While property prices have risen in most parts of Europe, tax havens have outstripped most for property inflation.

Little known outside of the skiing and financial communities, the small European tax haven of Andorra has seen some startling rises in her property values in the last two years, with a repeat performance in 2007 possible.

In 2005 property inflation hit 19 per cent, and in 2006 the official property inflation reached sixteen per cent, and according to Andorra property specialists Tribune Properties 2007 is likely to see a further ten per cent rise.

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 a Monaco property specialist 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.

Tax haven Monaco, the world's second smallest country, is currently enjoying the most expensive real estate in Europe - topping even the most fashionable parts of London.

Home to many of Europe's top businessmen and women, residents benefit from an absence of income tax as well as close proximity to the French Riveria, Italy, and a short flight away from the United Kingdom and Germany.

Andorra, the tiny independent country in the Pyrenees, saw her property prices rise in value by 19.3 per cent last year, and a local travel guide suggests that another rise in prices is likely in the year ahead.

Best known for her ski resorts, Andorra attracts nearly ten million tourists a year, but it's not just the holiday makers who are falling in love with the country and buying second homes that is fuelling the price rises, the guide says.

Andorra, a small independent country and European tax haven in the Pyrenees, saw real estate prices rise in value by 19.3 per cent last year, and one local travel guide thinks that another rise in prices is likely in the year ahead.

Best known for her ski resorts, Andorra attracts nearly ten million tourists a year, but it's not just the holiday makers who are falling in love with the country and buying second homes that is fuelling the price rises, the guide says.

It could be ten years before it is complete, but a new island to be built off Monte Carlo is already attracting the attention of property investors.

With 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.

Property prices in Andorra, second only to Monaco in popularity among Europe's tax havens, have risen consistently over the last decade by an average of ten per cent a year, and in the last two years by over fifteen per cent.

But a lack of snow and tourists in December and January has stopped the rise in its tracks, according to Andorra property specialists.

Property investors have done well on the Mediterranean island in recent years, with good annual increases in prices over the last ten years.

But with EU membership now two years old, and questions last year about Malta staying as a mainstream holiday destination, future potential became questionable.

Estate agents on the island though seem fairly confident that the rises will continue for a while yet.

Having spent tens of millions of Euros on new and improved facilities for skiiers, European country Andorra was looking forward to a good 2007 season, increasing the near ten million tourists that have been visiting in previous years.

But the one thing the country really needs to entice ski tourists hasn't been coming - snow.

Over the last decade Andorra has been blessed with an abundance of snow, making for perfect ski conditions.

The Andorra government has introduced Capital Gains Tax in a move that has surprised many in the tax industry.

Andorra is a well known European tax haven, and residents benefit from a zero rated income tax and inheritance tax.

The reason for the introduction of the capital gains tax according to the Andorra authorities is to try to slow down the high property inflation seen in the principality in recent years.

Apartments and chalet prices in Andorra, second only to Monaco in popularity among Europe's tax havens, have risen consistently over the last decade by an average of ten per cent a year, and in the last two years by over fifteen per cent.

But a lack of snow and tourists in December and January has stopped the rise in its tracks, according to Andorra property companies.