital weighing into a very small geographic area, residential values have been pushed to world highs. The price of ultra prime property in Monaco stands at €90,900 per square metre, or $11,700 per square foot, ahead of Hong Kong at €85,500psm / $11,000psft, and topping Savills World City Ultra Prime index by this measure (Table 3).

Unsurprisingly, yields are very low, typically between 1% and 2%. Income is not a consideration for most buyers; the majority of purchases are for lifestyle purposes, whether it be permanent relocation, an additional home or business base.

Taken from
Spotlight: Monaco Residential Market