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

Орон сууцны зах зээл ба 2014 оны төлөв

Орон сууцны зах зээл
2013 он барилгын салбарын хувьд өндөр өсөлттэй жил байлаа. Засгийн газар болон Монголбанк хамтран барилгын салбарыг дэмжих, орон сууцны эрэлт нийлүүлэлтийг дэмжих зорилгоор бага хүүтэй зээлийн хөтөлбөрүүдийг хэрэгжүүлж эхэлсэн. Хөтөлбөр хэрэгжиж эхэлсэнээс хойш 2014 оны 1 дүгээр сарын байдлаар нийт 14685 иргэн шинээр орон сууц худалдан авч 17105 иргэний 482.4 тэрбум төгрөгийн зээл дахин санхүүжилт хийгдэж 8 хувийн хүүтэй зээлд шилжсэн бол Улаанбаатар хотын хэмжээнд нийт 16500 айлын орон сууц шинээр ашиглалтанд оржээ. Зах зээл талаас нь харвал орон сууцны нийлүүлэлт эрэлтээсээ бага зэрэг илүү байсан ч орон сууцны үнэ өмнөх оны мөн үетэй харьцуулахад 26.2 хувиар өссөн үзүүлэлттэй байлаа. Энэ нь сүүлийн жилүүдэд байгаагүй өндөр өсөлт байсан юм. Засгийн газраас хэрэгжүүлж байгаа хөтөлбөрүүд иргэдийн хувьд орон сууц худалдан авах таатай нөхцөлийг бүрдүүлж өгсөн хэдий ч орон сууцны үнийн хэт өсөлтийг зохицуулж чадахгүй байгаа нь эргээд эрэлтийг хязгаарлахад хүргэж байна .


 Эх сурвалж: UMC Alpha, (*таамаглал)

 2014 онд орон сууцны үнийн өсөлт буурч жилийн 10 хувиас хэтрэхгүй байх ба үнэ одоогийн байгаа түвшиндээ тогтворжих хандлагатай байна. Учир нь одоогийн эдийн засгийн таагүй байдал, орон сууцны үнийн хэт өсөлт орон сууцны бодит эрэлт буурахад нөлөөлнө гэж үзэж байна.

  Орон сууцны нийлүүлэлт 
2014 онд Улаанбаатар хотод хэрэгжихээр төлөвлөсөн 37049 айлын 211 төсөл байгаагийн 21450 айлын 150 орчим төсөл нь энэ онд багтан ашиглалтанд орохоор төлөвлөгдсөн байна. Энэ нь 2013 онтой харьцуулахад орон сууцны нийлүүлэлт 30 хувиар өссөн үзүүлэлт бөгөөд нийт ашиглалтанд орох орон сууцыг дүүргээр авч үзвэл дараах байдалтай байна.

 
 Эх сурвалж: Barilga.mn

 Нийт төслийн 66 хувь нь зөвхөн Хан-Уул болон Баянзүрх дүүрэгт хэрэгжиж байгаа бөгөөд төслүүдийн 1 метр квадратын дундаж үнийг дүүргээр авч үзвэл Хан-Уул 2.62 сая, Чингэлтэй 2.43 сая, Сүхбаатар 2.71 сая, Баянзүрх 2.15 сая, Баянгол 2.23 сая, Сонгино хайрхан 1,53 сая төгрөгийн үнэтэй байна. Орон сууцны нийлүүлэлт 2016 он хүртэл одоогийн түвшинээс буурахгүй бөгөөд цаашид дунд болон урт хугацаанд дэд бүтцийн хүрэлцээ, хангамжаас хамаарч хотыг хөгжүүлэх ерөнхий төлөвлөгөөнд тусгагдсан барилгажих нөөц талбайд нэгдсэн шийдэл бүхий орон сууцны хорооллууд баригдахаар төлөвлөгдсөн нь нийлүүлэлт тогтвортой байхыг харуулж байна. Харин гэр хорооллын хувьд дахин төлөвлөлтийн процесс удаашралттай явагдаж байгаа нь нийлүүлэлтэд сөргөөр нөлөөлж болзошгүй юм. № Бүсийн нэр Талбай /га/ Хувь 1 Гэр хороолол 9,752 27.7% 2 Барилгажсан бүс 6,712 19.1% 3 Барилгажихыг хязгаарласан бүс 6,890 19.6% 4 Барилгажих нөөц талбай 7,703 21.9% 5 Бусад 4,149 11.8% Нийт 35,206 100% Эх сурвалж: Улаабаатар хотын хөгжлүүлэх ерөнхий төлөвлөгөө 2020 Улаанбаатар хотын хэмжээнд нийт 7703 га талбай барилгажих нөөцөд байгаагийн 80 хувь нь Хан-Уул болон Сонгино хайрхан дүүргүүдэд харъялагдаж байгаа юм.

