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Mongolian Property - Better than you may think?

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Mongolian Property - Better than you may think?

High yields, Rising per capita GDP

===============================

 

Inspired by a posting on another thread:

Maybe? You'd think though that after raising capital and establishing relationships etc, a business would look pragmatically at their situation and decide to relocate to a cheaper part of the country? Instant savings or long-term view savings?

Interesting. You gonna tell us more about this? I've always fancied a trip to Ulan Bator.

In a nutshell:

+ GDP looks set to Double in 5 years, and then double again in the 5 years after that.

+ GDP per capita could easily rise from $2,000 to $10,000 per capita in 10 years.

 

What do you think will happen to rents? And we start now with yields at 10-12%.

 

Ulan Bator Map / source

001y.gif

 

(A little out of date, but provides some basic info):

 

Mongolian property prices rising rapidly, yields high .. May 2008

 

The boom in Mongolia rolls on. 2007 was an extraordinary year of capital appreciation and rising prices – and the smart money is betting that 2008 may be just as spectacular.

 

Mongolia may seem an unlikely property investment destination, but the remote land-locked country is in the middle of a mining boom, with enormously rich mineral resources of copper, coal, and gold. This has brought in mining companies such as BHP, Rio Tinto, Ivanhoe, and Centerra Gold, as well as a large foreign diplomatic and commercial presence.

 

There is a severe shortage of quality housing. Ulan Bator is a Soviet-era city, ugly, badly planned. Accommodation is badly maintained, unattractive, and unsafe, and it is hard to convince expatriates to work in Ulan Bator.

 

This has provided an opportunity for a few companies which are building modern high-quality condominium buildings.

 

Foreigners can freely own property in Mongolia through the Immoveable Property Ownership Certificate, which is equivalent to freehold ownership.

== ==

 

LIKE LEASEHOLD ?

All Land belongs to the Mongolian state, but the right to use it typically transfers with the immoveable property upon it - DrB

 

Mongolia / Country Overview : source

 

Mongolia's national identity has been dominated by the talismanic figure of Chinggis Khan. This legendary warrior nomad conquered vast tracts of Central Asia in the 13th century to found the Mongol Empire which spanned Eurasia from the Caspian Sea to the Pacific and remains the largest contiguous empire to have existed in the history of the world. Following the dissolution of this empire in the late fourteenth century, Khan's successors retreated back to Mongolia, which itself fell under Chinese rule in the mid-seventeenth century. In 1921 Mongolia regained its independence in a Soviet-assisted revolution, giving rise to a Communist regime that would endure for the next seventy years. During this time Mongolia's industries and infrastructure were fostered by Soviet help including notable mapping and exploration of natural resources in the 1960s and 1970s.

 

In the twenty years since the peaceful democratic revolution of the early 1990s brought an end to Communist rule, Mongolia's political landscape has been dominated by two parties, the ex-Communist Mongolian People's Revolutionary Party and the Democratic Union Coalition. With this two-party system came a new free-market economy and considerable privatization of state owned enterprises. Following the turbulent recession of the 1990s, Mongolia's economy in the past decade has been boosted by high copper prices and development of gold mines, which brought an average of 9% GDP growth from 2004 to 2008. With production starting in world-class Mongolian mines, the IMF estimates Mongolia's economy will be the fourth fastest growing in the world over the next four years in terms of dollar GDP, expanding by 80% over that period, with an expected GDP growth of 23% in 2013.

 

= = = = =

LINKS:

Mongolia / Global Prop Guide :: http://www.globalpropertyguide.com/Asia/Mongolia

 

Papers from the Mongolia / Mining Insight Conference

12 Nov. :: http://www.beaconevents.com/2010/MongoliaM...erDownload.html

14 Nov. :: http://www.beaconevents.com/2010/MongoliaM...erDownload.html

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What are the property laws like?

 

From the GPG website:

Foreigners can freely own property in Mongolia through the Immoveable Property Ownership Certificate, which is equivalent to freehold ownership

 

Mongolia has high income taxes for non-residents

Rental Income: Rental income earned by non-resident individuals is taxed at a flat rate of 20%.

 

Capital Gains: Capital gains are considered as part of income and non-resident individuals are taxed at a flat rate of 20% on their capital gains realized from selling real property.

 

Inheritance: There are no inheritance taxes in Mongolia.

 

Residents: Residents are taxed on their worldwide income at a flat rate of 10%

 

Buying costs are very low

 

The round-trip costs of buying and selling a property are around 5.7%, including legal fees and the agent’s commission (together 3.5%) and resale tax (2%).

 

/more: http://www.globalpropertyguide.com/Asia/Mongolia

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Mongolian property prices rising rapidly, yields high .. May 2008

 

“It has become virtually impossible to buy an apartment for less than 40 million togrogs (about US$37,000),” says Baron Christopher de Gruben, director of Mongolian Properties, the leading developer of high-end properties. “At that price one can expect a two room apartment on the fringes of the city centre, generally in a building from the sixties or eighties.

