About: Mongolia, Property, Times, Ulaanbaatar
Written by Lorna Blackwood on the 25th of May 2007.
Mongolia is developing fast but investing in property requires a leap of faith, writes Lorna Blackwood
THE VAST arid country of Mongolia, centre of the ancient Mongol Empire, might seem to be the last place a property investor would explore. But where there’s economic development there are property bargains – at least, for the brave. And with its mineral wealth and the arrival of international mining companies, such as Rio Tinto, Mongolia is looking up.
Far from the herdsmen’s yurts, in a small underground bar some boisterous men are holding a weekly quiz night. Welcome to Dave’s Place, focus of the expat community in Ulan Bator, capital of Mongolia. “It’s all very friendly, things don’t get too out of hand – it’s just the men needing to let off steam after a few weeks in the mines,” says Lee Cashell, a property developer based in the city. This taste of the expat life-style is probably not the best introduction for investors. But it seems that the property market in Mongolia is unaffected by such distractions. The country’s economy had a harsh transition to a free market in 1990 after the collapse of the Soviet Union. But by 2004 the state was undergoing an economic renaissance, with growth reaching 10.6 per cent. That figure has stabilised at about 7.5 per cent and, with the wealth of copper, gold, coal, uranium and other minerals, mining companies have created a demand for homes.
Cashell’s company, Asia Pacific Investment Partners (APIP), founded its property arm, Mongolian Properties, in 2002 to meet the needs of foreign residents looking for homes in the capital. Its current development, the Regency Residence, overlooking the park and the Bogd Khan Mountain, has sold nearly all the 97 apartments offered to foreign investors. With such an uptake, APIP expects that only half the building will be available for rental, which “will keep the yields high” – an investment of £80,000 can produce a return of 20 per cent a year. In the near future, APIP is planning to launch two further projects in Mongolia, Park Plaza and Olympic Residence. The launch in the UK is being handled by Property Frontiers, which says that it has a waiting list of about 30 people for the schemes.
But the huge potential profits do have risks attached. Mongolia is still a developing democracy. There are no mortgage laws, although 20-year loans are available to locals. But there is an underlying optimism. Ceri Morgan has owned property in Mongolia for 14 years and is an unabashed believer. “There are incredible returns to be made on the rental market,” he says. “The economy is getting better and there is a developing local market. I bought a property on the outskirts of the city for $60,000 (£30,300) and am getting $700 a month in rent.” But he is concerned that investors are relying on foreign clients. “As investors are chasing the expensive developments, the top end of the market could reach saturation point,” he says.
The growth in the local market is the thing to watch, he believes. Although young Mongolians are still unable to afford the high rents in new developments, the growing economy could soon put them in a position where they will be knocking on the doors of developers. This represents a leap of faith that British investors astonishingly seem prepared to take.
About: Mongolia, Property, Times, Ulaanbaatar
