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Spotlight Monaco Residential Market 2015

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Spotlight Monaco Residential Market

2014 was a record year for Monaco's residential markets. A weak euro offers buyer opportunities. Executive summary

elcome to our unique position as a hybrid centre second in- that incorporates not only commerce depth look at and ultra-wealth in a low-tax the residential jurisdiction but also a Mediterranean Prices are stable and Monaco remains property playground for the world’s wealthy. one of the world’s most expensive real marketW in Monaco. In this report estate markets. However, in US dollar we show how market activity and Aside from the clear parallels pricing is at an all-time high while with other world centres, Monaco terms the Principality has slipped to extraordinarily constrained land is a premier destination for gambling, second place behind Hong Kong, due supply means newly built property motor sport, yachting, recreation and to a weak euro. See page 5 is extremely rare and at a premium relaxation. This combination, right on so only the ultra prime market and Europe’s doorstep, sets it apart from the world’s wealthiest are now almost any other city or state. Only catered for in the Principality. Macau, on the doorstep of China is beginning to come close but the Monaco has the highest GDP per attractions of the South China Sea are For the global super rich, Monaco head of any population in the world. not the same as the Mediterranean. operates as part of a network of city It is one of a handful of global elite In the longer term, Gibraltar has the city-states and, in this respect, has potential perhaps to be a regional property holdings. Homes in Monaco more in common with Macau and rival but will need huge amounts are most commonly paired with London, Singapore than almost anywhere of investment and infrastructure to else in Europe. Monaco’s wealth and approach Monaco’s prestige. followed by New York and Moscow. status, nevertheless, goes hand in See page 5 hand with some of the world’s major The unique offering of Monaco’s urban centres where many Monaco global appeal and its extremely residents will also spend some of limited land supply will all combine their time. The lives of the ultra-rich to keep Monaco’s real estate prices in London, New York and Moscow high with few or no mechanisms are often intertwined with Monaco. for them to fall. We anticipate they 2014 was a record year for the Monaco are at, or near, a high plateau, in To classify Monaco solely as another common with many other ultra prime residential market. The number of world-class urban conurbation markets globally and will be for some residential sales exceeded their 2007 misses the point. It occupies a time to come. n peak for the first time in 2014, with a combined value of €2.4bn. See page 6

New build development is characterised by well appointed schemes offering large units to appeal to the world’s wealthy.

Notes about the publication Developers are aligning products with This document was published in May 2015. The data used in those offered in the major world cities. the charts and tables is the latest available at the time of going See page 8 to press. Sources are included for all the charts.

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Monaco at Figure 1 Figure 2 Monaco fact file Super commuters: the top city pairs where UHNWI hold homes a glance Monaco is governed under a constitutional A sovereign monarchy, of which the Sovereign Prince of -state Monaco is the second smallest – Albert II – is head of state. independent state in the world, and home to the world’s highest The Principality is home to residents from over 100 concentration of ultra wealthy Global nations. French is the official language of Monaco, individuals. A global hotspot with a hotspot but Monégasque, Italian, and importantly, English are widely spoken. distinctly Mediterranean character, London Monaco offers its residents a Just 2.2km in area, Monaco is 6% the size of MOSCOW cosmopolitan city environment Manhattan but home to the world’s highest New York Supply Los Angeles in a low tax, business friendly concentration of wealthy and super-wealthy constrained jurisdiction. A busy annual calendar individuals. Prime property is in high demand with Beijing Monaco of high profile events ranging from price tags to match. shenzhen Delhi the Monaco Grand Prix to the Tennis Hong Kong Masters keeps the global gaze Sitting outside the EU, Monaco does not levy Miami Low tax firmly on the tiny Principality, and income tax, wealth tax or capital gains taxes. Mumbai ensures it punches well above its weight on the global stage. Singapore Financial Monaco ranks 6th in the Y/Zen European Global centre Financial Centres Index. Jakarta The Monaco Grand Prix and Rally are Motor sport widely considered to be the most prestigious events “Monaco's low taxes and in the motorsports calendar. SYDNEY The iconic Monte Carlo Casino is integral to Monaco’s appealing living environment Monte Carlo economy, tourist industry and global profile. It Casino have made it a centre of incorporates an opera house and ballet company. global wealth” Source: Savills World Research Source: Savills World Research, Wealth X