 

CO-MNP-I01.jpg

 

“A decent apartment in the city centre (three rooms, good structural integrity) will cost a minimum of 60 million togrogs (about US$55,000). The high end or newer apartments now range in price from US$85,000 to US$250,000.” Square metre prices are between US$1,100 to US$3,500 for used apartments, he says.

 

Ulan Bator is buzzing. The restaurants are full, the bars are packed, the shops are overflowing. Everywhere you look you find busy entrepreneurs, large companies getting bigger, and more expatriates.

 

Mongolia’s mineral resources are enormous, with rich supplies of copper, coal, and gold. The country has recently been discovered to have the world’s largest copper mine, expected to provide over $100 billion of ore over the next forty years. Copper prices have risen 250% since 2002, and the production of gold, economic growth is rising. Some of the world’s largest mining companies such as BHP, Rio Tinto, Ivanhoe, and Centerra Gold are falling over themselves to move in.

 

Mining profits are causing the rise of a new elite, and much talk about corruption. This new found wealth and commercial energy is being spent partly on larger cars, flashier jewellery and designer goods. There is much conspicuous consumptions as the new elite shows off its wealth. A Rolls Royce was recently spotted in Ulan Bator, the first in the country.

 

In 2007, the price of apartments grew very strongly, especially the value of low to middle income housing. No figures are available - but some observers say that prices rose between 20%-30% within the last 3 months.

 

Around 50% of the demand for Mongalian Properties’ new luxury developments comes from expatriates, but the rest come from locals “mostly buying for their own use,” says de Gruben. He believes that demand in 2008 will be even stronger, as mining operations pick up pace and the economy improves. “Demand is just going through the roof,” he says.

 

/more : http://www.globalpropertyguide.com/Asia/Mo...a/Price-History

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The Mongolian Property Boom v.2.0?

 

News - Opinion .. Thursday, 24 September 2009 23:01

 

This week will probably turn out be one of the most eventful and important weeks for the Ulaanbaatar Real Estate market, in exactly seven days, the deadline set by the government for the signature of the Oyu Tolgoi project runs out. The long awaited signature of this agreement is expected to have a wide ranging impact on all the various industries of Mongolia. Due to its small size (not geographic but in terms of economy as well as population), this project alone could give an enormous boost to what has now become a mostly lethargic economy.

 

As Peter Morrow, CEO of Khan Bank declared at the recent Euromoney Conference, Mongolia has remained largely unscathed by the world financial crisis but was hit hard by the subsequent commodity crisis. Due to its lack of exposure to the global financial markets, it had little to lose, the real hit came when the price of copper (Mongolia’s single largest export) collapsed from 9,000USD a ton to 3,000USD a ton in little over 5 months. This greatly impacted the unprepared Mongolian economy: foreign investments dried up, GDP growth collapsed; the national currency became unstable, national reserves dwindled, large companies went into administration, construction projects screeched to a halt, banks stopped lending and most property prices fell between 20 to 50% of what they use to be.

 

Not all property prices fell. Some sectors not only remained stable but appreciated in value, for example the high end prices have remained generally stable while properties that benefit from an excellent location and middle to high end pricing have gained in value as they are considered a safer investment. The demand for quality properties has not dropped (if at all) as fast as the supply has. Not everyone in the Mongolian economy was hit equally hard, indeed some benefited handsomely from the crisis.

 

Since the last winter, cautious optimism in the economy has grown; property prices have slowly risen again even if they are still a far cry from their pre-crisis levels. Will the imminent signature of the Oyu Tolgoi Investment Agreement signal the start of the Mongolian Property Boom (Version 2.0 Beta)?

 

A COPPER DRIVER ?

87946144.png

 

Here's Ivanhoe Mines / IVN.t ... update - slated to become Mongolia's biggest copper producers

ivnbc.gif

 

Here's South Gobi Energy / SGQ.t ... update - will become one of Mongolia's biggest coal producers

sgqbc.gif

 

The signature of the agreement will not only bring in the associated investments by Rio Tinto and Ivanhoe Mines, which is considerable at 5$bn (equivalent to current GDP levels), but also create a strong supply chain with its own capital investments. This means more expats on the ground, more money circulating in the economy and a subsequent boom in all mining related businesses. As the economy explodes, it is likely that the property market will follow. A large number of expat families are expected to relocate to Mongolia within 6 months of the signature, foreign companies currently waiting on the sidelines, will finally make their long awaited investments in Mongolia. The combined effect of those investments will undoubtedly affect the demand of real estate; more office space will be required by companies, new comfortable apartments will be needed for expat families not to mention the increasing need for hotels, restaurants and shops.

 

Demand will of course not only be driven by the expat market along with its foreign direct investments, the bulk of the new demand will come from the increasingly wealthy Mongolian middle class, they are the end user and the main players in this market, it is their new found wealth that will dictate the property prices of the majority of the market. As Mongolian commercial banks recover and mortgages are once again available, the market will gradually move from cash only purchases to mortgage driven acquisitions, thereby making house ownership affordable to a larger segment of the domestic market.

