WILL MONGOLIA'S REAL ESTATE MARKET STILL GO INTO HIBERNATION?

AS THE FAMOUS MONGOLIAN WINTER IS STARTING TO MAKE ITSELF FELT, WILL MONGOLIA'S REAL ESTATE MARKET STILL GO INTO ITS TRADITIONAL SEASON OF HIBERNATION UNTIL NEXT MARCH?

Winter is usually a time when Ulaanbaatar’s real estate agents go on holiday to South East Asia, a time when construction companies reflect on what they have done in the past summer and prepare for the work to be done next summer, essentially a time when the Mongolian Real Estate market all but dies. This until it is revived again the following spring.

Expats rarely relocate to Mongolia after the mid-October period as it is considered too cold to do so and their employers fear that they will run away if they are too soon confronted to the harsh Mongolian winters. City inhabitants very rarely agree to leave their homes during the winter months as it is too cold to move out. The Immovable property office is deserted and the newspapers carry a slimmed down real estate classifieds section.

It seems that there is a generally un-spoken agreement that real-estate business is carried out during summer while the winter months are reserved for quiet contemplation, recuperation as well as business planning for the following “season”.

This seasonal pattern has always had a great impact on the pricing trends within Ulaanbaatar’s Real Estate market. Small traders would sell their apartments in the city center of the city in spring in order to raise capital for their summer operations, thus maximizing supply of property and leading to a slight drop in prices while in autumn, once profits have been achieved, those same traders would buy back real estate to hibernate in winter, thus leading to a spike in prices as demand increased.

Yet this year seems to be different, the month of October has been an unusually busy month with an increased jump in both sales and rentals. Expats are still flooding the country and the immovable property office is still as busy now as it was in the height of summer. While there is no doubt that winter will see a gradual slow down in transactions, the increased activity currently being witnessed is never the less noticeable and a sign of a maturing real estate market (or maybe even an early sign of an upcoming bubble).

Construction companies still seem to be working in full swing to get as much of their buildings completed before it is too late and they are too forced into holiday mode. Dalanzadgad is in full construction mode and other secondary cities around Mongolia are even now gearing up to start building soon.

Eventually, increased prices of real estate will enable construction companies to invest in equipment and chemicals designed to allow them to built right through the winter, this should allow for a more steady and constant stream of new supply, thus potentially better balancing the property market.

Furthermore, as financial service providers gear up to provide lower interest rate mortgages to the growing middle class, the properties will become less of a short term commodity and more of a long term investment, thus removing a lot of the seasonal fluctuations in property prices within Ulaanbaatar.

Mongolia seems to be coming out of its commodity crisis in full gear, it is a great time to be here and witness the evolution of its economy and its property market as well as an exciting time to invest.

It is not just Ulaanbaatar’s real estate market that seems to come out of its hibernation but rather the city as a whole, the ski slopes have provided inhabitants with a good outdoor activity while the increased numbers of bars and restaurants in the heart of the city seem to constantly draw new patrons. Mongolians must soon start spending their new found wealth and what better way to do so than round a hot wine when it is minus 40 outside.

Source: M.A.D News