FIGURE 3 Economy and employees, and VAT payable on the key world cities and centres of Moscow are also frequently paired Monaco enjoys a buoyant and goods and services, to raise income. Europe and North America. with Monaco, in smaller volume. It is Ultra-prime prices: per square foot/metre diversified local economy. GDP Corporations are exempt from tax, no surprise that the neighbouring Nice surpassed pre-crisis levels as early as except where more than 25% of We have observed that real estate airport is one of the most important 2014 price movement 2012, and the economy has performed turnover is generated outside Monaco, investment among the world’s super- bases for private jet traffic. City USD psft Euro psm well since, driven by wage growth and in which case a rate of 33.33% applies. rich – particularly among emerging in local expansion in the economy generally – wealth – is overwhelmingly an urban Monaco’s status as a must-have currency notably real estate. Centre of global wealth phenomenon. Just under half of global address has pushed prices to Hong Kong $10,700 € 92,500 Monaco’s low taxes and appealing UHNWI investment has flowed into the global highs (Figure 3). The price of  Finance remains the city-state’s major living environment have made it a long- major cities of the world. An important ultra-prime property in Monaco stands industry, accounting for 16.7% of standing centre for the global super- urban centre in its own right, Monaco at €90,900 psm ($9,000 psft). While Monaco $9,000 € 90,900  GDP. Monaco ranks 6th in the Y/Zen rich. One reason it bounced back so benefited from this flow of capital in prices were static in 2014, a weak European Global Financial Centres rapidly from the global financial crisis the years immediately following the euro has seen it drop down the global New York $6,100 € 52,700  Index, having leapfrogged Vienna was due to a weight of international global financial crisis. league table and is now second to since last year’s poll. Other important capital seeking safe-haven investment Hong Kong in US dollar terms, purely London $5,900 € 51,300 sectors include sciences (including in the Principality’s real estate. For the global super rich, Monaco on currency movements. Monaco  biometrics), tourism and public operates as part of a network of city looks increasingly affordable to US Tokyo $5,900 € 51,300 services and administration. The number of global UHNWI property holdings. Figure 2 above dollar, British pound and Swiss Franc  individuals (those with assets of at shows the top city pairs where UHNWI buyers (see p8). n Monaco is an important centre of least US$30m) exceeded 211,000 in hold homes and divide the majority Paris $4,400 € 38,400  employment in the region, and a net 2014, with a combined wealth of $29.7 of their time. While London is at the importer of labour, with more than billion. Their numbers are forecast nexus of these city hubs, it is one of Moscow $4,500 € 38,600  50,000 jobs to its 36,950 inhabitants. to pass 250,000 by 2019, with a a dozen globally important locations. Employment grew by 3.8% in 2014. combined wealth of $40bn, according Monaco, is one of these important Singapore $2,500 € 23,100  Unsurprisingly, the unemployment rate to Wealth X. Asia, Africa and the centres, in league with major world 29% Almost one in three of is close to zero. Middle East are set to see the fastest centres for this group. Shanghai $2,400 € 20,800  growth in their wealthy populations. Monaco’s residents are The Principality does not levy any For homeowners the London-Monaco Dubai $1,200 € 10,600 income tax, wealth tax or capital This is important for Monaco as link is especially strong, the major classified as millionaires  gains tax. Instead, it uses social new wealth created in emerging world city complementing the Source: WealthInsight insurance, payable by both employers economies seeks safe havens in low-tax Principality. New York and Source: Savills World Research