 

While the levels of demand are expected to increase exponentially, there will be an equally distinct lack of new supply, the vast majority of construction projects that began pre-crisis have been abandoned due to a lack of financing from the banks coupled with falling demand, it will take at least two to three years before we experience again a consistent supply of new properties on the market. This supply is not only limited by financial constraints, by the harsh weather conditions (which limits the available construction time) but also by the lack of available buildable land.

 

When the Soviets built Ulaanbaatar in the early 1950’s, it was designed to accommodate a relatively small population, since then the population of the city has greatly expanded but investments made in the infrastructure of the city has been lagging behind, this means that land which has access to the city infrastructure is strictly limited to the city center and a few outlying suburbs. With no serious Government commitment to infrastructure development predicted in the near future, buildable land will command an even greater premium and property prices will rise accordingly.

 

/more: http://www.mongolia-web.com/opinion/2636-t...operty-boom-v20

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EXAMPLES - of Property For Sale

 

Olympic Residence / Mongolia : Ulan Bator : Ulan Bator

3 bedroom Apartment : £127,060

Added: Wednesday, December 23, 2009 ▪

 

LImageURL-olympic_residence_2.jpg

 

The Olympic Residence is a striking mixed use development featuring 115 luxury apartments and penthouses. A Scandinavian influenced architectural design, the Olympic Residence boasts views surpassing any other development in all of Ulaanbaatar.

 

/source: http://www.themovechannel.com/property/mongolia/

 

The Mongol Bank Penthouse, Ulaanbaatar, Mongolia

Mongolia : Tov Aimag : Ulaanbaatar

5 bedroom Apartment : £190,590

Added: Tuesday, October 12, 2010 ▪

 

This 240sqm large penthouse is a unique property in Ulaanbaatar. Comprised of three separate apartments that have been joined and fully refurbished, taking the full top floor with views over the children�s courtyard and one of the city�s main green pa

 

The Mongol Bank Penthouse, Ulaanbaatar, Mongolia

In the region of USD $300,000 / 240 sqM : $xxx per SM

 

bankpenthouse.jpg

 

This 240sqm large penthouse is a unique property in Ulaanbaatar. Comprised of three separate apartments that have been joined and fully refurbished, taking the full top floor with views over the children’s courtyard and one of the city’s main green park’s. Featuring 5 bedrooms, a spacious living room, a comfortable dining space seating 10 people and a full modern convenience kitchen area as well as 3 modern bathrooms (and an oversized open bath in the master bedroom). The penthouse has a very light and spacious feeling.

 

This penthouse is perfect setup for a large family or an expat with regular visitors. An excellent space to entertain and hold large functions. This penthouse can be divided into two self functioning apartments with a shared lobby space. The Penthouse has original hardwood flooring and 3 meter high ceilings throughout. Located across from the Mongolian Central Bank, just next to the Zanabazar Museum and the Trade Development Bank Headquarters, about 3 minutes walk to Sukhbaatar Square and the Central Business District, also close to the commercial and entertainment center of the city.

 

The penthouse also features a 2 car heated garage, excellent courtyard security and 4 large balconies. Available for purchase or rental fully furnished.

 

/source: http://mongolia.homesgofast.com/properties...lia-P123613099/

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Is it still worth investing in Ulaanbaatar property?

If so, what types of Mongolian property investment makes the most sense?

 

As the summer economic growth period is reaching its traditional zenith, property prices are yet again on the slow path upwards. For all intents and purposes, it seems that Mongolia’s recession blues are over to be replaced by a new wave of optimism.

 

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Is this growth sustainable and does the UB real estate market still makes investment sense?

 

The crisis seems to have had a lasting impact on Mongolia’s investment environment; it has served its purpose as a wake up jolt, demonstrating Mongolia’s heavy vulnerability to international economic swings with it’s over reliance on commodity prices as a catalyst for economic growth. As those commodity prices dropped, Mongolia quickly found itself in an unfamiliar situation of recession followed by a long period of economic confusion.

 

The sudden lack of liquidity in Mongolia’s industries and the subsequent general loss of confidence negatively impacted property prices throughout the capital. The economic loss forced Mongolia to kick start the economy by opening itself up to foreign investments while presenting a stable political front.

 

Today, it seems that the euphoria of the care free days has gone away to be replaced by more sophisticated and considered investment strategies. Real estate prices are still generally below pre-crisis levels (by 20 to 40% depending on the type of property) but the market is slowly showing distinct signs of recovery.

 

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Challenges of the Ulaanbaatar real estate market.

 

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Looking at the market from an outsider’s perspective, you may be forgiven for thinking that it is back in full swing with rental yields yet again advertised at staggeringly high levels along with heavy promotion of ambitious construction projects.

 

This is not necessarily an accurate picture of what is happening on the ground. Those staggeringly high returns on investments are rarely realized, while many properties sit empty for months post-completion, that is if they ever do reach completion. Walk into the office of any one of the Mongolian construction companies in Ulaanbaatar and you will be shown futuristic architectural drawings depicting tall, graceful, steel and glass skyscrapers, each more elegant and over-sized than the last.