  Орон сууцны эрэлт 
Орон сууцны зах зээл дэх эрэлтийг тодорхойлох нэг гол үзүүлэлт нь тухайн сард арилжааны банкуудад шинээр олгогдож байгаа орон сууцны зээлийн хэмжээ, зээлдэгчийн тоо байдаг. Хөтөлбөр хэрэгжиж эхэлснээс хойш тухайн сард зээл авсан зээлдэгчийн тоо өнгөрсөн оны 8 сард хамгийн өндөр түвшиндээ хүрч байсан ч түүнээс хойш тасралтгүй буурч ирлээ.

 
 Эх сурвалж: Монголбанк, (*таамаглал)

 Цаашид ч энэ үзүүлэлт буурах хандлагатай байна. Учир нь одоо зах зээл дээр борлуулагдаж байгаа орон сууцны үнэ 8 хувийн хүүтэй зээлд хамрагдаад ч иргэдийн худалдан авах чадвараас хэтэрчээд байна. Монголбанкаас зээлийн нөхцөл дэх зарим хязгааралтуудаа зөөллөх арга хэмжээг авч магадгүй ч энэ нь эрэлтэд тийм ч хүчтэй нөлөө үзүүлэхгүй болов уу гэж таамаглаж байна. Иймээс энэхүү хөтөлбөр цаашид өмнө нь орон сууцтай байсан иргэдийн хувьд орон сууцны нөхцөлөө илүү сайжруулах байдлаар хязгаарлагдмал хүрээнд үргэлжлэх байдал ажиглагдаж байна. Эндээс орон сууцны зах зээлийн 2014 оны ерөнхий төлвийг дүгнэвэл зах зээлийн идэвхжил өмнөх оны түвшинд хүрэхгүй ч тодорхой хэмжээний өсөлттэй байх ба шинээр хэрэгжиж байгаа орон сууцны төслүүдийн борлуулалт удааширч зарим төслүүдийн санхүүжилт хүндэрч болзошгүй байна.

 Эх сурвалж:  “Юу Эм Си Альфа” ХХК

Mongolia Property: Boom or bubble?

