| From tents to real estate |
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It’s not for the fainthearted, but Mongolia with its massive housing drive is attempting to woo overseas property investors. Ginetta Vedrickas reports from Ulaanbaatar.
In recent years increasingly remote destinations have been touted as
‘‘emerging markets’’ and, while Bulgaria once seemed daring, today’s
buyers are prepared to look much further afield in search of good
returns. China has been on investors’ radars for some time now but a
recent addition to the market is its neighbour Mongolia, which is now
coming under the spotlight.Wherever you go in the world, it’s the same old story - if anywhere is worth investing in then chances are that Irish buyers will be in there first. Always at the forefront of any market, the Irish investor is renowned as a canny customer who sees the risk and, when the rewards are high, is more than prepared to take it. Chris Aherne set up Overseas Cork three years ago and first started selling in Spain before branching out into a range of destinations which include France, Bulgaria and Cyprus. His most recent addition is Mongolia, and he is now selling units on behalf of Mongolian Properties. ‘‘I met the company and was very impressed with both the development they are selling and the people, so I’ve decided to give it a go,” says Aherne. While he has no direct comparable developments to the Mongolian market, he points to the success of China. ‘‘This is a place where Irish investors have done very well, particularly in Shanghai,” he says. ‘‘China is a country of great economic progress and the fact that Olympics are being held in Beijing next year will have a knock-on effect and will help sell Mongolia.” Beijing is just over an hour’s flight from Mongolia’s capital, Ulaanbaatar where you find the international airport. The proximity may prove beneficial today but it hasn’t always been the case and, traditionally, relations with both neighbouring countries of Russia and China have not been happy. Occupied by Chinese warlords until the early 20th century, Mongolia asked for help from the Bolsheviks and the country fell under communist rule until the 1990s, when it became a democracy. Mongolia has suffered years of poverty, which is still apparent on the streets, but it has recently undergone something of a boom thanks to its rich natural resources of gold, copper and coal, which it now exports to China. Aherne commonly comes across a stereotype which stems from Mongolia’s most famous leader. ‘‘People I speak to generally associate the place with Genghis Khan and the herds. What they don’t think about is its reputation for eco-tourism and its beautiful countryside,” he says. And that is one thing that does strike you when you visit Mongolia. The journey may be arduous - you can expect to travel for almost 24 hours, usually with a stopover - but the vast tracts of beautiful countryside compensate. Twice the size of France, Mongolia is the world’s 18th largest country and around half of its 2.79 million population live in Ulaanbaatar. Of this population, around half still live in the tents known as gers which the country is famous for, and many people are still nomadic. The Mongolian government is keen to rehouse ger-dwellers into apartments through a mass building drive known as The 40,000 Homes Programme, which is well underway. It is Ulaanbaatar, UB to those who live here, which is attracting the interests of investors and Aherne says that rental yields here can be huge. ‘‘It’s fascinating that you can buy so far away and, if the returns prove correct, make so much money from it. Personally, I think it’s certainly worth a go but buyers must accept that this isn’t for what I term your ‘feelgood investors’,” he says. Rental income is expected to come from the expat population who work mainly for multinational mining companies, the tourism business which is taking off here and also from companies producing and exporting cashmere. It is here that Mongolia Properties are selling and letting resale properties and are building new developments which they sell to wealthy Mongolians and overseas investors. The company’s MD, American Lee Cashell, arrived here after meeting his Mongolian wife in Hong Kong where he worked as an Asian trader. On moving to Ulaanbaatar, his eyes were instantly opened to the potential of its property market. ‘‘I bought one cheap flat, then another and rented them out and, to my amazement, found I was getting a yield of 37 per cent,” he says. Cashell eventually formed Mongolian Properties and is now trying to alert the world to the country’s potential for investors. ‘‘Mongolia is a great opportunity,” he says. ‘‘It’s a great place to do business and there is very little supply of high quality accommodation, which is where our company has the edge.” Initially Cashell bought Soviet-built apartments, which still make up much of UB’s housing stock. Today’s