 

If, on the other hand, you were to ask about financing for those projects, you will invariably find that it is still wanting, the financial tools and systems to capitalize on such projects are yet to be created or utilized. This is possibly a good thing as it seems that the size and growth potential of the market is consistently overestimated.

 

The city abounds with examples of this extraordinary lack of foresight. Empty commercial buildings litter the landscape; deserted shopping malls are legion, hotels are being built left, right and center with no clear concept as to who will fill those hundreds of new luxury rooms. To give but a few example, in the new Jiguur Grand Plaza, both the retail and office space is mostly vacant; the brand spanking new Ulaanbaatar Delguur has sufficient empty space to play car football on its marble floors; the Eko construction office tower has not yet dared to open as they fear that it will be entirely populated by ghosts.

 

New hotel opening rumours are equally prolific, while it seems that the Hilton project has been canceled, the Shangri-La Hotel is forging ahead while the Radisson hotel is itself slated for completion in 2011. Both a Sheraton and a Best Western hotel also seem to be in the plans while a Holiday Inn may take over an existing hotel. In total, over a thousand new hotel rooms are due to open in the coming few years; this in a country that only has a 4 months long tourism season, mostly backpackers.

 

Will there be sufficient business travelers to reach the required 80% levels of occupancy year round? Despite the oversupply of property in some segments of the market, today’s real estate market is more mature than ever, some areas as well as some types of properties are still likely to witness strong growth while other segments of the market will remain stagnant for the foreseeable future, potential can be seen in particular within parts of the residential property as well as the low cost housing sectors.

 

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What are the predictions on the Ulaanbaatar Property Market?

 

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Further criticism of the real estate market in Ulaanbaatar could be levied; it is currently segmented into a strong domestic sector, with generally lower prices but dedicated to owner’s self occupation while another, shadow property investment sector is itself growing alarmingly fast. This property investment sector is generally concentrated around the heart of the city and the Zaisan areas. It is based around those investors who regularly buy property with the specific aim of renting to expatriate corporate tenants.

 

This is gradually leading to an increasingly artificially inflated and detached property market. As more investment pours into the sector, prices are automatically artificially inflated, thus leading to further inflation in rental rates as investors need to justify their return on investment, which in turn leads to continued increases in purchase prices. This snowball effect is further compounded by considerable (and slightly misplaced) public enthusiasm about the estimated number of executive expats coming into the country; those figures seem to be consistently inflated and thus, indirectly, contribute to the potential creation of a new property bubble.

 

Despite all of the above, the market is not all despair and missed opportunities; there are a number of distinct and attractive possibilities that present themselves for both medium to long term investments. The main factor driving this growth is of course speculation in the mining boom currently gripping the country. If Mongolia keeps heading on the path of welcoming foreign investments and safeguarding their rights and investments in the same manner as it safeguards those of Mongolians, it is likely that Mongolia as a whole will remain an attractive investment destination.

 

Generally speaking, a bubble is unlikely to happen in the near future (famous last words), as the market further matures along with the general state of the economy, a greater proportion of the Mongolian population will become involved and thus create new potential tenants. Furthermore, the Millennium Challenge Account property rights program will, if completed as planned, signal the start of a real mortgage financial industry in Mongolia, thus, yet again, creating a brand new customer base. Beyond that, further growth in the property market is dependent on the diversification of the economy, moving away from a complete reliance on commodity prices as well as retaining its attractive tax regime.

 

While the increasing levels of urbanization currently experienced in Mongolia’s cities are unlikely to have an impact on medium to high grade properties as this urbanization is concentrated in the ger areas of Ulaanbaatar, it presents gigantic opportunities in the low to mid housing sectors.

 

/more: http://www.mad-mongolia.com/news/opinions/...-property-1700/

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While the increasing levels of urbanization currently experienced in Mongolia’s cities are unlikely to have an impact on medium to high grade properties as this urbanization is concentrated in the ger areas of Ulaanbaatar, it presents gigantic opportunities in the low to mid housing sectors.

/more: http://www.mad-mongolia.com/news/opinions/...-property-1700/

"Gigantic opportunities in the low to mid housing sectors"

 

But at what price levels? What sorts of rents can Mongolians afford?

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MONGOLIAN MORTGAGES - still evolving ?

 

(from 2005):

Mongolians test alien idea: Privatizing the land

By Jehangir S. Pocha .. May 27, 2005

 

Despite the reputation for violent acquisitiveness that Mongolians acquired when Genghis Khan and the Golden Horde forged the world's greatest land empire in the 12th and 13th centuries, Mongolia developed as a communal land-sharing system long before capitalists and Communists clashed over the principles of property and ownership.

 

Every herding clan led its animals across a specific seasonal grazing route established by the clan's ancestors, and the right to this path was respected by others through an unwritten code based on honor and mutual cooperation.

