After years of abuse, a new law now regulates the profession of property traders in the Principality. While real estate agents welcome the change, they are concerned about the future of this profession.
It’s a collective sigh of relief… All real estate agents agree: the recently enacted law to regulate the property trading profession was an absolute necessity. The primary merit of this legislation is that it will first and foremost limit the number of property trader. « What pushed the authorities to act was the explosion in the number of property traders in Monaco. A few years ago, we would see two or three property trading companies being granted authorization to operate in the Official Gazette every week, not to mention those operating individually, » recalls Nicolas Croesi, a negotiator at Miells Christie’s. « We had reached a point where some regular clients were turning themselves into property traders, often without understanding the business. It had become completely crazy. Finding a property truly suited to this activity isn’t easy; it was purely speculative. » According to him, the legislative process took too long, and the government waited too long to close the doors on these operating authorizations.
Read also | Property traders in Monaco: new law aims to limit abuses
“There was a real legal vacuum”
Beyond the numbers, the lack of constraints and regulations for this profession was causing frustration among real estate agents. « It was an anomaly, in my opinion, that it wasn’t regulated, whereas every profession in Monaco, to my knowledge, is, » points out Florian Valeri, director of Valery Agency. « There was a real legal vacuum. You can’t just improvise as a property trader; it’s a profession. While some are true professionals, well-structured, others were much less so, engaging in this for reasons unrelated to the core objective of their business. »
“Reducing excessive speculation”
For Eugenia Petrini, head of Petrini Exclusive Real Estate Monaco, the new obligations and stricter framework will have another advantage: reducing the number of property traders operating speculatively. « By imposing financial guarantees and compliance obligations, the law aims to eliminate opportunistic players who took advantage of loopholes in the system to make quick profits without real investment in the quality of the properties, » she explains. « The new regulations should also curb excessive speculation that contributed to rising property prices, making the market more accessible to local buyers and permanent residents. » Jean-Yves Le Graverend, who runs the John Taylor agency in the Principality, believes that property traders will now « be more discouraged from holding onto apartments for years. »
Is the tax incentive now too weak?
However, the passing of this law has raised some doubts and discontent. Some real estate agents fear that many property traders will leave the profession because the tax benefits are no longer attractive enough to offset the new constraints imposed by the law. « Currently, a property trader operating through a professional structure, like an LLC (which is the case for the largest traders), benefits from a 50% reduction in transfer duties. This means that an LLC, which normally pays 7.5% in registration fees, would pay 3.75% in this case. It’s worth noting, though, that if the purchase was made under the normal regime, in personal or civil company names, this rate would be 4.75%. The difference between these two options is only 1%. For such a small saving, is it really worth the risk of not being able to sell within three years and managing a more costly structure? In my opinion, no, » says Florian Valeri. « Time will tell, but I think there’s a risk that some property traders will stop operating as such and turn to civil or asset-holding companies. My concern is that the tax incentive may no longer be strong enough for them to continue using this regime. » With their margins shrinking due to this new legislation, many property traders rushed to finalize trades before the law came into effect.
Reopening the property trader status
According to some professionals, it may also be necessary to reopen the property trader status, which has been considered overrepresented since 2020. Now that the profession is regulated, some real estate agents suggest that new authorizations should be granted, while revoking them from inactive property traders. « It’s outrageous that new property traders can’t access the market. Now that the profession is regulated, the state should allow new players to enter this field while filtering out those who are inactive and haven’t made any transactions in a long time. And I’m convinced there are many of them, » suggests Kate Dorfman, director of Caroli Real Estate. « It would be wise to revoke the status from those who haven’t made any transactions in two or three years, while giving others the opportunity to try. Currently, those holding this status have a monopoly on the market. »
Mandatory work percentage: A controversial removal
Another point that has caused frustration among some professionals, as well as the Monaco Real Estate Chamber (see interview with Alain Vivalda), is the removal of the requirement to carry out work equal to 5% of the property’s purchase price. This requirement was part of the original bill but was ultimately dropped from the final version, as lawmakers considered this obligation unsuited to the realities of the real estate market. A decision lamented by Kate Dorfman, who even believed that a 10% threshold should have been imposed. Florian Valeri shares this sentiment: « I also regret that a minimum amount of work wasn’t mandated (apart from electrical compliance), as it would have systematically modernized the real estate market. »