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Residential Investors have been active in the FIGURE 5 €1-10m bracket, seeking easy to Monaco district by district Seven key districts with distinct residential characteristics market manage properties to feed into the rental market. Monaco benefits from a range of end users, and second Monaco experienced a surge in home purchasers and those seeking Average transaction price & residential market activity last year, primary residences in the super- 2014 with transaction volumes exceeding prime segment have been active too. On the east side of Monaco is Larvotto and on the hills, La Rousse, developed in the 1960s. It is their 2007 peak for the first time.  Above €4m dominated by apartment buildings of this era, though In total, 555 residential properties Monaco is unusual in that almost  €3m to €4m the majority are only available for rent. La Rousse is traded in the resale market in 2014, all of its residential stock could be  €2m to €3m home to the soon to be completed Tour Odeon. putting the number of deals 21% considered ‘prime’. The ‘mainstream’  €1m to €2m above 2007 levels. housing stock, in which many of its Key buildings: La Reserve, 21 Princesse Grace workers live is found in bordering The very upper tiers of the market French towns. Given Monaco’s have been the most liquid, and as a restricted space, 95% of its housing consequence transactions in euro stock is in the form of apartments, terms reached new records. Some with villas making up the balance. Monte Carlo €2bn of property traded in the resale market in 2014, compared to the The Principality has a large rental Arguably the most prestigious previous peak of €1.1bn in 2008, an sector, much of it institutionally district in Monaco, at the increase of 91%. owned and let to Monégasque centre of Monte Carlo is the residents. In the ultra-prime sales Carre d’Or, a grand square While total sales volumes by market British, Russian, Middle bordered by luxurious hotels both number and value have reached Eastern buyers have been especially and casinos. High-end, new highs, average prices have active in the last year. modern apartments and villas, such as those of the Boulevard remained static. This, set against de Suisse are all in high a weak euro has made Monaco Monaco’s ultra-prime residential demand. property look cheaper to some markets are focused in Monte foreign buyer groups, particularly Carlo, around the famous Place Key buildings: Mirabeau, those with US dollars. du Casino. The most desirable Floralies, Park Palace, Sun area is Carre D’Or, followed by Tower, Monte Carlo Star A €2m property cost US neighbouring Fontvieille, which also This district encompasses dollar buyers $2.16m in April 2015, offers a variety of commercial uses. Port Hercules, and is known for the ‘Place d’Armes’ compared to $2.77m in April 2014, a Sought-after buildings can be found Jardin Exotique reduction of 22% in a year. The same throughout the Principality, with the market, restaurants and €2m property to a British sterling majority of new ultra-prime schemes On the western corner of the high-end retail offer. As the hub of the annual F1 Monaco buyer cost £1.44m in April 2015, developed in outer districts due to Principality, centred around Grand Prix circuit Grand Prix, Condamine is compared to £1.65m a year prior, a limited land availability in the ultra- Monaco’s cliffside botanical recognised around the world. reduction of 12%. prime core. n garden. A comparatively cheaper area, but with Apartments with terraces and a number of prestigious direct harbour views command buildings. a significant price premium. figure 4 Porto Bello, Resale transaction volumes exceed 2007 peak Key buildings: Patio Palace Key buildings: and Monte Carlo View Shangri La and Ermanno n Studio n 1 bed n 2 bed n 3 bed n 4 bed+ n Villa ---- Total € volume Palace 600 €2,500

Fontvieille 500 Monaco Ville €2,000 Largely reclaimed from the The oldest district in Monaco, sea, Fontvieille is home to 400 Monaco Ville is the original Fontvieille Harbour, Louis II fortified town and home to €1,500 Stadium and a ‘pollution free’ the Prince’s Palace. A popular industrial centre. As one of 300 tourist spot, apartments are Monaco’s newer districts, rare here and many are subject apartments here are larger on €1,000 to ‘sous le loi 1292’ which average compared to some 200 places restrictions on letting

Number of transactions older districts of Monaco. ransaction volume (millions) the property. T €500 Key buildings: Terrasses du 100 Key buildings: 18th or 19th Port, Seaside Plaza, Palazzo century conversions Leonardo

0 €- 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: IMSEE Source: Savills World Research