 

But as the modern world has encroached on this remote country, Mongolia has been trying to reinvent itself as a free market democracy.

 

Many local politicians and economists now say that Mongolia's traditional land regime is the core cause of its backwardness and want to replace it with a Westernized property management system under which land would be parceled out and privatized.

 

"Our plan is, every citizen gets some land free once, in one area," said Myagmarsuren Dechinlkhundev, consultant to the government's standing committee on environment and rural development in Ulan Bator.

 

In cities it might be just 0.3 hectares, or more than 0.7 acres, he said, but in rural areas it could be about 0.75 hectares.

 

"Doing this in rural areas," he said, "faces more difficulties, but we're determined to go ahead. Private land is the base for a free economy."

. . .

Sentiments like that seem to embarrass planners like Myagmarsuren somewhat. They say nomadism is backward, and they do not deny that the intended land reform is a backhanded way of moving Mongolia's scattered population into cities.

 

"Urbanization is linked to progress," said Dorjnamjim Lhaajav, the country manager in Ulan Bator for the International Finance Corporation, a unit of the World Bank.

 

Today, many young Mongolians seem happy to swap their traditional dels, or long silk shirts worn over baggy trousers, for stylish black leather outfits in rapidly modernizing Ulan Bator. But many others, like Narangerel, still shudder at the thought of giving up their life on the plains to live in a cookie-cutter apartment.

 

/more: http://www.nytimes.com/2005/05/26/world/as...iht-mongol.html

 

(2009):

Ease of Registering Property in Mongolia

 

Listed below is a detailed summary of the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute.

 

The information appearing on this page was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 183 economies. The most recent round of data collection for the project was completed in June 2009.

 

Note: Transfer of the land use right

Ownership of the land belongs to the state. Only Mongolian citizens own land for family use. Therefore the land use rights are transferred with immovable property. This means who owns the immovable property then automatically holds land use right of the site. The land department of the relevant district will issue a new land use certificate for the new owner of the immovable property and will make a land use contract with the new owner.

 

More: http://www.doingbusiness.org/Data/ExploreE...tering-property

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STATISTICS - Population and Mortgages

 

According to Mongolia’s National Statistics Office (NSO) 2006 Bulletin, Mongolia’s total population as of year end 2006 was 2.594 million, which represented a 1.2% increase since 2005. Mongolia’s population has maintained steady growth between 1.1-1.5% per year over the past few years and this level of growth is expected to continue in the near term.

 

Of the 2.594 million people in Mongolia, 2005 estimates indicate that approximately 520,000 or 20% of the population inhabit structures meeting standard hygiene and sanitary requirements and connected to basic infrastructure, such as water, sanitation, and heating. This figure implies that approximately 2 million reside in dwellings that do not meet modern living standards. According to the Ministry of Construction and Urban Development (MCUD), urban households (55% of all households in Mongolia are urban) have an average of 4 people per household. If it is given that 2 million people live in substandard structures and there is an average of 4 people per household, it can be inferred that the present approximate need for housing units meeting standard hygiene and sanitary requirements is 500,000 units. Based on this basic demand approximation there remains a significant unmet demand for housing in Mongolia. However, demand in this sense is more representative of need and does not take into consideration what portion of the population can actually afford housing at market interest rates, which is questionable and remains undefined.

 

MIK’s business plan used the historic growth rate of the mortgage market to make projections for mortgage originations for the next 5 years. Based on these projections, mortgage originations are estimated to reach MNT 230 billion by 2011. The 9 MIK shareholder banks have a total of MNT 68,495,488,467.16, which represents a total number of 13,378 mortgage loans. Using the existing MIK shareholder bank portfolio as a basis for projections, a 235.79% growth in the value of mortgage loans would represent approximately 31,543 additional mortgage loans on the market. This is obviously a very basic projection, but gives an idea of the potential for growth.

MCUD in cooperation with the Government of Mongolia (GoM) has resolved to provide the construction and financing for 40,000 homes by 2009. MCUD created the Housing Finance Corporation (HFC) approximately 6 months ago to manage the implementation of the 40,000 Housing Units Master Plan. Though still in preliminary design stages, the HFC intends to make mortgage loans under the program available for a maximum of 10 years with an annual interest rate ceiling of 10%, which is approximately 9.8% less than the current market average interest rate, as displayed in Annex 1 Table 4. Properties under the program will sell for USD 350 per square meter while the going UB market price is USD 500 per square meter.

 

/more: http://pdf.usaid.gov/pdf_docs/PNADK777.pdf

 

NI Bank's Mortgage program: http://www.nibank.sr.mn/index.php?option=c...&Itemid=102

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From yurts to luxe apartments

 

By Cecilia Chow of The Edge Singapore .. 12 April 2010 15:48

Tags:

Canadian , copper mines , Gobi Desert , gold , Ivanhoe Mines , Lee Cashell , Mongolia , NGO , nomadic herders , Rio Tinto , tents , Ulaanbataar

ulaanbataar.jpg

Ulaanbataar, the capital of Mongolia

 

says the 41-year-old Cashell. “There were no real-estate agents in Mongolia.”

