A shortage of supply in the principality has encouraged investors to trade heavily in the few new homes coming on the market Speculative activity is pushing up prices for scarce des res homes in Monaco. The principality has some of the highest property prices in the world because its low taxes, high society glamour and moderate climate mean the number of prospective buyers searching its opulent streets for luxury pads is consistently high. Unfortunately, the micro-state's small size means there are too few homes to go around. The result is that, aside from studio flats, few properties are available for less than Euro1million ($9.23 million). This supply and demand imbalance means prices are rising. 'During the past year there has been a 10 per cent general augmentation in prices,' said Joanna Haavikko, director of estate agent Savills Monte Carlo. Prices were being driven higher by speculative activity, she said. Speculators were trading heavily in the limited number of new apartments coming on the market. Monaco is only 3.5km long by 600 metres wide and built up, so few new projects are built. 'In the very sought-after, latest new development, Les Terrasses du Port in Fontvieille, which was handed to the owners in August 2004, some apartments have already changed owners three times without the buyers ever even visiting their investment,' she said. A shortage of refurbished, older properties was boosting the demand for new homes. Prospective owner-occupiers wanted something they could move into. They did not want the hassle of hiring builders to renovate a flat or villa when they were based overseas, Ms Haavikko said. Driving demand for property is the large number of wealthy people from overseas looking to take up residency in the principality to reduce their tax bills. Only 20 per cent of Monaco's 32,000 population is Monegasque. Most of the rest are tax exiles, mainly from neighbouring France and Italy. Famous overseas residents include Formula One drivers Michael Schumacher and David Coulthard. 'Monaco's tax regime is highly attractive. There is no income tax or capital gains tax,' Ms Haavikko said. 'Estate duty is levied at 16 per cent and only zero per cent for direct descendants. The crime rate is zero per cent, which is one of its most attractive points for the world we live in today. It has a pleasant climate, a glamorous international lifestyle and accessible geographical situation.' When buyers dry up from one source, they appear from another. Most demand is coming from northern Europe at the moment. 'Italians, normally our primary source of buyers, have been replaced by English, German and Dutch buyers,' Ms Haavikko said.