The new development will add an additional 275,000 square metres to the surface area of the world's second smallest country, and according to local travel guide YourMonaco, could also take some pressure off local property prices, which are among the highest in the world.

However, one of the stipulations for those bidding for the development is that it must be good architecture and sympathetic to the local environs - "which we take to be no high rises," the guide commented.

While there is no mention of new hotels in the initial plans, the presence of a yacht berth at the new development is likely to ensure that at least one hotel is built close by. It is thought this will have to be of a similar standard to the many luxury hotels already located in the city.

In addition, the famous Monte Carlo Grand Prix circuit may also have to be changed to accommodate the new development.

At present, property prices are high all across the Principality, and apartments in the district of Fontvielle, much of which is also reclaimed land, equal those in the city of Monte Carlo. A three bedroom apartment in Fontvielle's Seaside Plaza building will fetch up to EUR4 million (US$5.1 million), while a four bedroom four bathroom dwelling is currently on the market at close to EUR10 million.

However, Tribune Properties, which specialises in Monaco property, expressed doubt that prices will ease as a result of the new development.

"By the time the development is finished prices would probably have gone up in Monaco anyway, and this new development on the housing side is likely to be aiming for quality rather than quantity," the company stated. "It's almost certain that the properties will be snapped up by investors off-plan, and then come back to the market with a premium once the buildings are complete. The development in itself will attract more attention to the Monaco property market."

"In the short and medium term prices are likely to rise in Monaco rather than fall," Tribune predicted.