Residential real estate observatory 2019

 

I- The Monegasque residential real estate market

 

Evolution of real estate property sales and resales number

 

 

The numbers of sales and resales have been following the same trend since last year, and it continued in 2019, but this time downwards. The number of sales fell sharply (-54.2%) even if it has nevertheless remained at a relatively high level for the last 10 years, while the number of resales recorded a much less significant drop (-4.9%), with a total of 462 transactions.

In almost 10 years, the number of transactions has more than doubled despite a drop of 11.7% compared to 2018 when we recorded 523 transactions.

 

Evolution of sales and resales amounts

 

The total amount of sales and resales has been constantly above 2 billion euros since 2014 with a total of almost 3 billion euros in 2019, an historical record. However, there has been a stabilization phase since then, with fluctuations from year to year but much less than the exponential growth recorded between 2009 and 2014.

 

A/ The real estate sales market

Regarding the property sales market, in other words, new apartments deliveries and the commercialization of buildings under construction, a total of 49 apartments were delivered in 2019, 40 of which are located in the One Monte-Carlo building and are intended for rental only and 9 were delivered in the 26 Carré Or building, half of which were intended for sale.

However, the market remains sustained, on one hand by future real estate projects such as the 45 rue Grimaldi, The Exotique, or the Tour des Giroflées buildings and on the other hand, by the commercialization of apartments delivered in 2018 in the Stella building.

 

Evolution of the number of sales by apartment type

 

 

Thereby, despite the very low supply in 2019 of new properties, 33 apartments were involved in a transaction (whose 25 apartments sold off-plan in future delivery), which is nevertheless in sharp decline compared to 2018 (-54 %) where the operation of the Stella building entirely intended for sale was delivered with at the end 89 apartments.

 

Evolution of the amount of sales by apartment type

 

In contrast, the amount of these sales represents € 320.5 million, a decrease (-14% compared to 2018) but much less marked than the number of transactions.

 

Evolution of the sales average and median prices

 

 

Therefore, the average price shot up, going from 5.2 million € in 2018 to 9.7 million € in 2019. This is directly linked to the fact that the 26 Carré Or building, the only real estate operation delivered in 2019, includes very high standard and large apartments which have been sold for several tens of millions.

 

B/ The real estate resales market

NB : A resale is defined as the 2nd transfer of a real estate property, or the 1st transfer of a property but more than 5 years after the building completion.

 

Evolution of the resales number by apartment type

 

 

Regarding the resales market, there are 429 transactions, 22 less than in 2018 (-4.9%). Resales involving studios, two- and three-rooms apartments represent three-quarters of the market, the last quarter includes larger apartments. It is interesting to note that despite the difficulties encountered on the rental market with regard to studios, the number of sales continues to grow (going from 99 transactions in 2018 to 105 in 2019). Another point to highlight is the 15 villas sold in 2019, the highest total ever recorded since the creation of this observatory, and which have often been acquired for real estate development

 

Evolution of the resales average and median prices

 

The resales average and median prices rose by 11.8% and 8.6% respectively, and more than doubled over the last 10 years.

 

Evolution of the resales average and median prices by apartment type

 

 

All average prices by apartment type rose in 2019, except for the 5 rooms apartments which in general are more volatile given the differences in standing and sizes from one property to another and given the lower number of annual transactions. The average sale of a studio flat in 2019 is close to 2 million euros (1.8 million euros).

 

Number of resale transactions by year and by price range

 

 

This is explained by the fact that 1 out of 7 transactions is worth more than 10 million euros in 2019, an increase of almost 40% compared to 2018. Comparatively in 2010, sales beyond 10 million euros represented only 1 transaction out of 20!

 

Evolution of the annual price per square meter by apartment type

 

A stabilization of the average price per square meter was noticed between 2018 and 2019 with a value of 48,151 euros. It declined for all apartment types in 2019, except for studio and 4-rooms apartments. The highest volatility observed on large apartments, is also explained by the fact that the number of transactions is lower and therefore more fluctuating.

 

Evolution of the annual price per square meter by district

 

 

Only six districts have enough data to calculate the average price per square meter each year, which in 2019 exceeded € 52,000 in the Monte-Carlo, Fontvieille and Condamine districts. The Larvotto and Monaco-Ville districts have too few transactions data to be analyzed.

Despite a 6% drop, Monte-Carlo remains the most expensive district with a price per square meter of 53,042€ At the opposite, the lowest price per square meter is observed in the Jardin Exotique district (€ 35,383).

A substantial decrease of 11.1% was noted in the Jardin Exotique district between 2018 and 2019, and it happens now to be the worst graded area in terms of price, while in the same time, the Fontvieille and Moneghetti districts recorded the largest gained (+ 14.2% and + 24.8% respectively).