 

When one thinks of housing and Mongolia, felt tents called “yurt” or “ger”, and nomadic herders roaming around miles of desolate grassland in harsh winter conditions come to mind. Not quite luxury condominiums. Unless you’re Lee Cashell, of course. The American former venturecapital fund manager with JAFCO Investments visited Mongolia on vacation seven years ago, fell in love with the country and has since morphed into one of the top three property players there today.

 

Cashell discovered first-hand the extraordinary returns on investment one can get due to the shortage of quality housing in Mongolia. Seven years ago, when he first moved there, he purchased three apartments in Ulaanbataar for US$10,000 (RM32,100) apiece. He fixed up the apartments, which were in old, run-down buildings built during the Soviet era, and quickly found tenants among the expatriate community, mainly diplomatic staff and those working in NGOs (non-governmental organisations) at that time. The units were rented out at US$600 a month, which worked out to a gross rental yield of a whopping 60% then.

 

Not long after he had rented out the apartments, Cashell was enjoying a leisurely cup of coffee in a local coffee shop one day when he was approached by a succession of expatriates, each one of them echoing the same sentiment. “They said, ‘Oh, I heard you have these apartments for rent; I don’t know how to find an apartment in Mongolia; I can’t read the newspapers,’” he recalls. After the sixth person approached him, “I had one of those ‘ding’ moments, an epiphany”, says the 41-year-old Cashell. “There were no real-estate agents in Mongolia.”

 

The statistics right now may look far from promising: A country with a population of 2.7 million, of which, according to the Mongolian government in February 2009, only 40%, or over a million, live in Ulaanbataar, the capital city. And, of the population in Ulaanbataar, approximately 700,000 live in “temporary housing” — some are felt tents, while others are structures erected from pieces of bricks and wood stolen from construction sites, says Cashell. Then, there are some who live up in the hills with no heating and no proper sewage system. Some may have electricity, but no running water, he adds. “Of those who live in the countryside, a significant percentage of them are nomads.”

 

cashell.jpg

Cashell: In an economy that projected’s to grow at 15% [this year], people’s incomes

rise very rapidly. And, all thee people aspire to move into apartments...

 

To Cashell, however, these are some of the strongest push factors towards strong housing demand, especially in the light of a recovering economy after the global financial crisis last year. Another factor was the signing of a landmark mining agreement last October between the Mongolian government and Canadian-based Ivanhoe Mines as well as its partner, Rio Tinto, which will develop one of the world’s largest gold and copper mines, located in the Gobi Desert. The deal means more jobs and higher income for the local population. “In an economy that’s projected to grow at 15% [this year], people’s incomes rise very rapidly,” says Cashell. “And, all these people aspire to move into apartments, and the government would also really like to see them transition from temporary housing into apartments.”

 

Large increase in expat community

 

What’s more, the expatriate population, which stands at 4,000 today, is projected to grow fivefold to between 20,000 and 25,000 in five years. “I have 400 families from Rio Tinto coming to Mongolia over the next four to five months, and there’s nowhere for them to live,” says Cashell. “So, they have to live in hotels. There are no serviced apartments.”

 

The first two development projects that Cashell was involved in were carried out jointly with a local Mongolian developer. At that time, Cashell’s role was mainly as a consultant in design and marketing. “We went in with a group of investors and bought half the units in the building at a low price, and that helped pay for the building to be completed,” says Cashell.

 

Since then, he’s developed five mixed-use residential-cum-commercial projects under Asia Pacific Investment Partners (APIP), a company he founded and of which he is the chairman and managing director. He also started a real-estate brokerage firm called Mongolian Properties to handle all the leasing and management of the projects in the portfolio on behalf of his investors. Today, it’s the largest real-estate-management firm in Mongolia. Cashell also owns his own construction company and a cement factory “for quality-control purposes and as a hedge against inflation”.

 

His latest project, called Olympic Residence, is located in the heart of Ulaanbataar in the embassy enclave and flanked on either side by two upcoming five-star hotels (the Shangri-La and Hilton). “As the city became more densely populated and green space started disappearing, the only significant green space left was the Children’s Park,” says Cashell. “We basically bought up all the land around it, with Central Park in New York and Hyde Park in London at the back of our minds.”

 

The 135-unit, 18-storey Olympic Residence, which contains a mix of four-bedroom apartments and duplexes, as well as five-bedroom penthouses, retail space and a food court, was showcased in Singapore over the weekend of March 27 and 28. Prices ranged from US$250,000 to US$1.4 million for the largest penthouse of over 6,000 sq ft.

 

It was the first time that APIP had launched a project here and it was also the maiden launch of a Mongolian project in Singapore. The marketing agent for Olympic Residence in Singapore is CB Richard Ellis (CBRE). “Mongolia, being one of the fastest-growing economies in the world, is attracting keen interest from Singaporeans,” says Johnny Yu, director of residential services at CBRE.

