The size of Central Park: the country that became the peak of real estate prices

A Manhattan couple looking to rent a luxury apartment, with a budget of $30,000 per month, could afford a 290 square meter corner apartment on Central Park West, with three bedrooms, 2.7 meter vaulted ceilings and windows overlooking the park.

In the same rental budget for tiny and glamorous Monaco, they had to settle for a modest two-bedroom apartment, less than 110 square meters, with a small kitchen and a windowless bathroom, but in a nice location on the waterfront near the Casino de Monte Carlo.

The Principality of Monaco, spread over a steep stretch of the Mediterranean coast between the French city of Nice and the French-Italian border, is among the smallest sovereign states in the world. Its area is about 2.5 square kilometers, smaller than New York’s Central Park.

But as one of the most attractive tax havens, it has created a unique rental market, with residents from all over the world willing to pay millions of dollars in annual rent for the chance to live in style and enjoy the absence of personal income and capital gains taxes.

Monaco tops the list of the world’s most expensive residential rental markets, according to an analysis conducted in May and provided to The Wall Street Journal by Knight Frank, a real estate firm that analyzes international trends.

Knight Frank checked the top percentage of properties with an area of ​​about 100 square meters in different cities. Monaco’s luxury rents in this category start at more than $19,000 per month, 36% more than in Hong Kong, which comes in second place, and twice as much as in Singapore and London. In New York and Los Angeles, such prime rents start at about $9,200 and $8,300 per month, respectively. And these amounts are only for 100 square meters.

The concentration of wealth in Monaco means that there is a high demand for larger luxury rental properties, with concierge service and hotel-level amenities, which can easily exceed $100,000 per month.

Rental prices reach up to $280,000 a month for some of the triplex penthouses at One Monte Carlo, a residential complex completed in 2019, located a few minutes’ walk from the casino. The penthouses also include private outdoor pools and a landscaping team that takes care of the trees on the balconies.

Monaco has a network of winding roads, and is sparkling and spotless, unlike the rest of the French Riviera, which is partly neglected. The favorable tax policy may be the main attraction, but One Monte Carlo residents also praise the lack of crime and the exclusive shopping at Louis Vuitton, Saint Laurent and Bulgari boutiques.

Whether they rent a one-bedroom apartment for $150,000 a year, or a luxurious penthouse for millions, Monaco renters must pay rent quarterly, quarterly in advance, along with a three-month security deposit.

Why would anyone throw away more than $1.5 million signing a lease – plus more than $120,000 in additional annual service fees – instead of buying?

Rent on the way to residency

Renting an apartment is often an initial and important step in the process of obtaining residency, explains Alexis Medier, a partner at the century-old law firm in Monaco, the Gordon S. Blair. Tax benefits can take effect after one year, he says, and proof of a rental agreement for at least one year and a deposit of at least 500,000 euros (about 535,000 dollars) in a local bank are required before the process can even begin. There is no guarantee that the application will be accepted or renewed in the future, and renting is simply easier, faster and less risky than buying.

In 2023, the population of Monaco was 38,367, of which only about a quarter were citizens. The number of foreigners applying for residency has been increasing since 2000, according to Monaco’s government agency statistics, and in recent years the luxury rental market has expanded to meet this demand. Applicants must commit to spending more time in Monaco than anywhere else, and the renewal of residency depends on the relevant authorities going through credit card receipts and even talking to doormen in the buildings to verify the applicants’ claims. It will be very difficult to fake your way into residency, Medyer says. Therefore, a residence in Monaco should serve as a real home.

Capital of 30 million dollars

Medyer says that Northern European citizens, whose status as citizens of the European Union or Schengen countries allows them a faster and visa-free path to residency, have a prominent presence among the new arrivals. Near the bottom of the list are actually French citizens, who must still pay income tax in France regardless of their address in Monaco. There are French families who still move, to take advantage of the inheritance tax benefits, he says.

Americans also owe US ​​tax on worldwide income regardless of residence, so according to Medyer, they would benefit the least from acquiring residency.

The one thing that almost all of Monaco’s new residents have in common is wealth, Medier says. The lawyer, who arrives daily from Nice, estimates that his foreign clients seeking residency have a capital worth at least 30 million dollars.

“Most residents keep a low profile,” he says, pointing to the contrast between his clientele and the one-day visitors and smartly dressed vacationers. “When you see them on the street, they are the ones who don’t show off.”

The question hovering over the Monaco market – especially when it comes to foreign investors and its banking sector – is whether a “watchdog”, a global supervisory body, may soon add the principality to a financial “grey list”, which will assess its anti-money laundering measures as insufficient, and will require monitoring intensified. But agents in Monaco say that even if this happens, they expect little impact on the residential real estate market.

Shopping in a grocery store in Italy

New residents may be sleeping in Monaco, but they’re taking advantage of the southern region of France, known for its idyllic scenery and excellent food, and its proximity to northern Italy, where they may grocery shop — if they grocery shop at all. One couple, who are in the process of acquiring residency in Monaco, say they are hiring a dispatch chef in nearby France instead of shopping and cooking. For a couple of One Monte Carlo residents, the nearby luxury hotels are used for social gatherings, ordering room service or hopping for a meal at restaurants where a cup of coffee can cost $15.

