Stroll through the streets of Monaco and the tiny principality of just two square kilometres appears to be bursting at the seams.
The traffic — a constant gripe among locals — has come to a near standstill, with roads closed for the Grand Prix. There’s barely space to be seen among the apartment blocks that rise from the coast to the French border in the hills — yet the juddering from construction sites is an audible reminder of Monaco’s urgent need to update its mainly 1960s housing stock and build new homes for a growing population.
Prince Albert II of Monaco is standing in his palace gardens, contemplating a sweeping vista of the country he has ruled for 17 years since the death of his father, Prince Rainier III. As he prepares to host 20 or so global heads of state for the Formula 1 main event, he tells me about the challenges Monaco faces.
Famously described by Somerset Maugham as a “sunny place for shady people”, Monaco has a reputation for being a tax-light bolt-hole for absent billionaires and a playground for the bling-loving super-rich. Albert’s mission has always been to change perceptions, he says. “I’ve been trying to boost the attractiveness of Monaco since I took over from my father. I can’t face Monaco appearing on any black or grey list,” he says in his soft, American-accented voice, the legacy of his university years spent in Massachusetts.
Monaco was removed from the OECD’s “grey list” of uncooperative tax havens in 2009. And in 2016, Prince Albert signed a tax transparency agreement with the EU, agreeing to exchange information on the bank accounts of residents from 2018. “We put together a plan with the finance department. Any financial institution has to comply with those rules and regulations. It took a while, of course,” he says.
Monaco still flies under the radar in some areas; the country doesn’t, for example, appear in Transparency International’s annual Corruption Perceptions Index, whose findings are based on 13 independent global data sources. That “does not mean it’s corruption-free, only that there is not enough data available to accurately measure levels of corruption,” says Transparency International’s Shubham Kaushik.
However, since the start of the war in Ukraine — which Prince Albert publicly condemned in late February — some of Monaco’s Russian population has been in the spotlight. Of Monaco’s 749 Russian residents, the prince says that “only a handful” appear on the list of oligarchs facing sanctions, “and of course they were immediately dealt with,” he adds. “Those who had bank accounts here, they have been frozen.”
He mentions one Russian yacht owner who has left Monaco. He won’t specify names, but the one reported case is the retail billionaire Sergei Galitsky, whose name is not on the EU’s list of sanctioned individuals but whose $250mn superyacht Quantum Blue was temporarily seized in Monaco’s Port Hercule in March and later seen heading to the Suez Canal.
“The only other [Russian who has left] is Mr Usmanov, who comes in summer. His yacht was seized in Germany. His helicopters were also seized,” the Prince says, referring to Alisher Usmanov, owner of the world’s largest yacht, Dilbar, which includes two helipads.
Did Monaco turn a blind eye for too long to money from Russian oligarchs? “Everyone seems to focus on us because of our Russian residents. Many more have homes along the Côte d’Azur. There are a lot of them in the UK too,” he retorts. “In the past, it was seen as OK to accept Russian money. The focus is [for Monaco] to try to attract other nationalities.”
With 139 nationalities already resident in Monaco, he can take his pick. The appeal of Monaco appears to be undimmed by any of the controversy, and wealthy people from all over the world are still clamouring to take advantage of its low taxes. Estate agency Knight Frank predicts that the number of Monaco residents with a net worth (including their primary residence) of more than $30mn will increase 23 per cent in the next four years. The number of dollar millionaires in Monaco will increase 43 per cent.
Edward de Mallet Morgan, head of Knight Frank’s global super prime residential team, says the rising cost of living is adding to Monaco’s appeal. “Tax is usually people’s first reason for wanting to move to Monaco,” he says. “With the cost of living rising, they’re thinking it’s a good moment to sell their companies and invest in one of the most expensive real estate markets in the world, with no inheritance, capital gains or income tax. They’ll live there for 20 years, then sell.”
Finding homes for them all is a struggle — hence the cranes. And the increased development has caused problems. Locals feel Monaco is going through “quite an aggressive, disruptive transformation as it turbocharges its expansion to accommodate an UHNW [ultra high-net worth] community,” says de Mallet Morgan. But such is Monaco’s appeal, they simply need to build more of it: a €2bn land reclamation project is creating Mareterra, a new six-hectare area off the coast between Monte Carlo and Larvotto.
