If you think Hong Kong’s property is really expensive, spare a thought for homebuyers in Monaco.

According to world-leading property agency Savills, this glamorous principality on the French Riviera remains the most expensive location for residential property worldwide, with an average price per square foot of over US$5,100 in 2020, though that figure is down 1.1 per cent from 2019 levels.

Savills’ report finds that Hong Kong, the second most expensive location across the globe, saw average prices per square foot fall 3.9 per cent to US$4,300 in 2020.

And despite the upheavals of 2020 that rocked markets worldwide, Irene Luke, head of Savills Monaco, says 2021 has seen sustained activity in both the rental and sales markets.

Monaco skyline at night – a view that will cost you a pretty penny to call home.

“Despite continuing travel restrictions, people have been moving to Monaco and we have seen a constant stream of new residents looking often to rent, but also often to buy,” she said. “A trend is the emergence of younger clients from many different countries, and notably a real interest from young fintech entrepreneurs looking to move and work within Europe in a pleasant place with an attractive tax regime.”

The opportunity presented by the pandemic has given further impetus to those buyers who have plenty of money to spend, Luke continued.

“Monaco’s handling of the Covid-19 crisis has been seen as exemplary with no lack of hospital beds or staff, a stable infection rate, good access to vaccinations for all residents and employees, and an ability to keep society – such as restaurants and even theatres – pretty open throughout.”

Monaco Principality during the Monaco Yacht Show, in 2019, one of the most prestigious pleasure boat shows in the world, highlighting hundreds of yachts for the luxury yachting industry in port.

There was a decline in transaction numbers in 2020 – down 11 per cent overall compared to 2019 – which Luke puts down to travel restrictions around the world making property purchases by foreigners more difficult.

“This trend can also be seen when examining transactions by price point,” she said. “Properties priced below €5 million (US$6million) represented the most active price point in the principality, with transactions down only 6 per cent compared to falls of 39 per cent for properties priced over €10 million (US $12 million). Transactions for properties less than €5 million account for 71 per cent of total sales in the principality, so softer declines at this price point result in less steep declines for Monaco overall.”

Property size has also impacted these results: larger homes including four-bedroom-plus flats and villas saw the steepest falls in transactions, down 38 and 53 per cent.

Monaco’s premier residential tower Tour Odeon commands beautiful views over the Mediterranean Sea.

However, the falls in transactions at higher price points did not translate into lower prices, which Savills says shows “that buyers who did purchase were still willing to pay pre-pandemic prices”. Adds Luke: “The slight decline in prices in 2020 of 1.1 per cent is not enough to derail the upwards trajectory of prices in Monaco, which have grown over 50 per cent in the last decade.”

Such is the appeal of this glitzy playground of the rich and famous that buyers are willing to commit to a new off-plan project even many years ahead of its planned construction.

Edward de Mallet Morgan, a partner at Knight Frank and head of Monaco within the International Super-Prime Sales Team, cites a new land reclamation project as “a fantastic example of that”.

To expand its diminutive land area (being the second-smallest country in the world after Vatican City) Monaco is adding 6 hectares under a US$2.4 million reclamation project. Called Portier Cove or Mareterra, the pedestrianised eco-district beside Larvotto is set to open by 2025 and will feature a public park, a port with 30 boat slips, and luxury housing including multi-tenant buildings and private waterfront villas.

This four-bedroom flat in Monaco’s premier residential tower Tour Odeon commands beautiful views over the Mediterranean Sea.

Prices for the luxury homes have been set at around US$11,000 per square foot – about double the average prime Monaco home price.

“We’re talking about the most expensive real estate on the planet, and it’s still able to almost sell out years in advance of the project being finished,” de Mallet Morgan says.

Investor appetite at this level underpins Monaco as a place the wealthy feel very safe investing their money, he continued. But, not everyone is happy with the changes taking place.

“Monaco has a long history behind it, but it’s been adapting a lot,” de Mallet Morgan said.

Monaco is regarded as a playground of the rich and famous.

“Some of the more long-term residents do not like the fact that Monaco is evolving into a modern metropolis – they’d rather the sedate, traditional small town feel it used to have.”

Nonetheless, the new uber-luxury housing – and with it, regeneration of the coastline, together with Monaco’s strategic location and its tax advantages – work in the principality’s favour. “It’s a very convenient base, enabling people to travel quickly and freely throughout Europe, and with a time zone that is conducive to doing business around the world,” he said.

Monaco is a truly international community which welcomes foreign investment, de Mallet Morgan added. “Anyone can buy (property) in Monaco, as long as you’ve got the money – and that is a vast amount of people,” he said.

“The more mobile the global wealthy become, who are able to travel privately, the more they are saying Monaco has the lifestyle benefits they want, with some great private schools – a big driver – health care and security.”

The Monaco Formula 1 Grand Prix is a status symbol long enjoyed by the principality.

“Monaco is really starting to compete with other wealth hubs around the world but it over-delivers on the lifestyle and health benefits.”

In terms of location, Savills’ report records only three districts where transaction volumes increased in 2020: Larvotto, with an increase of 133 per cent (albeit with only seven properties transacted); Monte Carlo, with a 14 per cent increase; and Jardin Exotique, which increased by 12 per cent. Savills finds Monte Carlo’s 34 sales to be unsurprising considering that the district accounts for nearly a quarter of housing stock, and has the most global name recognition.

Larvotto, however, has commanded the highest price per square foot with prices over US$6,615 since 2017, and US$7,224 in 2020.

Monaco from La Turbie.

Space constraints have resulted in few projects coming online each year. Historically, new builds make up only a small fraction of the total sales in Monaco, averaging 5 per cent of the total since 2006, and 4 per cent last year.

Yet according to Savills, those space constraints also mean that Monaco’s market has been able to keep prices close to pre-pandemic levels.

Just five large projects are in the pipeline: Mareterra, L’Exotique, Villa Palazzino, Bay House Monaco and the second stage development of Villa Portofino. While combined these projects will bring much-needed stock to the principality, delivering a total of 260 flats and 15 villas, Savills believes they will do little to keep up with the consistently high demand across Monaco. Since 2011, the firm points out, only 487 new flats have been brought to market, just 2.5 per cent of the total housing stock in the principality.