Confidence that Mongolia’s resource wealth will generate unprecedented expansion in its real estate market has seen prices rise and many of Ulaanbaatar’s prime properties snapped up. However, the experience of other countries that have had similar resource-related property growth suggests it may not last forever. In September, Export Development Canada, the state-owned export credit agency, warned that due to bank credits rising in excess of 50% year-on-year in 2012, a real estate “bubble” had appeared in the capital, which is likely to have a negative impact on the banking sector. Meanwhile, in October the central bank said the national growth rate in 2012 will slow by up to one-third from the record 17% achieved in 2011, due to a decrease in foreign direct investment (FDI) and reduced demand from China. Talk of slowing growth and a property bubble clashes with the estimations of real estate agencies, which are predicting that, as copper and coking coal mines come online, the real estate market will see “exponential” growth. “We expect [our] diversified portfolio of high-quality retail, office and redevelopment property in downtown Ulaanbaatar to compound at 30-50% per year going forward, undergirded by a combination of rapidly rising rental yields and compressing capitalisation rates,” wrote Mongolia Growth Group, a real estate and financial services conglomerate, in an October press statement. However, the rapid growth scenario for a country of just 3m people, which issued its first mortgage only in 2003, poses a number of issues for investors, including the crumbling state of much of the country’s infrastructure. Citing further problems, in August the Mongolia Real Estate Blog wrote, “The volatility of housing prices and the potential for a boom-bust is higher if the housing supply is severely constrained by land access and urban regulation problems, which is an issue, considering the short supply of land in Ulaanbaatar”. A number of players in the industry, who are concerned about the prospects of a real estate bubble in the capital, have pointed to similar circumstances in Kazakhstan in 2008. “Driven by an influx of oil-related FDI and easily accessible mortgages, land prices in downtown Almaty, Kazakhstan’s largest city, surged a whopping 8000% between 2002 and 2008, while the cost per metre of apartments in the downtown area rose 833% in the same period”, noted local news website Mongoliana in July. With the onset of the global financial crisis, the property bubble burst and prices dropped 40% from their peak, and currently are half of what they were in 2007. However, industry insiders say there is inherently less risk in the Mongolian market. “Despite rising prices, the market in Mongolia remains majority cash-based, so borrowing is not yet a significant risk factor,” said Christopher De Gruben, the CEO of Real Estate Mongolia, in January. Another important factor to the country’s growth is its emerging middle class. Per-capita GDP in Mongolia more than tripled to $2200 in 2010 from $638 in 2004, and is set to rise further this year, as the government increases all government salaries and pensions by 43%. There are now around 4000 apartments in Ulaanbaatar available to nationals with middle incomes, who will be able to easily access mortgages, according to Frontier Securities, a local investment firm. According to Mongoliana, the key to avoiding the bubble is enabling growth by lowering lending standards and “encouraging new homeownership, while also managing risk across the mining and financial sectors in the long term”. In terms of encouraging home ownership among citizens, the government is taking a number of steps, with T. Bayarsaikhan, the minister of construction and urban development, stating in October that a 6% interest loan, implemented by the government for first-time buyers in February, will be extended to all Mongolian citizens. He also said that future buildings will be geared toward low heat-loss parameters and energy efficiency, while further noting that planned future construction will have higher standards and better health and safety measures. However, in the same month, the central bank officially stopped accepting applications for the loans, part of the government’s “100,000 Homes Project”, stating that it needed to acquire the necessary financing to resume the loans from the Trade and Development Bank of Mongolia. While Mongolia’s rapid growth story indeed raises the spectre of it repeating mistakes made by other resource-wealthy countries in the past, it has the opportunity to learn from their experiences. By Paulius Kuncinas Regional Editor, Oxford Business Group

Ulaanbaatar to have an alternative public transportation

On Monday, the Minister of Roads and Transportation A.Gansukh announced that the railway project, Bogd Khan Tumur Zam or Bogd Khan Railway, will be implemented and is planned to run along the southern side of Bogdkhan Mountain. The railway project will run from 2012 to 2016, and will connect the Mandal and Bagakhangai ports which have partaken in the project as well as a newly constructed a 170 km rail, crossing Tuv Province, Batsumber, Altanbulang, Sergelen, and Bayan soums. The Ulaanbaatar Railway is also one of the organizations that partook in the projects’ development. The cost of constructing the 170 km railway will amount to 326.8 million USD. The Bogd Khan Railway project, which will intersect Ulaanbaatar city with 35 km of railroad, will offer an alternative transportation method for the capital’s residents. When implemented the light railway transportation will be able to take people from one end of the city to the other in just 15 minutes. Specialists believe that the implementation of this project will add another means of transportation to the beleaguered city and thereby help reduce the city’s traffic congestions. At present, the traffic congestion in Ulaanbaatar city is centred most at intersections of the old railways and highways. The negative consequences of the old rail system includes fumes emanating from the locomotives, potential hazards caused by the chemically hazardous cargos and the loud noises produced all contribute to the violation of peaceful, healthy and safe environment of the capital residents. All of these issues can be potentially resolved by implementing the Bogd Khan Railway project. The Ministry of Roads and Transportation believes that it is best to implement the Bogd Khand Railway project by allowing private sectors to handle the implementation.