 

Keen investor interest in Singapore

 

Of the 20 units released, seven were reserved and several are under negotiation. Cashell is confident of selling close to 15 units. One of the investors, a Singaporean who declined to be interviewed, first invested in Cashell’s project six years ago. “He’s bought an average of two units in each of my projects — my first, second, third and fourth,” says Cashell. “And, he actually gave me the money to buy the land for Olympic Residence, so he will switch that investment into apartments.”

 

thompson_hyndes.jpg

Thompson (right, with Hyndes): There are very few assets where

I can get a yield of 10% to 20% from rental and enjoy capital growth

 

Another investor in Singapore is Redhill Partners, a private investment company started a year ago by Dave Thompson and James Hyndes, both of whom have 15 years’ experience in capital markets. Thompson was most recently a senior fund manager with Gartmore Investment Management, a UK-based asset-management firm. Prior to that, he was with Morgan Stanley and Credit Suisse. Hyndes was a director for Goldman Sachs, and had also worked with JPMorgan and Macquarie Bank.

 

/more: http://www.theedgeproperty.com/featured-pr...apartments.html

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...from ResCap...

 

Mongolia Minute

ResCap

 

23/10/2010 Issue 4

 

So what’s a 2-bedroom apartment worth in Ulaanbaatar? In a land of traded commodities it shouldn’t come as a surprise that the value of a 2-bedroom apartment is quoted in terms of a relative reference point: 0.07 hectares of land to be precise, or 7,534 sqft (almost the area of 3 tennis courts). City officials have been instructed to speed up work on the program to relocate inhabitants of UB’s ger districts (known as yurts in the west). On offer are un-built apartments in lieu of the land where they live now and until these blocks of flats come up on these lands in five years time, inhabitants will be provided with temporary apartments.

 

In UB, demand for residential property outstripped supply by two to one in 2009. A key beneficiary of Mongolia’s unlocking of mineral wealth is the property sector where a handful of developers, most importantly with a track record on the ground, strategic land banks and a general operating business know-how in Mongolia, have their first hand on the prized asset – trying to satisfy the demand from the 6-fold (5,000 to 30,000) increase in expats coming to Mongolia in the next 3 years. UB is being transformed with a range of modest and luxury property developments mostly mid-way through completion, while a further 2,000 labourers are arriving at Oyu Tolgoi in the coming months. It’s only a matter of time before 0.07 hectares of land will get you a 1-bedroom apartment instead…

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Yes, it is serious...

 

Laugh if you like, but Mongolia is a serious play

By David Stevenson

Published: October 22 2010

 

I’ve been talking up the imminent arrival of Mongolia as a hot new investing destination for years now, usually to hoots of derision.

 

Last week, though, I had not one but three separate confirmations that Mongolia has finally become the newest “in thing” in the fickle world of investing. The first indicator was at an event for a City think-tank called the CSFI. This august institution usually doesn’t talk much about adventurous investing and certainly not about Mongolia but at a gathering of Big Bears – pessimistic types predicting a coming financial storm – the subject of Mongolia came up.

 

While most of the speakers were rather predictably banging on about gold, one talked about the growing supply issues facing the global resources sector and the fact that Mongolia seems to have most of the easy access mega projects worth investing in. Crucially, its canny political leadership has no intention of being gobbled up by either the Chinese or the Russians in a resources land grab and is busily playing off each of these superpowers. For example, a new railway project linking Mongolia’s vast coal deposits to its chief customer in China goes all the way to the border but has been built using Russian track gauges.

 

A couple of days later, another development caught my attention – namely that one of the most successful international stockpickers, James Barstow at Aurora investment trust, has made a big bet on a Mongolian oil play called PetroMatad, which is itself attracting huge attention among the speculative small-cap brigade on the London market. Barstow has also made big bets on London- listed West China Cement, which is an indirect play on the infrastructure and resources boom in neighbouring Inner Mongolia (source of most of China’s coal reserves) and Shaanxi province. It’s best to see the Mongolia story as part of a wider regional narrative that includes the Chinese resource-rich provinces of Xinjiang and Inner Mongolia, as well as the state of Mongolia proper.

 

The clincher for me, though, came with the news that a specialist investment research firm called Eurasia has launched  . . . wait for it  . . . a Mongolian equity tracking index. Now before we all fall over ourselves to issue buy orders for that lesser-spotted Mongolian exchange-traded fund, I should say that the index is still a vulnerable, young waif, comprising an odd mixture of hugely speculative miners and a few financial services groups. But its launch speaks of a new mania gripping the Asian markets. Barely a week goes by without some Hong Kong-based outfit announcing it’s about to launch a big new Mongolian division. I’ve heard of aircraft arriving in the Mongolian capital, Ulan Bator, crammed full of bankers, mining execs and stock promoters all desperate to come up with the next Big Mongolian Thing.