The people coming to get residency are interested in increasingly luxurious residences, and the highest prices in the principality are those in new complexes or renovated historic buildings. Caroline Olds, a real estate agent in Monaco, offers a three-bedroom apartment with an area of ​​350 square meters located in a magnificent building from the 1880s. The building was recently renovated in 2021, and the monthly rent is $99,000. She also has a 255-square-meter, four-bedroom unit on the 31st floor of the Tour Odéon, a luxury residential skyscraper, and the asking rent for it is $48,000 a month. Isn’t the price quite low, considering the building’s luxury “Well, it’s not the penthouse,” says Olds.

Olds, a long-time resident of Monaco, says that new arrivals to Monaco are sometimes amazed. “People who come from outside Monaco are used to big houses,” she says. For customers who can afford an apartment the size of a mansion, it can offer a penthouse, spread over four floors, with four bedrooms and about 770 square meters of balconies. The price: 268 thousand dollars per month.

Driver on duty and linen change

Irene Locke, who runs the Monaco office of British real estate firm Savills, says the new wave of luxury complexes like One Monte Carlo has convinced some residents to stay in rentals rather than buy. The Tour Odéon, for example, offers residents an on-call driver, according to Olds. And the staff at – One Monte Carlo says they assist tenants with requests such as ordering a change of bed linen for an unplanned return home after a visit abroad, or booking a helicopter for a quick hop to restaurants up the coast in France.

A similar apartment to purchase in this small area, which has few single-family homes, Luke adds, can cost upwards of $50 million.

The path to obtaining residency creates a certain rhythm of renting and owning, says Bjarni Breidfjord, director of the Luxoria international interior design studio in Paris and Nice. Renting in the tiny, urban, high-rise dense country could quickly lead to buying in nearby France, he says. Customers “become a bit claustrophobic, and then they need a country house – anything that allows them to enjoy a little garden space,” he says.

An increase in furnished apartments

With a few notable exceptions, the apartments for rent in Monaco are unfurnished, and must be returned to their original condition after the rental period. “What’s so strange about Monaco,” says Breidfjord, “is that even if you make improvements, the owners want the apartment back in its original state.”

Breidfjord is often called upon to find solutions for wealthy clients accustomed to luxurious mansions, who now plan to live in small, low-ceilinged apartments, which they may only stay in for a few years. His solution: change the spaces using wall coverings and paint jobs, while leaving the floors as they are. “We refer to it as a ‘cosmetic overhaul,'” he says.

According to Breidfjord, this summer he will complete the work on furnishing a 120-square-meter apartment for a couple moving to Monaco. With a monthly rent of $15,000 – reasonable by Monaco standards – the couple adds a touch of luxury to the apartment on a budget of $375,000, including Italian designer furniture and a custom-built wine fridge, priced at $96,000.

Luke says the market for furnished apartments is starting to grow. Savills is handling long-term, furnished units at the Columbus Hotel, near the southern tip of Monaco, where the 125-square-meter penthouse, with an even larger balcony, rents for $37,500 a month. Miells, a branch of Christie’s in Monaco, offers a furnished apartment For rent at the other end of the principality, also at an asking price of 37,500 dollars per month. The apartment has three bedrooms and an area of ​​228 square meters, it is located on the 15th floor with impressive views of the Mediterranean Sea.

People who move “think they have enough chores involved in moving here,” Luke says. With a to-do list that may include obtaining a visa, obtaining a residence permit, and moving children to schools, the meaning of a home that is ready for immediate entry is: “Your living arrangements are already organized.”

The One Monte Carlo project is the fruit of the initiative of the Monte Carlo Société des Bains de Mer, the state-controlled entity known as SBM. She owns a large part of the principalities, including the casino, the opera house and more. Over the past few decades, SBM has invested in luxury rental properties, and its portfolio now includes 71 units, including three rare waterfront villas, where rent is $280,000 per month.

In a market where luxury properties can be sold for tens of millions, why does SBM emphasize residential rentals? “The rents are very high,” says Stephan Valery, chairman and CEO of SBM, “and they represent long-term profitable income.”

100% occupancy rate

Valerie says that the occupancy rate at One Monte Carlo is close to 100%. The only available space at any given time is usually a unit being renovated for the next tenant, he says.

SBM also now owns Villa La Vigie, an early 20th century mansion just over the border in France, which was for a long time the Riviera home of the late fashion designer Karl Lagerfeld. It is rented at a cost of up to $160,000 per week during peak season, and is also available for long-term rentals of up to two months for more than $1.18 million.

SBM’s One Monte Carlo now faces competition from Mareterra, a new $2 billion luxury waterfront complex and neighborhood built on land that was previously covered by the sea. Some of the world’s most famous architects, including Renzo Piano and Tadeo Ando, ​​are involved in the project, and its residents will have access to a private marina.

In the project, which includes 134 large units, some with an area of ​​up to 1,490 square meters, the sales prices reach almost 100 thousand dollars per square meter. Rental units in the range of 930 square meters will cost about $160,000 per month, according to Stephan Brianti, CEO of the Ageprim agency.