capital is a tangled jumble of crumbling blocks interspersed with new build townhouses and high rise apartments which are increasingly being built. Demand from wealthy Mongolians and expats who want better standard accommodation is driving the market, according to Cashell. The government is not only behind the plan to improve UB’s housing stock; it is also keen to attract overseas investment and is currently legislating to introduce Mongolia’s first ever mortgages to a nation mainly still living in tents without sewerage. The government believes that overseas investment is vital to the Mongolian economy. ‘‘We’re encouraging foreign investment by ensuring that market conditions are favourable and by keeping taxes low. Ninety nine per cent of all businesses operate at a flat rate of 10 per cent, the lowest rate in Asia,” says S Ogonbat of the Foreign Investment and Foreign Trade Agency. He describes the Mongolian property market as a secure place for foreigners to invest: ‘‘There are no restrictions on money coming in or out of the country. This is a liberal climate and we want to promote the growth of real estate.” Cashell says that property prices are soaring at a rate of 20 per cent but admits that the market is difficult to gauge. Home ownership is a new concept to a mainly nomadic people and, while some locals put hefty price tags on their homes in the hope that wealthy foreigners will buy, others are naive to the risks associated with capitalism. ‘‘We go to apartment blocks and ask everyone if they’re willing to sell. Nine out of ten say no or want $50,000, but the little old lady might take $30,000 cash and then bang, we buy,” says Cashell. And quality newbuild appears to sell well. Mongolian Properties’ first development of 75 apartments, the Regency Residences, sold for $650 to $1,500 per metre, according to Cashell. ‘‘Two years ago, an apartment costing $65,000 would net $1,500 per month, a return of 24 per cent per year,” he says. ‘‘Today the same apartment costs $90,000 but rents for $1,700, a rate of 22 per cent.” The firm recently launched Park View Residences, where a three-bedroom apartment costing $120,000 could net $2,400 a month, says Cashell: ‘‘Good quality apartments are rare and these guys are on relocation packages and don’t care how much they pay.” But not everyone is convinced. Harald Finkmayer from Germany was hired by the Mongolian government for the unenviable task of trying to establish a land registry system in a country which only recently introduced birth registration. ‘‘I’d never buy here, it’s too risky and any high profits come from a high risk investment,’’ warns Finkmayer, whose chief concern is that while foreigners can own property sold on 15 year leases and so far extendable for another forty, land is government owned and the future is uncertain. Plenty of expats are happy to take the risk, including Welsh geologist Ceri Morgan who bought an apartment where he lives when working in UB and rents out while travelling. ‘‘I didn’t buy the best rental property as I bought for my own use - it’s ground floor and not right in the city centre but I’m still making good returns although not as good as my mother, who has also bought here,” he says. Michael Goinhas runs the US-based agency Zarav biz, which sells new and resale property in Mongolia and is mainly targeting the US investment market. ‘‘We’re trying to promote Mongolia and let people know of the current opportunities there,” he says. Goinhas admits that, unlike the Irish, most US investors are not geared up to worldwide opportunities. He believes that British and Irish mentalities are much more open to new destinations but hopes that he can persuade buyers of the opportunities which he believes are available in Mongolia. ‘‘Rental income in UB is now amazing - on a fully furnished apartment which costs $61,000, an owner could expect to get a monthly rental income of $1,000.Where else in the world would you find that?” he asks. Zarav biz has a range of property for sale, new and resale, including a fifth floor apartment around 2.5 kilometres from the centre of UB on the bank of the Tuul river for $90,000. A three-bedroom townhouse in the Narkhan district is for sale for $225,000. UK-based Property Frontiers is marketing several developments on behalf of Mongolian Properties and the head of the firm’s legal, diligence and compliance department Marsha Lu believes that the Irish market will quickly see its potential. ‘‘It is an unusual destination but I liken it to Hong Kong back in the 1960s when an immigrant population moved first into boats then into apartments,” she says. ‘‘The Irish are pioneers and, once they learn about the market, they will see that the rental potential is significant and they will be able to exit quickly as supply is currently limited.” CONTACTS Mongolian Properties: 0097699091899, www.mongolianproperties.com. |
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