Construction has begun on a $2bn (£1.5bn) scheme to reclaim land from the sea around Monaco so that more luxury apartments can be built for the thousands of extra millionaires expected to move to the principality in the next 10 years.
Nearly 35 in every 100 Monaco residents are millionaires and more of the global super-rich want to join them. Around 2,700 more are expected to call Monaco home by 2026, according to research by estate agent Knight Frank, taking the total to 16,100 out of a total population of under 38,000.
But the sovereign city-state – which is only slightly bigger than Regent’s Park in London – has run out of space for those seeking the “fiscal advantages” that the tax haven offers.
To attract the world’s wealthy, Prince Albert II, the reigning monarch, has approved the “offshore urban extension project”, which will add six hectares (15 acres) to Monaco’s 202 hectares. This will allow the creation of 120 luxury homes selling for more than $100,000 per sq metre – more expensive than One Hyde Park in London and 15 Central Park West in Manhattan.
The new Portier Cove ecological neighbourhood, near Casino de Monte-Carlo, is regarded as vital for the continued growth of the principality; according to state statistics body L’Institut monégasque de la statistique et des études économiques (IMSEE), not one new-build apartment went up for sale last year.
Previous plans for a larger reclamation scheme were dropped after the financial crisis and environmental concerns. But Bouygues, the construction company behind the project, has promised there will be no detrimental effect on the environment. Important species on the seabed have been moved to a new reserve and the company said 3D-printed artificial coral reefs on the 18 trapezoid reinforced concrete caissons used to create the boundary of the new land would provide an artificial reef for wildlife.
Edward de Mallet Morgan, global super prime residential partner at Knight Frank, said huge demand and a severe lack of supply had sent Monaco prices “through the roof”.
A cool $1m in Monaco will buy 17 sq m of prime residential property, less than a third of the space it would buy in Paris and just over half of the 30m of space it would command in prime central London.
Only 70 of the Portier Cove apartments – some of which are designed by The Shard architect Renzo Piano – will go on sale (the others being retained by the developer). Mallet Morgan said that by the time the development was finished “who knows what stratosphere Monaco’s prices will have reached”.
“Such is the demand for new waterfront homes that price will be little deterrent to buyers – and their tax advisers - who are thinking ahead with wealth preservation in mind for future generations of their families,” he said.
Most of his clients looking to buy in Monaco have vastly more than seven-digit fortunes. Knight Frank’s research shows that 1,220 of Monaco’s residents were worth more than $30m [ultra-high net worth individuals in 2016 – a 10% increase on the 2015 figure. That works out at 320 ultra-high net worth individuals per 10,000 people, compared with two in every 10,000 in the US.
Among the wealthy already based in Monaco are Sir Philip Green’s wife, Tina, who has been resident in the Monegasque principality since 1998. The Greens say the companies behind their retail empire are based in offshore locations because of their “strong regulation”, not for tax reasons. Formula One drivers Lewis Hamilton and Jenson Button and tennis superstar Novak Djokovic also live in Monaco.
Mallet Morgan explained the reason that most clients wanted to buy in Monaco: “In their private lives and business lives, they naturally want to structure themselves so that they are only paying as much tax as they need to. You can’t avoid that Monaco is a tax haven, you can dress it up as a low-tax environment, but it is a tax haven with a lot of tax breaks for families, businesses and importantly inheritance tax.
“Inheritance tax is important for a lot of families who have developed wealth over generations, because here there is no tax at all on passing wealth over to children.” The inheritance tax break applies to assets held in Monaco or overseas.
There is no personal income tax in Monaco. In the UK, income above £150,000 is taxed at 45%. Companies incorporated in Monaco are exempt from taxes if most of their business is based in the principality. In order to apply for Monaco residency, applicants must open a Monaco bank account and deposit at least €500,000 (£440,000).
Nick Edmiston, the founder and chairman of superyacht builder Edmiston & Co, said a high sense of personal security was a big draw for the super-rich. “You can walk around wearing expensive jewellery and feel safe,” said Edmiston, who has lived in Monaco since 1989. “Many wealthy people are used to always being surrounded by bodyguards but that’s not necessary in Monaco.”
However, Mallet Morgan warned rich prospective buyers that they were not likely to get much space for their money. “You can pay the best part of €500,000-€750,000 for a parking space,” he said, and a €6m two-bed apartment is going to be “quite pokey compared to London”. But a lot of people commute to London or Paris.
“It is easy to go anywhere from Nice airport, which is a short helicopter ride away,” he said. “You can easily go and have a meeting with your trustees in Geneva, and then go to the Opera in Vienna that evening.”
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