Comprising an area of 275,000 square metres, the island will include new apartments, hotels and retail units, with an estimated build cost of between 5 and 10 billion Euros.

Of the sixteen developers who submitted proposals for the island last year, five have been chosen to submit further details, with the winning bid anticipated to be announced in the autumn.

The second smallest country in the world, Monaco has France and Italy as neighbours, and realistically can only extend her land mass by reclamation from the Mediterranean, as it did some years ago with the area known as Fontvieille, and by building islands.

The arrival of new property for sale in Monaco will be particularly welcome. Monaco recently overtook London as the most expensive property destination in London.

Although new properties are currently being built in Monaco, these are for local residents, and not those seeking residency in the principality.

Residents in Monaco enjoy benefits including no income tax, and is a major attraction for business men and women.

Current properties for sale in Monaco include a small 30m2 studio at 720,000 Euros, a one bedroom 75m2 apartment at 1,500,000 Euros and a 2 bedroom 2 bathroom apartment at just over 3,000,000 Euros.

Rising Prices

The classic rules of supply and demand in the real estate market are likely to see Monaco property prices rise further in the short and medium term, according to one Monaco property company.

With one bedroom apartments in the Principality already at the million Euro level, the lack of properties coming to the market and the absence of new builds could make today's prices seem like a bargain in five years time.

'Three years ago there were six hundred properties on the market', they claim, 'Now there are two hundred. Coupled with increased demand, especially from the UK, prices have been rising and could go quite a bit further if current trends continue.'

Visitors to Monaco and Monte Carlo are often surprised at the lack of apartments for sale as they can see new buildings under construction.

'The apartment buildings under construction are for local Monaco people', they explain, 'Rather than for the open market where anyone can buy a property. The situation is unlikely to improve in the short and medium term but the number of buyers is rising - and consequently so are the prices. Monaco now has the highest priced property in Europe.'

Other reasons for the shortage of property in Monaco include that residents are holding on to their apartments longer, enjoying the tax free status Monaco affords, and as the owners see their property rising in value holding on to it as an investment.

To maintain residency in Monaco, residents need to live in the Principality for six months a year. Winter time often sees a lot of apartments mothballed with the owners wintering in the Caribbean.