We believe that despite some emerging risk factors, Mongolia’s real estate market remains one of the most transparent, liquid and tangible ways to invest in the country’s considerable growth story.
Since democratisation in 1992 Mongolia has wholeheartedly embraced free market principles. Rapid economic liberalisation has created a stable business environment for the country to benefit from the recent mining boom.
Growth has been powered by the vast copper and gold project at Oyu Tolgoi, with ownership split between Rio Tinto and the Mongolian government. Ore extraction began at the facility in February 2013, with shipments commencing a few months later however, Mongolia’s mineral potential extends beyond this single project.
To date, more than 1,170 mineral deposits and in excess of 7,654 mineral occurrences have been identified, with just 30% of the country’s surface properly explored. This has left analyst predicting that Mongolia hosts more than USD 1.5 trillion of reserves, with assets including copper, gold, silver, thermal and coking coal, iron, molybdenum, uranium, tungsten, tin and flouspar.
As a result of its resource endowment, the country experienced 17% GDP growth in 2011 and 12% growth in 2012, making it one of the fastest expanding economies globally. Continued development of Mongolia’s vast natural resource potential is expected to sustain these trends over the coming decade, with double-digit growth forecast by a variety of international agencies.
Aside from Mongolia’s mineral wealth, growth associated with it is naturally spilling over to all industries. Real estate represents one such industry as a newfound development opportunity of Mongolian nationals, expatriates and businesses alike with majority of the expansion currently taking place in the country’s only international city: Ulaanbaatar.
Ulaanbaatar residential market has seen construction of a number of skyscrapers and luxury homes, with flagship properties currently commanding in excess of USD4,000 per square metre. Continued economic growth will expand the market for luxury space with rising wages and a developing mortgage market also expanding the country’s home owning class over the coming years. This set against the small amount of residential stock, limited land available for development and the financial limitations of many developers, is very likely to result in a supply shortage over the coming years.
The market for retail space in Ulaanbaatar appears to have been chronically underdeveloped by investors. A focus on office and luxury residential units over recent years has seen the burgeoning middle class, that lies at the centre of Mongolia’s growth, remaining untapped. Luxury brands have enjoyed considerable success, however it is the untapped ‘mid-range’ market catering to local consumers, that is expected to outperform over the coming years.
The market for office space has moved with similar momentum over recent years. Buoyed by the mining based FDI boom, demand for business units has rocketed. A development pipeline, extending all the way to 2017, is likely to lead to an eventual oversupply possibly dampening investors performance in recent market success.
To assist our individual and family investor network identify investment opportunities, Centreville Partners, in cooperation with Asia Pacific Investment Partners (APIP), offers the “Mongolian Properties Real Estate Guide 2014”, in downloadable format.
Although targeted at personal and institutional real estate investors, the document is also suitable for individuals, families and corporations looking to relocate to Ulaanbaatar.
The 2014 Guide is the most comprehensive analysis of the market to date, combining macroeconomic, political and legal insights with the local industry knowledge across a variety of sectors to best enable investors to make informed decisions. It represents a unique opportunity to understand the forces driving Ulaanbaatar’s real estate market as perceived by those who continue to define it.
