Monaco, the tax haven on the French Riviera, is experiencing a luxury housing boom that includes the world's most expensive penthouse as developers prepare for an influx of millionaires and billionaires escaping higher taxes or a loss of banking privacy.
A flow of new residents is emigrating from Switzerland, where financial secrecy laws are crumbling, said Jean Claude Caputo, managing director of broker Savills's French Riviera unit.
They're drawn by the principality's “security, sophistication and climate,” he said – as well as for financial reasons. The Swiss government signed an accord in May to automatically share bank data across borders.
“High-net-worth individuals want to be in this part of the world,” Caputo said as he drove in his Audi Quattro to Monaco to brief Swiss private bankers on the property market there and help them advise clients considering a move.
New levies on luxury homes in London and a U.S.-led global crackdown on hiding assets will also probably attract the affluent to Monaco, which already counts pop stars, Formula One drivers and Russian billionaires among its dwellers.
One in three of Monaco's 38,000 residents is a millionaire, according to a study by Spear's magazine and WealthInsight. As that number increases, home values will rise by about a fifth by June 2015, according to London-based Savills. That would almost erase losses sustained since the market's 2007 peak.
The Tour Odeon, a double skyscraper being built by Groupe Marzocco near Monaco's Mediterranean seafront, will contain a 35,500 square-foot penthouse with a water slide connecting a dance floor to a circular open-air swimming pool.
The apartment may sell for more than $400 million when it goes on the market next year, French magazine Challenges reported. That would make it the world's most expensive penthouse, according to broker Knight Frank.
“We think we can get a little bit more,” Daniele Marzocco, a director at the company, said in June. So far, the developer has found buyers for 26 of the 36 luxury homes that have been offered for sale.
“What we sell is Monaco,” commercial director Niccolo Marzocco said during a viewing of the skyscraper. He cited security, stability and the convenience of living in a city-state about two-thirds the size of New York's Central Park.
The most expensive part of Monaco, centered on the Golden Square and The Casino de Monte-Carlo made famous in James Bond films, is already the world's costliest property location ahead of Hong Kong.
For $1 million, you could buy about 160 square feet of space, Knight Frank estimates. That's about a third of the size of the median studio in Manhattan, according to the Naked Apartments website.
The principality's residents, who include Russian billionaire Dmitry Rybolovlev and pop singer Shirley Bassey, don't pay taxes on income. The French have to pay taxes there, with certain exceptions dating back more than 50 years.
Famous for its Grand Prix, Monaco is home to a host of Formula One drivers such as 2008 world champion Lewis Hamilton, who moved there from Switzerland two years ago.
The Grimaldi family took control of the city-state in 1297 when Francois Grimaldi seized the fortress from a rival Italian faction. The family has largely reigned since and is now ruled by Prince Albert II, son of Prince Rainier and Hollywood star Grace Kelly.
While Switzerland also has some of Europe's lowest tax rates, it's becoming less attractive to luxury homebuyers as the country's financial secrecy laws are eroded amid a move toward a global standard of information exchange between tax authorities.
Asking prices for luxury homes in Geneva have fallen by an average of about 30 percent in the last 12 months, and values have dropped by as much as 6 percent, according to Alex Koch de Gooreynd, a partner at Knight Frank.
Other jurisdictions, including Monaco, are looking for ways to tap into the wealth held in the Alpine country.
Moving to Monaco is an obvious strategy for many of Switzerland's super-rich residents, according to Richard Murphy, co-author of “Tax Havens: How Globalization Really Works.”
“You've got to go somewhere where you can flash what you've got and still have secrecy about how you got it,” Murphy said.