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The new build downturn developers in Monaco Shaping shifted their focus to the global ultra- market prime segment, developing larger units Monaco: city at higher price points. This has pushed total new build sales volumes to €345 building for The new build market in Monaco is million, 2.5 times the volume recorded the future tiny, and exclusive. New development in 2013 and 13 times that of 2008. is tailored to the demands of the global elite and this means large, High-end schemes completed in Land is constrained in Monaco so high-spec apartments with extensive recent years include L’Oiseau Bleu the Principality is taking innovative facilities within the building. Much of (20 units), Le Monte-Carlo View (45 approaches to urban development by Monaco’s housing stock is comprised units) and Le Monator (19 units) and making available new development of apartments developed in the 1960s the Tour Odeon (70 units) which is space through urban restructuring, and 70s with a limited amenity offer, so due to be completed this year. land reclamation and renewal. the new supply occupies and enjoys a unique position in the marketplace and Other large developments, such as New development carries a significant price premium. Le Stella (102 units), have recently New development has been targeted launched, and will incorporate retail firmly at the global super rich, IMSEE recorded just 11 new build and office space. Last year also saw designed to compete with the best sales in 2014, down from 15 in 2013, the completion of Villas du Sporting, schemes of London, New York and so the market remains very small and three ultra-prime villas of 500sqm on Hong Kong. Tour Odeon, situated in exclusive. During the global economic the seafront. n La Rousse, topped out in 2014, rises to 49 stories and offers 70 apartments Figure 6 to a very high specification. Le Stella, How much a €2m property costs to a US dollar buyer located in La Condamine, consists of two villas and 99 apartments in an iconic ‘sculptural form’, thanks to its undulating balconies.

April 2014 April 2015 Land reclamation Monaco is no stranger to land 22% reclamation, it has been claiming $2.8m $2.2m Cheaper land from the sea since the late 19th century. The Fontvieille district, Source: Savills World Research, exchange rate as at 17th March 2015 developed in the 1970s, is almost entirely built on reclaimed land and extended the Principality’s land area by FIGURE 7 20%. There are plans for an eleventh New build transactions: the trend for larger units continues ward, , adding 27.5 hectares of new land between Port Hercule and n Studio n 1 bed n 2 bed n 3 bed n 4 bed+ ---- Total € volume Grimaldi Forum.

30 €400 Urban renewal Prominent sites are being re-imagined

€350 and redeveloped to maximise limited 25 land and make it fit for the 21st century. A new Sporting D’Hiver is €300 under construction, replacing the 80 year old building of the same 20 €250 name. The Richard Rogers scheme incorporates six residential pavilions, office accommodation, a pedestrian 15 €200 retail street and conference facility. n

€150

10 ransaction volume (millions) T Number of new build transactions €100

5 €50 A further 27.5 ha of land is to be reclaimed 0 €- 2006 2007 2008 2009 2010 2011 2012 2013 2014 from the sea Source: IMSEE

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Outlook World Research Publications

■ World cities cool: World city ultra-prime is n 12 Cities | US Special cooling, but Monaco’s restricted supply and retreat n Spotlight | Alpine Homes characteristics means it should fare better. Prices n GPS Report | Island Real Estate in the Principality are static and we expect them to n Spotlight | Prime Residential Retreats remain stable given limited new development and sustained demand.

■ Brand Monaco: Monaco’s high global profile gives it a cache among the global wealthy that will underpin demand over the long term. Monaco’s history and heritage is something that the competition in emerging enclaves just can’t replicate.

■ Wealth creation: As a ‘safe haven’ real estate market, new wealth created in emerging economies is already flowing to stable markets of Europe and For more publications, visit savills.com/research North America, into key world cities and centres Follow us on Twitter @Savills including Monaco. Monaco’s internationally cooperative stance means its status as a low tax jurisdiction appears secure.

■ Heritage: Monaco enjoys a rich cultural and built heritage. To date, it has been Monaco Ville’s historic architecture that has been protected and celebrated. But much of Monaco is characterised from development in the 1960s and 70s and we anticipate the best buildings from this era being preserved and promoted in future.

Savills team World Research

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