Real Estate in Monaco: Focus on Interest Rates!

In this article, we delve into the complex landscape of real estate in Monaco, a market undergoing a profound transformation influenced by fluctuating interest rates. The story unfolds through the expertise of Olivier Pradeau, General Manager at Monaco Properties, who shares a comprehensive analysis of the market's present dynamics and future prospects. From a record-breaking year in 2022 to a more challenging 2023, we explore the impact of surging interest rates, potential hurdles for investors, and the opportunities that may arise amidst this evolving terrain. Monaco's resilience in the face of change offers a glimpse into the potential for an exciting new phase in the real estate sector. Discover exclusive insights and offers from Monaco Properties for those considering property in this dynamic market

Monaco's real estate market in 2023

Monaco's real estate market is at a crossroads, with interest rates taking center stage as a key determinant of its future. According to the Monaco Properties agency, 2023 is expected to see a decline in the number of transactions compared to the preceding year, and this downward trend is anticipated to continue into 2024.

Olivier Pradeau, General Manager at Monaco Properties, provides a detailed analysis of the current real estate landscape, revealing the challenges and opportunities that lie ahead.

While 2022 had been a very successful year for real estate professionals, with the number of sales and resales reaching 520, approaching the recent record of 544 transactions in 2014, 2023 appears to be more challenging. In fact, in the first quarter of 2023, IMSEE already records 17 fewer transactions than in the same period of 2022. With interest rates paid by borrowers having continued to rise significantly, it is highly likely that the number of transactions in 2023 will be lower than in 2022, and the downward trend is expected to continue in 2024.

The number of real estate transactions in Monaco is expected to decrease in 2024 - © IMSEE.

Rising from 0% in early 2022 to 4.5% in September 2023, the sudden increase in the central bank's interest rate by the European Central Bank (ECB) to combat inflation risks freezing the real estate market in Monaco. Such an interest rate level had not been reached since the early 2000s, with the burst of the internet bubble, and had preceded a decrease of about 30% in the number of transactions between 1999 and 2003. The same occurred in 2007 when the ECB's interest rate reached 4.25%, and a staggering 50% drop in the number of transactions was observed between 2007 and 2010.

The abrupt increase in the central bank's benchmark interest rate by the ECB to combat inflation poses a risk of freezing Monaco's real estate market - © Trading Economics.

For many investors, these interest rates pose a real obstacle, either forcing them to lower their budget or postpone their acquisition projects to the future. But some are even less fortunate. Owners who financed their acquisitions at the time when central bank rates were at 0%, with variable-rate mortgages, now find themselves having to pay monthly installments four to five times higher.

Those who can afford it repay their entire loan in advance to avoid paying such high rates. The less fortunate are sometimes forced to sell their properties at greatly reduced prices to get out of this difficult situation. This situation is reminiscent of the famous quote by businessman Warren Buffett: "It's only when the tide goes out that you discover who's been swimming naked."

The misfortune of some can be the opportunity for others, as investors with available liquidity can take advantage of great deals. Since the ECB's central bank interest rate has most likely reached its maximum level, it is highly likely that a decrease in the central bank interest rate will begin in 2024, with inflation receding to an acceptable level. As Monaco's real estate market has repeatedly demonstrated its resilience, a new cycle of increasing transactions will likely begin within one to three years.

Interested in renting or buying in Monaco? Discover the exclusive offers of our agency Monaco Properties here, or contact us for more information at:

Tel. +377 97 97 33 97 

Whatsapp : +33 6 40 62 65 76

Email : info@mpmonaco.com

(* Interest rates that a central bank, such as the European Central Bank or the Federal Reserve, will apply to commercial banks for loans. The benchmark interest rate is also known as the bank rate or base interest rate.)