The future is here

Mongolia is the most sparsely populated country in the world, with a only three million people. However what it lacks in people it makes up for in massive deposits of coal, copper, gold iron and uranium. The country’s recent growth is driven primarily by these mineral reserves that are in turn driving other industries. As people flood in to capitalise on Mongolia’s growth, so the real estate market demand is at all-time high.

Today through market liberalization, democratization and an amount of geographic good fortune, it is recognised as one of the world’s fastest growing economies.

Ulaanbaatar has already caught the eye of high profile international companies such as Louis Vuitton, Armani and Montblanc who have all opened in the last few years, with Vuitton stating the store as their second most important boutique in the world. Several leading hotel brands including Hilton, Kempinski and Shangri-La are also newly present, and cater to the rising five star demands of an increasingly sophisticated local market.

There are two dominant factors to consider when investing in property in Ulaanbaatar: congestion and pollution.

The city even has the indignity of being recognised as the most polluted capital in the world. However some of the constraining factors including the city’s fixed heating grid, the scarcity of parking and an overloaded road network all conspire to create extraordinary pockets of opportunity across the city. Key projects are pushing the boundaries of the city outwards where wealthier families have started to relocate to the picturesque valleys of Zaisan, Nukht and Ikhtenger.

Residential rental prices have increased every year across the city – with the exception of 2010 – rising 206 per cent to US$5.42 per square foot. Residential sales market, following similar supply and demands is driving along the same promising price path. Asia Pacific Investment Partners forecasts suggest that rental prices could quadruple over the next four years, so profit margins could still be substantial. Mongolia achieved real GDP growth of 17.3 per cent in 2011, significantly outperforming every one of the BRIC countries and 12.2 per cent in 2012. “Mongolia is still expected to maintain one of the highest economic growth rates in the world,” says Taehuyn Lee, senior economist for the World Bank in Ulaanbaatar and World Bank estimates suggest 2013 will play out in much the same way with a 13 per cent forecast.

Will Tindall, business development director at Asia Pacific Investment Partners (APIP) explains “It is forecast that over US$1.5 trillion of high grade minerals are waiting to be exploited and with two-thirds of Mongolia’s border being with China, it has an exceptionally large customer on its doorstep. Although the potential wealth has been known about for over a decade, it hasn’t been until this year that any of the major mines have started to produce.

One such mine, Oyu Tolgoi, began extracting copper and gold in July and this mine alone, when it is at full commercial production, will increase GDP for the whole country by over 30 per cent. The extra income is already having a very real effect on the real estate market and in particular on Ulaanbaatar, the only truly urbanised area in the country.”