About: Global Property Guide, Interview, Mongolia, Property
Ulan Bator, Mongolia – a commodities boom has made this city in the “Wild East” a buy-to-let dream, according to Baron Christopher de Gruben of Mongolian Properties.
What’s the attraction of buying residential property in Mongolia?
In a word – it pays very well. You get 18% rental yields, with no tax.
Who can buy property in Mongolia?
Anyone can buy in Mongolia, there are no restrictions on foreign investment, aside from the Chinese.
Who is buying?
Not Hong Kong people. Hong Kong people tend to misjudge Mongolia. They think it is part of China, and they know that China is very restrictive in terms of real estate investment.
The typical investor is British, and buys 1-2 units. These are directors of businesses, or people who work in the finance industry in the UK such as hedge fund managers. They are paid in sterling, so for them Mongolia is very cheap. They are taking a gamble, speculating.
US$300,000 buys one of our most luxurious apartments of 200 square metres.
Ulan Bator is nice?
No, it is horrible. Ulan Bator is hideous. You could call it “nostalgic.” It is Soviet era. A horrid city, which is worsening very fast. Traffic is getting appalling. Overwhelmed by Hummers. No city planning, anyone can build anything. Everyone builds small extensions to their shops.
Three years ago there was a very harsh winter, and the nomads lost all their livestock. Ulan Bator suddenly expanded from a population of 500,000 to 1,000,000. So urban conditions are very bad. The crime rates shot up, and all sorts of new problems emerged.
The “ger” (= “tent”) district is where all the “new” people live. It surrounds the city on three sides, the North, West and East. Mongolians live in tents, they don’t build anything.
What’s in it for visitors?
Ulan Bator is a pure investment product. People are unlikely to want to come here on holiday. Though Beijing is only 1 hour away, and we are starting to get expatriates from Beijing for the weekend. Some buy a small house outside Ulan Bator.
The country’s strength is its diversity and culture. There is hiking, rafting, mountain climbing, and mountain biking. But the winters are long and cold, and the summers are hot and dry.
You say investment returns are good?
Marvellous. There are 18% rental yields, though I should mention those have been falling, as house prices have risen.
There is no capital gains tax, no income tax, no property tax. There is a 2% sales tax on resale of the property, but that is the only tax. If you set up a company you have to pay a tax on capital, but to buy property you do not have to set up a company.
A system is not yet in place to tax individuals. These are nomadic people. They move about a lot, everyone has several names. So you cannot find anyone! It’s hard to tax people in these circumstances. The government taxes the mines, this is the main source of revenue.
But why would anyone live here except Mongolians?
Ulan Bator urgently needs places for the foreign experts to live. The Mongolians have enormous natural resources, but no knowledge. Everything has to be done to by foreign companies. All kinds of multilaterals are here: the ADB, EBRD, USAID, IMF. Every year new countries set up embassies, so there is tremendous demand for housing. There is also 10.5% GDP growth, based on the mining boom. But there are no luxury apartments. All the buildings date from the Soviet era. So foreign companies are reluctant to come because there is nowhere to house their staff.
What is the government like?
Excellent. This is a new democracy. They are importing US commercial laws as the basis of their judicial system.
Tell me about Mongolian Properties
We’re building in the New District, which is the embassy district. It’s next to Central Park. It used to be a ger (tent) district. They threw them out. Now it is beautiful – very residential, very quiet and safe, the best part of town.
We have built three apartment blocks, the Regency is the 4th. There will be 4 more in the next 3 years. The Regency is still being constructed, but we are sold out, we always do pre-sales. Most likely the building will be entirely pre-let. Decent accommodation is so short, that renters need to pre-let.
We also provide management. Paying electricity bills is very difficult, there are 5 different desks and 5 different stamps. Expatriates are driven crazy by such bureaucracy. For 5% of the rent, we will do everything for you.
Thank you.
Link to the Global Property Guide Article
About: Global Property Guide, Interview, Mongolia, Property
