Mongolia - A small gem to watch!

Population: 2.9 million 
Total retail sales: $4.2 billion Retail sales 
CAGR (2010–2014): 15.8% \

Resource-rich Mongolia, unranked last year, reemerges in 5th place behind rapid growth and low market saturation. Mongolia's country risk is among the highest in the GRDI, but it also has the highest market potential (see figure 3). GDP has grown at a CAGR of 11 percent since 2010, driven mainly by copper and coal mining, while its retail sales growth rate is among the highest of any developing market in Asia

Although growth has slowed recently, international entrants have plenty of opportunity in a still-fragmented market dominated by traditional retail. The luxury market may have the biggest potential as Mongolia sits on deposits worth more than $1.3 trillion. The concentration of wealth has attracted luxury brands such as Burberry, Damiani, Louis Vuitton, Swarovski, and Zegna, who all have stores in UlaanBaatar Central Mall. Food, representing two-thirds of the total retail market, has also drawn attention from international and regional retailers. Tavan Bogd Foods opened the first KFC franchise in 2013 and plans to open 15 more restaurants over the next five years. Korean cafe Tom N Toms entered Mongolia through a joint venture in 2014, and Korean coffee chain Caffe bene opened two stores in early 2015 with plans to open 20 by next year. Max group opened Burger King in 2015. 

Source:

https://www.atkearney.com/consumer-products-retail/global-retail-development-index/current-research-detail

Why you should invest in Mongolia

Mongolia is a fantastic place to invest in property as a foreigner.  The regulatory framework on title and property rights, combined with a great tax policy and no exchange controls, make Mongolia one of the best destinations in Asia for property ownership.

Why Mongolia? In addition to being the fastest growing economy in the region and one of the fastest growing in the world, there are a number of compelling reasons why Mongolia is the ideal destination for investors to consider. 

These include an extremely benign regulatory environment for property ownership, with the rights exercised by international investors regarding property ownership being identical to those enjoyed by Mongolian citizens. The‘floating freehold’ system provides investors with inalienable freehold rights to real estate in Mongolia. 

There are no currency controls. The currency is fully convertible and freely floating and there are no issues repatriating profits out of Mongolia.  Indeed, recent exchange rate weakness presents a strong buying opportunity for investors deploying foreign currency into the property markets. 

It has fantastic tax laws. The tax laws in Mongolia are clear-cut with the 10% income tax representing one of the lowest income tax rates in Asia.  In addition there is no concept of capital gains tax in the market and only a 2% stamp duty tax paid upon eventual sale of the property.

There are high overall returns from both cash rental income and capital growth. Mongolia’s property market boasts one of the highest cash rental yields in Asia as well as strong capital appreciation prospects. From 2005 to 2013 the average annual rental yield from residential space was over 11% per year across all of Ulaanbaatar.  Rapid growth in GDP per capita, disposable income, and real wages are driving demand for high quality residential and retail space across the city, and the property market has been posting annual growth rates of over 15% per year on average for the past 10 years.

It's below the radar. Mongolia is a fast growing frontier market that remains relatively unknown to the rest of world. As such, competition for good assets in good locations from other foreign investors remains limited. 

According to the Bank of Mongolia, the mortgage penetration rate in 2011 was under 4%. Credit-driven property price speculation and real estate bubble risk are therefore non-existent in the market at the moment. In 2013 the government created a subsidized mortgage product for low-income families to help them take their first steps onto the property ladder. This mortgage is an 8% product for very small, low-end apartments – the remainder of the market remains entirely under served by credit. However, there has been such demand for subsidized mortgages that banks may consider entering the space with a more commercial product in the coming years. Should leverage be introduced to the system, we would expect prices of property to rise very quickly.

While the herd is chasing Thai, Philippine or even Myanmar real estate, Mongolia offers one of the fastest growing economies in the world.  Buyers can enjoy access to a market where prices remain unaffected by competition, where low taxes and strong property rights protect your investment, and where exchange rate movements can increase profits over and above the already high rental yields that are available today. 

Source: http://www.therealestateconversation.com.au/blog/2015/02/05/why-you-should-invest-mongolia