It is therefore interesting to observe tighter prices between the most popular districts and the others. Although in 2017 there was a gap of 66% between the least popular and best appreciated areas, in 2019, this gap is only of 50%.

 

C/ Housing characteristics

 

To go beyond the observatory's figures, it is interesting to know the characteristics of the dwellings, derived from the 2016 Population Census Study, in order to understand the market needs in terms of real estate.

 

 

Between 2000 and 2016, the total number of dwellings available in the Principality increased by 6.2%.

A very large majority of the dwellings are occupied as Main Residence (88.6%), and 7.4% of the dwellings are unoccupied probably because they are for sale or under renovation.

 

 

It is interesting to observe that the typical accommodation in the Principality, corresponds to a 2 bedrooms apartment with an area between 60 and 80 sqm.

More than one out of two households live in a 1 bedroom or 2 bedrooms apartments (56.5%) and with an surface area lower than 80 sqm (53.1%)

 

D/ To go beyond

 

Proportion of available apartments resold by district in 2019

 

 

Based on the number of dwellings recorded in 2016, subtracted from the “state” apartments only reserved for Monegasques but completed with the new deliveries since then, and the whole thing compared to the real estate resales figures by district, we get the proportion of the available housing stock that is resold each year.

Thus, Fontvieille is the district with the largest turnover, while the Larvotto is the most steady one. Strangely, Monte Carlo area, which enjoys the highest prices per square meter and is sought after by new residents, is only the 6th most dynamic district for resales. The average percentage is relatively low, meaning that only 1 out of 38 apartments available in Monaco is sold each year.

It can be explained by several reasons:

  • the widespread wealth management approach amongst some Monegasque and old Resident families, who own a very large number of apartments only intended for rent.
  • Absence or low inheritance fees that do not encourage heirs to sell.
  • The comfortable financial situation of owners, meaning that they do not need cash or necessarily sell in order to buy.

 

E/ Conclusion

 

The past year

The year 2019 recorded a new record sales volume with nearly 2.8 billion sales and resales despite a decrease in the number of transactions of 11.7%, bringing the total to 462.

Despite the often longer relocation delays between outgoing and incoming tenants, and rental prices that declined for entry-level properties, selling prices are steady or continue significantly to rise.

Some districts such as Fontvieille or Moneghetti, which were previously underestimated in favour of others, enjoy now a new attractiveness thanks to prices that were more accessible but also thanks to current demanded criteria such as green spaces or generous volumes available, that they offer.

Numerous refurbishment projects undertaken by many property dealers, upgraded and improved the quality of the estate.  This meets the expectations of new residents who are increasingly demanding and accustomed to the major international capital standards and who are spending more and more time in the Principality, with the Police strengthening controls about their actual residency.

 

Next year and beyond

The market is always dynamic and prosperous and the properties whose owners are really intended to sell have no difficulty in finding a buyer. Supply is limited and demand is sustained, so the market is still very strong.

In addition, this market always benefits from state interventionism, which does not hesitate to pre-empt and buy properties with future restructuration perspectives.

Also, many real estate projects are in progress, as evidenced by the record trading volume of the Villas. On one hand, there are private operations, but only part of them will be for sale and the rest will be preserved in movable heritage and on the other hand there are public operations financed by the State, which are part of a vast national plan

Besides, what has made the Principality successful for decades is still relevant, including the territory economic prosperity, the quality of life and the advantageous taxation policy. In addition, exogenous factors also reinforce its attractiveness with the political and fiscal instability in neighborhood countries, insecurity, as well as the always quicker wealth growth of Monaco's main clientele : the HNWI, and finally the incredible low interest rates that encourage the use of debt financing.

Nevertheless, and after this optimism vision, we nuance our analysis and our point of view, raising shadow zones that are left and should unfortunately increase, and therefore let us think we should remain cautious with our forecasts. The quality of life in Monaco, often praised, tend to decline largely due to the fact of the many works that create noise pollution and traffic problems. The increasing complexity of the procedure to open a bank account in Monaco that discourage some wealthy clients from relocating their home or their assets dictated by the strengthening control operated by the SICCFIN. Also, the likely artificial prices inflation recorded on real estate transactions in recent years heavily linked to the explosion of the number of speculative operations made by property developers.

Finally, the global economy is entering in an indecisive year with an extended period of negative interest rates, intense geopolitical and diplomatic tensions between the major economic countries and the main subject that has dominated international broadcast media for several weeks : the risk of a global Coronavirus pandemic, which raises fears of a global economy slowdown.

 

In Monaco, 27th february 2020,

 

 

Florian VALERI