It is not only the super-rich that face a housing shortage in Monaco. Prince Albert is also trying to increase the provision of affordable rental properties for Monegasques — a protected group who constitute one-quarter of the 39,000-strong population and are guaranteed a home and a job. His 15-year National Housing Plan for Monegasques, launched in 2019, will increase the amount of state-owned flats by 43 per cent to 4,548 units in total. About 600 will be built in the coming year.
Monegasques pay a third of the market rent, so a two-bed flat costs around €1,800 a month. But put in perspective, while Monaco’s GDP per capita is €172,000, skewed significantly by its super-rich residents, the average teacher’s salary is €3,360 a month.
When it is complete, Mareterra will boost Monaco’s land mass by 3 per cent, but it won’t address the social housing shortage. Instead it is proving a magnet for those with €45mn-plus to spend on three-bedroom flats or €150mn-plus for a villa. Most properties have sold, still two years from completion.
Prince Albert hopes that Mareterra will be considered “as eco-friendly a concept as possible, proving that land reclamation can be eco-friendly”. He says he has been an ardent environmentalist ever since he witnessed the effects of climate change during a 2006 visit to the North Pole, retracing the route of his pioneering great-great grandfather Albert I a century before.
He aims to make Monaco carbon neutral by 2050. It’s increasingly turning electric too, from the bin lorries to the shuttle buses, claiming that 40 per cent of the cars registered there last year were electric. He’s concerned, he says, that the Ukraine war has shifted governments’ focus and spending away from environmental concerns and into defence. “It’s to the detriment of sustainable growth in clean energy,” he says.
Land reclamation — as his father showed could be done in the 1970s with the Fontvieille district — buys Monaco time and space for now. “But technologically there’s a limit. The further out you go, the deeper it gets. We’re not like Hong Kong with its airport expansion in only 10ft or so of water. We have depths of 80ft-90ft or more,” he adds.
Monaco is ever exploring ways to manage its mountainous terrain; tunnels, public lifts and pavement escalators are all part of getting from A to B. But the principality’s future inevitably lies in building not just into the sea, but upwards. Tour Odéon — a 49-storey residential tower developed by Groupe Marzocco with 62 luxury apartments and 157 state-owned flats — dominates the skyline.
When it was completed in 2015, it broke global price records, including the 3,500-sq m sky penthouse, “which, at circa €400mn, was probably the most expensive residential single family home for sale in the world,” says de Mallet Morgan. Now it’s rented out, “it’s probably the most expensive residential rental in the world and will probably be costing the current tenant several million euros a year,” he adds.
Marzocco’s latest project, Testimonio II — due for completion in late 2024 — is, according to its developers, Monaco’s largest in terms of built square footage. On its improbably tight, steep site next to the French border, with a river running below, that density is achieved by building 30 storeys high (in two towers that will house 348 state-owned flats) and digging down 13 floors for underground public and private parking.
Its Monegasque architect Alexandre Giraldi and the US firm Arquitectonica have been inventive with Bay House, the scheme’s luxury component, too, given super-rich foreign families relocating to Monaco expect far more space than its housing stock typically provides. At street level is the relocated International School of Monaco. Above that sit 56 apartments priced from €17.5mn. And on top of those are what’s most likely a first in Europe — certainly for Monaco — five rooftop villas of up to 2,500 sq m each, priced over €100mn.
The Prince also has the ambition to turn Monaco into a “smart principality”, which includes giving sectors such as healthcare, education and transport a major tech reboot. This has not been without controversy, though. While many countries were voicing concerns about — or actively banning — Huawei’s involvement in its 5G networks, Prince Albert hosted the Chinese president Xi Jinping in 2019 after agreeing a deal with the Chinese technology company to develop Monaco’s wireless network.
For now, the Prince’s challenges seem like a series of balancing acts: marrying Monaco’s expansion with his environmental concerns; and not harming the country’s appeal to the super-rich, while boosting transparency. “In everything we do, we try to balance and to create as good a mix as possible for our residents and for Monegasques and to be able to live peacefully,” he says. “If we’ve managed to have 139 nationalities live on two sq km peacefully, then hopefully we’ve been pretty successful.”