Macroeconomic indicators by April

GDP by production approach reached 2277.4 bln.tog at current price, 980.2 bln.tog at 2005 constant price in the first quarter of 2012, up by 30.2 percent at current price and 16.7 percent at constant price compared to the same period of the previous year. The national consumer price index in April 2012, increased by 0.5 percent compared to the previous month, 8.2 percent compared to the beginning of the year, and 16.0 percent compared to same period of the previous year. The increase in national index compared to the previous month was mainly due to 0.7 percent increase in food and non-alcoholic beverages and 2.0 percent in clothing, footwear and cloth. According to the report of the Bank of Mongolia, money supply (broad money or M2) at the end of April 2012, reached to 6362.9 bln.tog, increased by of 258.1 bln.tog or 4.2 percent compared to the previous month, and increased by 1012.4 bln.tog or 18.9 percent compared to same period of the previous year. At the end of April 2012, currency issued in circulation reached 708.9 bln.tog, increased by 60.4 bln.tog or 9.3 percent compared to the previous month, and increased by 80.3 bln.tog or 12.8 percent compared to same period of the previous year. Loans outstanding at the end of April 2012, amounted to 5936.0 bln.tog, up by 154.5 bln.tog or 2.7 percent compared to the previous month, and up by 1962.1 bln.tog or 49.4 percent compared to same period of the previous year. Principals in arrears at the end of April 2012 reached 71.2 bln.tog, increased by 9.8 bln.tog or 16.0 percent compared to the previous month, decreased by 11.0 bln.tog or 13.4 percent compared to same period of the previous year. At the end of April 2012, the non-performing loans over the bank system reached 316.6 bln.tog, showing decreases of 3.6 bln.tog or 1.1 percent compared to the previous month, of 64.9 bln.tog or 17.0 percent compared to same period of the previous year. In April 2012, there were 21 trading days and 14.4 mln.shares valued at 4.1 bln.tog were traded. In the first 4 months of 2012, total equilibrated revenue and grants of the General Government Budget amounted to 1465.8 bln.tog and total expenditure and net lending amounted to 1513.8 bln.tog, representing deficit of 48.0 bln.tog in the equilibrated balance of General Government Budget. Current revenue of the General Government Budget amounted to 1460.8 bln.tog and current expenditure reached 1231.9 bln.tog. Thus, the budget equilibrated current balance was in surplus of 229.0 bln.tog. Compared to same period of the previous year, tax revenue increased by 229.7 bln.tog or 21.5 percent. The increase was mainly due to the increases of 102.0 bln.tog or 27.5 percent in taxes on goods and services, 67.8 bln.tog or 55.9 percent in social security contribution, 35.1 bln.tog or 12.8 percent in income tax, 14.6 bln.tog or 6.9 percent in other taxes and 8.8 bln.tog or 9.9 percent in taxes on foreign trade. Compared to same period of the previous year, non-tax revenue increased by 35.4 bln.tog or 28.3 percent. The increase was mainly due to the increases of 28.0 bln.tog or 48.8 percent in revenues from budget entities, 8.7 bln.tog or 89.4 percent in revenues from others, 3.7 bln.tog or 32.9 percent in revenues from interest, 3.2 bln.tog or 22.7 percent in revenues from oil petroleum and 1.9 bln.tog or 16.3 percent in navigation fee although there was decreases of 10.3 bln.tog or 50.1 percent in revenues from dividends. In the first 4 months of 2012, total expenditure and net lending of the General Government Budget increased by 364.3 bln.tog or 31.7 percent to 1513.8 bln.tog compared to same period of the previous year. This was mainly due to increases of 129.9 bln.tog or 2.0 times in capital expenditure, 116.6 bln.tog or 27.7 percent in expenditure of goods and services, 93.1 bln.tog or 16.1 percent in subsidies and transfers, 16.9 bln.tog or 2.8 times in lending minus repayments and 7.7 bln.tog or 46.7 percent in interest payments. In the first 4 months of 2012, spending of 255.4 bln.tog on capital expenditure increased by 129.9 bln.tog or 2.0 times compared to same period of the previous year. This was mainly due to increases of 125.8 bln.tog or 2.0 times in capital expenditure of domestic sources and 4.1 bln.tog or 2.3 times in foreign financed capital expenditure, compared to same period of the previous year. In the first 4 months of 2012, Mongolia traded with 118 countries from all over the world and total external trade turnover reached 3373.1 mln.US dollars, of which exports made up 1292.4 mln.US dollars and imports made up 2080.6 mln.US dollars. Foreign trade balance showed a deficit of 788.2 mln.US dollars in the first 4 months of 2012, reflecting 366.8 mln.US dollars or 87.0 percent increase compared to same period of the previous year. The foreign trade deficit in the first 4 months of 2012 was mainly caused by the fact that the import growth was higher by 20.1 points than the export growth. Total external trade turnover increased by 626.2 mln.US dollars or 22.8 percent, of which imports up by 496.5 mln.US dollars or 31.3 percent, and exports up by 129.7 mln.US dollars or 11.2 percent, compared to same period of the previous year. Mineral products, natural or cultured stones, precious metal, jewelry, coins, raw & processed hides, skins, fur & articles, animal origin products, textile articles and auto & air transport vehicles & their spare parts thereof accounted for 98.3 percent of the total export value amount.

UB Properties - Real Estate Agency in Mongolia

“UB PROPERTIES” LLC, REAL ESTATE AGENCY UB Properties, a new name in the market, yet the same people who’ve been around with you for the last decade assisting on your real estate concerns. Founders of the company, key realtors of Mongolian real estate market, established the team enforcing with experienced specialists of corporate and expat services. Enriching the Real Estate services with Property Management, Corporate and Expat Relocation Consultancy. Combine this with expertise and unrivaled local knowledge, when you choose “UB Properties” as your estate or letting agent, you can rest assured that your property is in safe hands. For those who are already with us, we are obliged to carry on the good old, successful cooperation in the future. For the new acquaintances, we are happy to offer tailor made services and cooperation methods for your unique desires that our clients and us mutually enjoy. Yours faithfully, UBP team.

UB Properties - Real Estate Agency