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Real estate comparison: London and Monaco

London and Monaco are both hugely popular destinations for real estate investment for high-net worth individuals from across the world, but what makes property in the two cities so highly sought after, asks Jemima Codrington

5 January 2015

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One is situated in the heart of the French Riviera and the other in the midst of a sprawling metropolis.

Monaco and central London may not have much in common in terms of geography, but there is plenty to be said for similarities where their luxury property markets are concerned. Pastor Real Estate recently commissioned a report which investigated the similarities between the cities bid to establish why the micro-markets prove perpetually popular with high-net worth individuals. The findings twinned the so-called 'city-villages' based on a number of comparable factors, such as economy, lifestyle and property prices. While undoubtedly reserved for an elite segment of buyers, real estate in either Monaco or Prime Central London (PCL) offers a great deal to those who can afford an address in one of these districts - or both.

PCL and Monaco - the key similarities

Pastor Real Estate is based in both London and Monaco, and was therefore able to uncover much about what makes these areas so much alike from a real estate point of view.

The layout of both areas is similar in that they have a small land mass. Both central London and Monaco are restricted in terms of outward development, and the little land available is normally subject to heavy planning regulations. This limited capacity for further development means that supply is obviously low, and demand is continually high. This combination ensures favorable market conditions which perpetually lead property prices to subsequently be pushed skywards.

The average price for property in the most sought-after postcodes in both markets is in a similar region. For example, in the home of Monaco's most expensive address, Fontvielle, the average asking price for an apartment is £3.43m. In London's equivalent of Knightsbridge, it's a near to £3.27m. This gap has closed significantly in recent years as London's property market has boomed.

Why foreign nationals love to buy in PCL and Monaco

The report revealed that high-net worth investors with the means to buy in both areas often seize the chance to do so.

A "significant portion of ultra-high-net worth buyers" that rent or buy in one market have an address in the other, according to findings. Of all the luxury residential property markets in the world, it is easy to see why these two prove so popular. Politically, both are stable regions and home to their respective heads of state and parliaments. Economically, both PCL and Monaco have strong, independently functioning markets that contribute a high amount in GDP each year. Tourism that arises as a result of the royal presence in each city, along with numerous other attractions, contributes highly to the local economy. Both Monaco and PCL are also home to strong finance and commerce markets and have a diverse employment market, making them a popular choice with high-net worth individuals employed in a range of sectors.

Another key reason these areas appeal to those with refined tastes are the high- quality, luxurious lifestyles they can provide. Many new residential buildings are specifically developed with 5-star amenities and dining included, while others are built just a stone's throw away from some of the world's top entertainment, luxury shopping and social venues.

Effects on the average Londoner

As London catches up to Monaco in terms of the average asking price, it is steadily becoming one of the most expensive property markets in the world.

Developers remain confident that buyer interest will remain intact, with billions of pounds already invested in more building. Since the market crash in 2007, the property market in PCL has made an impressive recovery, with prices increasing to 41 per cent over their highest point before it. For Qatari, Russian, Indian and other high-net worth foreign buyers, there is plenty still up for grabs where real estate is concerned, but it might not be so easy for everyday buyers to get a slice of London's property market as a result.

As developers continue to funnel money into the heart of PCL, the trickle-down effect can be felt when looking at the average asking price for a property in the capital, currently reported at a whopping £514,000. When compared with the UK's average income of £26,500, it can be seen that the market is racing ahead of the average Londoner's earnings, putting property ownership all but out of reach.

However, it's not all bad news for those who can't afford to buy in London, as the positive effects of exuberant investment in the capital can also be felt. An influx of high network individuals has improved the local economy, and nearby housing markets are benefiting from a 'ripple' effect that has seen prices rise outside of London as well.

Jemima Codrington is a freelance writer and journalist and works with 90Digital