 

I’d suggest that the fun and games have only just begun when it comes to this landlocked, resource- rich country. I’m absolutely certain that we’ll see some specific Mongolian funds emerge which that offer investors a more attractive play on this frontier market – at the moment all but a handful of the companies on the Eurasia index are very specific resource exploration companies. The biggest opportunities will be in the broader service economy sector as well as in real estate and infrastructure. But I predict the multiplier effects of billion-dollar projects will cascade into the small, illiquid local stock market, triggering a massive bubble.

 

Origo’s chief executive Chris Rynning says: “It is inevitable that Mongolia will experience bubbles with international investors charging in, creating immediate domestic wealth and rapid asset appreciation.” He adds the important caveat that “a lot of Mongolian companies look very pricey already. I think many of them will struggle to meet their production targets, mainly because of slower-than-expected infrastructure build-out”.

 

/see: http://www.ft.com/cms/s/2/69f80458-ddf0-11...144feabdc0.html

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Yes, it is serious...

 

Laugh if you like, but Mongolia is a serious play

 

I think it is also seriously cold there for 5 months or so. Down to -26 in winter? -40 in other places.

 

No, thanks...not for me. I also don't fancy the Russians and Chinese breathing down on me and Mongolia utterly defenceless as the filling in the sandwich. Bad enough in japan recently... Having all those resources might make her a tasty bone?

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I think it is also seriously cold there for 5 months or so. Down to -26 in winter? -40 in other places.

You can invest money without living there.

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EXCERPT:

"Mongolia is about to boom. Of that, there is no longer any doubt," says John P. Finigan, the Irish CEO of one of Mongolia's largest banks. A veteran of developing markets in scores of countries, he says the only comparable growth potential he has seen has been in the Persian Gulf oil states.

 

The reason for the boom can be summed up in a word: China. Mongolia has some of the world's largest undeveloped fields of coal, vital for its southern neighbor's hungry steel mills and power plants. Mongolia is also rich in copper, needed for the power-transmission lines being strung at record rates in fast-growing Chinese cities and for the production of batteries, especially those for the booming market in electric cars. China currently consumes nearly 7 million tons of copper each year (about 40 percent of global demand), but it's on track to triple its copper needs within 25 years, according to CRU Strategies, a London-based mining and metals consultancy.

 

Twenty years ago, when I first visited Mongolia, it had just emerged from seven decades under the Soviet umbrella. Ulan Bator had a shellshocked otherworldliness about it. There were a few grimy hotels fronting Sukhbaatar Square, named for the leader of the 1921 revolution that transformed Mongolia into the world's second socialist state. After decades of decline, the city looked like a set for an apocalyptic movie, especially in the crush of winter, when the sky was a perpetual charcoal gray.

 

Nowadays, Ulan Bator looks increasingly like a Chinese boomtown, with all the same trappings -- exploding property prices, huge capital inflows, rising concerns about corruption, widening gaps in income disparity, and a flood of flashy automobiles on the roads."

== ==

 

I am looking an opportunity in one of Lee Cashell's buildings right now.

I already have a 6-figure investment in a Mongolian coal miner

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EXAMPLES - of Property For Sale

 

Olympic Residence / Mongolia : Ulan Bator : Ulan Bator

3 bedroom Apartment : £127,060

Added: Wednesday, December 23, 2009 ▪

 

/source: http://mongolia.homesgofast.com/properties...lia-P123613099/

 

http://olympic.mongolia-properties.com/overseas-investment.html

 

KEY FEATURES
  • Stunning selection of strategically positioned high yielding apartments
  • 92.2 sqm apartment priced from just $239,720 USD (approx. £182,187)
  • 121.5 sqm apartment priced from just $340,200 USD (approx. £258, 432)
  • The highest rent yield area in the most vibrant city location (CBD) in the capital city, Ulaanbaatar, Mongolia
  • Strong and ongoing demand for rentals from Rio Tinto, Jacobs Engineering, the US Embassy and a number of international organizations
  • An opportunity to earn high rental property yields by investing in an award-winning property delivered by an established developer and asset manager in Mongolia
  • Exclusive to Asia Pacific Investment Partners
  • Luxury 2 bed apartments
  • Prime location with unbeatable city views
  • Fully managed to generate a passive income
1-1.png
1-1.png
THE OLYMPIC RESIDENCE

The Olympic Residence is a luxury condominium project located in the central business district, which features 99 luxury apartments, penthouses with terraces, four floors of luxury retail space, two floors of underground parking separate entrances for residential and retail spaces, concierge service, an attended lobby, security, underground parking and luxury retail and entertainment space.

The Olympic Residence is strategically positioned in vibrant city location in central Ulaanbaatar within the Embassy district where occupancy rate is the highest. The Olympic Residence will be situated in the most high-end neighborhood in the city. The scheme’s prime location makes it a unique investment opportunity.

 

====

APIP is behind a number of developments in Mongolia, including
Development Year Rental Yield Capital Appreciation
Mon House 2005 45% 400%
Park View 2007 35% 400%
Temple View 2009 18% 100%
Regency Residence 2010 24% 300%
Village at Nukht 2014 12% (guaranteed) 20%
============
*Average rental yields per annum and average capital appreciation since completion

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