Fontvieille Monaco

As the winds of regulatory change blow though the global financial industries, the images of some tax havens are being polished, reports the Financial Times.

Monaco is sprucing itself up and creating homes aimed at a wider range of residents.

“They are trying to encourage people and families to live here permanently, so apartments are getting bigger,” says Irene Luke of the Lorenza von Stein estate agency. “Twenty years ago there were no teenagers. Now, there’s a leisure complex for them near the [sea] front.”

Monaco has, of course, a famously low tax environment. There is no income, capital gains or wealth tax in this sovereign state, which is also a capital and a city. About 3,000 British multi-millionaires jostle for space here alongside its 35,000 population, made up of about 125 different nationalities. And jostle is the word. Monaco is small – about 2 sq km – and so is everything in it.

Stepping into the principality, which is literally across the pavement from France, is to leave behind space, greenery and countryside and enter a landscape of dense high-rises, cheek-by-jowl living and some of the highest property prices in the world.

In nearby Nice (20km away) the average price for a home is roughly €5,000 per sq metre but in Monaco it is €25,000-€35,000 per sq metre – and this is in a falling market: transactions are down by about 70 per cent compared with two years ago and prices have “softened” by 15-20 per cent, according to Stuart Baldock of buying agency Property Vision.

As properties are frequently advertised at twice their real value, however, Baldock feels that talk of huge falls is wide of the mark. “Advertised prices bear no relation to the truth,” he says. “What is happening is that asking prices are getting closer to reality.”

A 150 sq metre two-bedroom modern apartment in the popular district of Jardin Exotique, with a view of the port, is on the market for €4.2m; a year ago it was advertised at €4.8m. Nearby, in Le Larvotto, an area of reclaimed land near the main shopping streets, a 130 sq metre, four-bedroom apartment in a belle epoque block is for sale for €4m. It was advertised for €5m 18 months ago.

Houses are rare and, even by Monaco’s high standards, impossibly expensive: a villa recently sold off-market for €22m. Most residents therefore live in reasonable – if slightly smaller than they would wish – apartments.

“In the 1970s and 1980s an address would suffice so the apartment standard did not matter so much and many small and rather ugly apartments were built,” says Ricardo Giraudi, who lives in the principality and runs a meat-trading and restaurant business.

“Now, however, more people want to live in the principality and there is a big demand for luxurious larger apartments, but very few of them,” he adds.

In order to solve this problem, older buildings are frequently pulled down and rebuilt to a bigger and, generally, higher specification – whether they block another’s view or not. Little is listed in Monaco.

One new development in L’Annonciade district, on the border of Monaco and France, is the controversially tall Tour Odeon. The elegant butterfly-shaped building, 49 storeys high, was designed by Alexandre Giraldi, one of Monaco’s most respected architects, and is being built by the Marzocco Group. It will be the tallest residential (and commercial) tower in Monaco and France and is due to be completed by 2014. All but 10 per cent of the luxury apartments will have a view of the sea and, at an average 250 sq metre for a two-bedroom unit (though apartment size goes up to 540 sq metre), are spacious. “We are keen to attract families,” says the building group’s Daniele Marzocco.

Though prices have not yet been released, properties in the Tour Odeon are expected to sell for about €80,000 per sq metre, giving a price of about €20m for an average apartment – and will be some of the most expensive Monaco property for sale so far.

Such high prices can intimidate even the super-rich, so many opt instead to rent, while still qualifying as residents. “Rent is approximately 2 per cent of the capital value,” says Baldock, who often advises his clients to do this. Indeed, some streets, such as Princesse Grace, are almost entirely owned by old Monagasque families and apartments can only be rented.

“Of course you are chucking money down the drain [by renting] but, capital growth apart, why buy?” asks Baldock. “Especially if you are going to buy a house within an hour’s drive.” Many residents live in Monaco during the week and then enjoy weekends at their country home in neighbouring France or Italy.

Cap Ferrat is only 10 minutes’ drive away and also has some of the most expensive homes in the world: villas change hands for between €40m and €80m. Forty minutes’ drive from Monaco in the hills behind Nice and Cannes are villages such as St Paul, Tourrettes sur Loup and Gourden, that are also popular with second-home owners. In Les Hauts de St Paul (a gated estate) 500 sq metre villas sell for €4m-€6m.

A great deal of Monaco’s appeal lies in its convenience: close to the French and Italian rivieras and only an hour and a half’s drive from the Alpes-Maritime. And the principality is easily reached via Nice, the fifth largest city in France, and its international airport. It is, however, not without charm of its own. It shares the Côte d’Azur’s mild climate of 15°C average in the winter and about 21°C in the summer and it is safe and clean.

“It’s the only country in the world where multi-millionaires take the bus,” says Luke. But then millionaires have always felt comfortable in Monaco. Run by the Grimaldi monarchy since 1297, it became the epitome of glamour in 1956 when film star Grace Kelly married Prince Rainer III. Aristocrats and the rich and famous flocked to its casino on the Monte Carlo coastline.