MN Real Estate Market

Related: http://gegeen.wordpress.com/category/real-estate/ 

From: http://www.mongolia-properties.com/

Mongolia – Real Estate      

The Residential letting market of Ulaanbaatar has consistently grown over the last few years, with supply still very much struggling to meet the high levels of demand. The strong growth witnessed within the Mongolian economy has fuelled demand by local residents for housing as well as encourage expats to live and work in Mongolia.
Mongolia is quickly becoming the future source of resources for the growing Chinese economy. This has brought in many mining companies almost all of which are increasing their number of foreign personnel. At the moment there are not enough apartments to house them in and therefore the rental yields in Mongolia are about 15-18% per annum. This is considerably higher than any other Asian country.

 Rental Prices in Ulaanbaatar

 Rental prices in UB have been on the rise for the past few years. Below is a guideline on what is obtainable at what prices:

250 USD to 350USD

For this price you can generally rent a 1 bedroom flat / studio around Seoul street or further north towards the Lenin Museun and the Cinema. The building which you would get for that will be either a pink building or a goulag development. Usually comes partially furnished. It is hard to find an apartment in this category which is decorated in the western style as opposed to the heavy kitsch style so common in Mongolia.

350 USD to 500USD

2 bedroom apartment as above but in generally a better location and better decorated with more modern cons. Fully furnished, quite a few of them towards the north of peace avenue and around Sukhbaatar Square.

500USD to 1,000USD

The possibility to move in a courtyard development, it would generally be a 2 bedroom apartment with a security guard at the entrance. Standard mod cons. Those apartments are in a shortage so hard to find. They usually have reasonable levels of furniture.

1,000USD to 2,500USD

Those are starting to be luxurious apartments of a standard equivalent to mid to high end apartments in the Asian capital cities, some supply around the Children’s Park, they are the top end of the courtyard developments and the low to mid range of the luxury apartments. Most of the apartments in the Park View Residence are priced within this bracket. A reasonable amount of choice within this category, but it is very seasonal as consultants and expats tend to come for the summer or milder months and go home for winter. There are a lot of developments outside of the city, they form a compound with security and services within it but require you to have transport to and from the city centre.

2,500USD upwards

From 2,500 USD you can have access to some of the best real estate in the city, generally situated around the park, this would include penthouses and large apartments. From 3,000USD it might even be possible to have a small townhouse in the Star Apartments but a long queue is still existent.

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Real Estate      

A Brief Overview

The Mongolian Property market is in full expansion, all indicators and variable factors point to continued rapid growth, lack of supply and large scale demand keeps the return on investments high. Improved rugulatory system and further confidence in the judicial system makes Mongolians and foreign investors alike confident while the recent introduction of longer term mortgages available to Mongolians has made much of the market within the reach of a larger segment of the population.

The Residential Market

The Residential letting market of Ulaanbaatar has consistently grown over the last few years, with supply still very much struggling to meet the high levels of demand. The strong growth witnessed within the Mongolian economy has fuelled demand by local residents for housing as well as encourage expats to live and work in Mongolia.
Mongolia is quickly becoming the future source of resources for the growing Chinese economy. This has brought in many mining companies almost all of which are increasing their number of foreign personnel. At the moment there are not enough apartments to house them in and therefore the rental yields in Mongolia are about 15-18% per annum. This is considerably higher than any other Asian country.

As of 1921 in Mongolia, just after the revolution, only 9.0 % of the total population lived in urban areas and there was almost no civil infrastructure, except the telecommunications department, newspapers and publishers. There were no roads in the country except tracks of cattle in the vast territory of Mongolia. From the mid-1940’s, the capital city, Ulaanbaatar, started to thrive and from the beginning of the 1960’s, the cities of Darkhan and Erdenet were founded during this period.

Over half of the residents (52%) of Ulaanbaatar are currently living in their traditional nomadic dwellings, known as gers while the remaining 48% live in apartments with complete civil supplies; this is 24% lower than international standards. Despite Mongolia having one of the lowest population densities of any country in terms of overall space in the country, it also has one of the highest population densities per square meter of apartment space, the living area per person within the city is 31.2 % lower than normal international levels.

This situation is analogous to Hong Kong in the 1950’s and 60’s when a large percentage of residents actually lived on junk boats without any permanent housing. As the economy in Hong Kong grew and interest rates came down and mortgage products entered the market place, the demand for housing became quite substantial. Subsequently there was a movement from the junks into apartments. A similar phenomenon is underway in Ulaanbaatar and therefore the demand for housing is current very high.

This has affected the property demand, property prices and the plans for developers who have grasped the implications of this trend. These trends are also colliding with a fast growing foreign population which also places demands on apartments in the city. As the number of apartment’s available increases along with the demand from both locals and foreigners, the number of property transactions has also increased in tandem.
Juxtaposed against this high demand however is a nascent construction industry with insufficient financing and production capacity.
Below is a graph which shows that demand for apartments is estimated at approximately 8,500 units however last year the construction industry was only able to produce 3,500 apartments. This situation has resulted in a very small amount of apartments available for expatriate renters.

The remainder of the foreign residents are made up of long term residents for personal reasons such as marriage to a Mongolian, temporary residents, immigrants, and other various foreign residents. The number of expatriates arriving in Mongolia in connection with the mining industry and its related businesses has increased steadily and is set to do so for the foreseeable future.
High end apartments, for this definition, fall into the US$900 per month for rent and upwards. Generally the range falls between US$900 and US$4,000 per month with most people having a budget of US$1,600 per month.

This has brought about a strong need for luxury properties on the letting market. This demand is as of yet not being fully met.
While there are some properties which are adequately furnished or catered to satisfy the needs of expats, there are very few modern buildings of high quality and specifications on the current market. This is set to change with the arrival of a number of large residential projects.

The Regency Residence, The Olympic Residence, Japan town, Marshall town and other projects are underway but will not reach the housing market until the end of 2007 thus creating an enormous gap in the market until this time.

As the property prices have steadily increased with an average rate of capital growth around 18%, land has become increasingly unaffordable and the city is expanding on all sides. Some luxurious developments have embraced this development by creating gated residential communities consisting of individual houses and apartment buildings well outside the city thus necessitating a commute from its inhabitants.

To many casual observers it would seem that there is a construction boom going on in Mongolia along with a bubble in the prices of the apartments. In fact this is not the case. Although the pace of construction has picked up, there remains inadequate housing for the inhabitants of Ulaanbaatar.

The Commercial Market

The Commercial Property Market in Ulaanbaatar is thriving. There are three enormous office and retail development projects currently under construction in the centre of Ulaanbaatar. It is likely that this will bring about an oversupply of grade A office space in this sector of the market. This oversupply is most likely to bring about a drop in rental prices as there is a limited number of companies currently in Mongolia who can afford grade A space. This will eventually be absorbed as the economic expansion of the country proceeds forward and space becomes even more scarce and vaulable.

Related: http://gegeen.wordpress.com/category/real-estate/

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