Mongolia:Cementing growth

Source: Oxford Business Group The government’s approval of a bond release over the next two years to help fund major infrastructure projects should provide a much needed boost to the construction housing and transport sectors, with affordable housing and road connectivity cited as top policy concerns. On September 19, the government confirmed the release of bonds worth up to $5bn from the Development Bank to fund “large-scale projects, such as improvement of the railway network, road construction, and energy and power supply developments”. The government has identified 5572 km of roads and 900 km of highways that require restoration under the umbrella of a MNT4.9trn ($3.5bn) development programme. Additionally, there are plans to overhaul rail links with Russia and China. In total, the government plans to invest MNT30.9trn ($22.11bn) in infrastructure, as well as a number of sectors, including mining, construction and energy, between 2010 and 2015. As part of its development plans, Ulaanbaatar also wants to build 100,000 affordable family homes across the country by 2016 as part of the Development Bank-funded “Homes for 100,000 Households” programme, with 75,000 of these to be built in 17 different locations in and around the city. The project will require approximately 2.3m cu metres of concrete mortar – an increase of at least 400,000 cu metres of concrete mortar annually – in the coming five years. Current market demand is around 800,000 cu metres annually, according to a report by Frontier Securities, a local securities firm. Speaking at an international conference held in September that focused on the plans for overhauling Ulaanbaatar’s housing and public transport network, Mayor E. Bat-Üül said he was studying Tokyo as a model for the city’s urban construction system, due to the speed, efficiency and safety levels seen in the Japanese city’s post-earthquake re-building. Given the expected rapid urbanisation that will likely see Ulaanbaatar’s population swell in the coming years as an indirect result of the wealth generated from the country’s vast coal and copper mines, such grand public transport schemes will be required to sustain growth. Ulaanbaatar is already home to 42% of the population, a figure expected to rise to 55% over the next 18 years. As development plans forge ahead, concerns over the supply of construction materials have eased with the announcement in September that FLSmidth, a Denmark-based cement and engineering firm, had been awarded a contract worth approximately $111.2m from Mongolyn Alt (MAK) Group to build a greenfield cement plant with a capacity of 3000 tonnes per day. The MAK plant will be located near a limestone deposit, some 330 km from Ulaanbaatar. Domestic firm Remicon JSC also confirmed earlier this year that it was planning to build an $8m cement production facility with a 250,000- to 300,000-tonne capacity. Should Remicon double its capacity and become the country’s principal supplier by 2016, analysts have suggested its earnings could rise more than sevenfold. According to a World Bank report, cement consumption has grown more than tenfold in the past decade and is expected to reach 2m tonnes in the near term. At present, some 80% of the cement currently supporting Mongolia’s surging construction growth is imported from China. However, transport delays for materials have worsened in the past year, the bank has written, with reports indicating that the amount of time required to import materials has increased from 15 days to around 45. Another major issue facing the industry is human resources. In a June 2012 update, the World Bank reported, “capacity constraints are likely to prove a significant impediment to the massive road building and social housing plans announced by the government, as well as to housing developments planned by the private sector”. The labour market is currently dependent on Chinese labour, but officials have complained that this raises nationalistic tensions. Critics also say that the government must enforce the laws that stipulate the number of foreign workers should not exceed 3% of the 2.8m population, and that nationals from one country should not exceed 1%. While the release of new funds raises the prospects of Mongolia achieving its ambitious infrastructure goals, measures that ease the supply of materials and labour to avoid timing and funding issues will also be necessary to continued building.

Peace bridge to be expanded

The government is planning for a three-phase project that would expand Peace Bridge to reduce automobile traffic coming into the city center. Due to the growing population and car ownership, traffic into the city center has grown worse with each passing year. Using financing from the Asian Development Bank, the government plans to employ this project to reduce traffic and create the environment for a safe railroad system. An economic study for the expansion to the bridge will be ready by August, with construction to begin in spring 2013. The project includes plans for a special lane designated for buses on the 42.5 kilometers of road to be built. The project is a part of the larger Investment for Ulaanbaatar's Public Transportation initiative.

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.