Monaco, the most expensive residential market in the world, will likely retain that title as a dearth of new development will keep pressure on prices, according to a report Monday by real estate agency Savills.
The average price in the extremely wealthy independent principality along France’s southern edge hit €4.5 million (US$5.265 million) in 2017, an increase of 6% from the previous year, according to the brokerage’s annual market overview. Buyers paid an average €41,300 per square meter, or roughly US$4,500 per square foot.
More:Hong Kong, New York and London Top World Luxury Markets
Monaco beats out Hong Kong, the second most expensive market, a margin of 13%, according to the report.
The principality is a stomping ground for the world’s high-net-worth individuals. It’s home to 139 nationalities, even while the population numbers only 37,550. The largest contingent is French, making up about a quarter of all residents, followed by the local Monégasque, representing 22.5%, and Italians, representing 21.9%, according to the report.
Even with strong demand from around the world, a lack of available homes has kept buyers out of the market and dampened overall activity. About €2 billion (US$2.3 billion) worth of homes sold in Monaco in 2017, a 23% drop from a record €2.7 billion (US$3.16 million) the year before.
"Wealthy residents hold their property for long periods," exacerbating the housing shortage, said Paul Tostevin, associate director at Savills in the report, "while little new stock is added."
From Penta:Superyacht Awards Recognizes Boat That Traveled for Eight-Month Voyage
Buyers are snapping up new developments when they are available. Last year, 11% of the 456 properties sold were newly built—a record portion for the tiny city-state. New projects include Le Stella, which has delivered 99 one- and two-bedroom duplexes to the market starting at €3 million (US$3.51 million).
"However, we expect new build transaction volumes to drop off significantly in the near term," according to the report. "Monaco is extremely land-constrained, so new development sites rarely become available."