It is no secret that Monaco property prices are among the highest in the world. In this fascinating country where one out of three residents is a millionaire, the favorable tax system, geographical location, political stability and safe environment continue to drive the demand for real estate.According to a report released in February 2019 by IMSEE, the Monaco statistics office, average Monaco property prices – for sales and resales – were identical in 2018 at 5.2 million euros. While average resale prices have more than doubled in 10 years, average prices in the sales market are more volatile and depend on the types of constructions that become available each year. For example, in 2015 and 2016, a relatively high number of four-bedroom properties were sold (11 and 9 respectively), whereas, in 2018, the sale of 57 one-bedroom apartments represented 79.2% of new build transactions.The average price of a square meter in Monaco was 48,799 euros in 2018, compared to 24,538 euros in 2009.In 2009, a studio apartment sold for an average 26,545 euros per square meter on the resales market. In 2018, the average price per square meter for the same type of property was 41,811 euros. At the other end of the property spectrum, the average price per square meter for apartments with more than four bedrooms increased from 21,639 in 2009 to 56,850 in 2018.Yet eye-popping Monaco property prices don’t seem to deter buyers: IMSEE’s quarterly report in March 2019 mentions that 2018 saw 72 new apartments sold, the highest number since 2006.Supply vs demandMonaco property prices are strongly influenced by the shortage of apartments that can be offered for sale (or rent).With around 26,000 people per square meter, Monaco is the most densely populated country in the world, according to the United Nations Department of Economic and Social Affairs Population Division. That figure is predicted to rise to 27,000 by 2025.Due to its surface area of just 2.02 square meters, Monaco has mainly developed vertically, which has given it a distinctive cityscape of stacked skyscrapers overlooking the Mediterranean sea. But it has also claimed land from the sea: the southwestern Fontvieille district was built almost entirely on a land extension, adding 33 precious hectares to the country. Another, much talked about land extension project, Portier Cove is underway. The $2.4 billion development is scheduled for completion in 2025 and will give Monaco a six-hectare eco-district of residential and public spaces. It is expected to accommodate more than 1,000 people.Meanwhile, several new developments have opened opportunities for home-buyers. Le Stella, a boldly designed complex that opened its doors in 2018, was built on land once occupied by a handful of villas has provided 89 new apartments, mostly with one bedroom. This development alone accounts for the 44% increase in apartments sold between 2017 and 2018.Some units in ultra-luxurious new builds such as the Tour Odéon and Petite Afrique, inaugurated in 2015, sold for more than 100,000 euros per square meter.Why Monaco?Monaco’s tax system is a considerable draw for ultra high net worth individuals. Since 1869, Monaco residents have not been subject to income tax. There is no capital gains tax, wealth tax, annual property tax or inheritance tax either.Residents also appreciate the safe environment: a system of video surveillance is in place throughout Monaco and there is approximately one police officer per 100 residents.The quality of life in Monaco is high, with a wide-ranging calendar of cultural and sports events and plenty of dining options. Residents enjoy an average of 300 days of sunshine each year and have numerous beautiful towns, villages, cities, and beaches to discover in the neighboring French and Italian Rivieras. In winter, many people head to the ski slopes located within a short driving distance.Monaco’s many new developments also aim to improve public infrastructure. They will not meet the high demand for property but are certainly changing the face of the Principality. The lack of space and steeping terrain is challenging architects to find solutions that combine aesthetics and green technologies to help Monaco meet its goal of cutting greenhouse emissions by around 50% compared to 1990 and to be a carbon-neutral state by 2050.What other statistics strike us as evidence of the upward trends in property prices and property development in Monaco? There is the health of Monaco’s economy itself. And this health is a reflection of the growth in construction. One feeds the other. The supply infrastructure is robust even though it’s delivery capabilities are in the medium rather than a short term because of the complexity and large scale of its projects. And, of course, not all apartments that are built are for the wealthy influx. There have been important developments in social housing for Monegasque residents who eat into the supply.When one thinks of Monaco one thinks of Banking and Finance which is still the sector that leads the way at 16.3 % of the economic activity, according to IMSEE, the Monaco Institute for Economic Statistics. On the other hand if one combines construction and real estate services they together came a very close second when official statistics started in 2005.In the 2016 statistical analysis by IMSEE, they are now the leading sector has grown from 16.3% in 2005 to 24% in 2016. This would go part of the way to explaining Monaco outperforming its neighbors France and Italy and growing at 3.2% and also outperforming Europe in general.Whichever way one looks at it one sees unabated strength in property prices in Monaco and a construction industry that will be put to the test with challenges on land and sea; and is growing despite the complexity building in limited spaces.