Previously a relatively small group of Monaco residents, the number of British people living in Monaco has doubled in the last two years since 2005, with some 3000 now claiming residency in Monaco.

The figure could be set to rise in the short and medium term, with some estate agents in Monaco reporting that 40 per cent of new enquiries are emanating from the UK.

Higher indirect taxes in the UK - often referred to in the UK's media as 'stealth taxes' in recent years, with more anticipated in the years to come, have been fuelling the move by wealthy Britons to the tax haven of Monaco.

With property prices among the highest in the world, residents of Monaco normally need to spend six months a year there to maintain residency.

The lack of new homes in Monaco surprises many would be buyers as they can clearly see construction work being undertaken, but the new apartment buildings are for locals and key workers rather than new incoming residents.

An announcement has been made recently that a new island is to be built off Monte Carlo, and this will provide more land and property in the world's second smallest country.

Higher Prices

Traditional 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 Monaco property specialists.

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', explain the companies, '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 for the future.