Working in Mongolia: Getting warmer
Mongolia is famous for many things, and being a hotspot of construction activity is not among them – but perhaps it should be. Thanks to a booming economy, the country is developing at a rate of knots. Building finds out why it’s well worth braving the cold
Must be prepared to travel. If you want to find the best emerging property markets in the world, that is. And as you plan your itinerary on the global map, you can firmly put a pin on Mongolia. Yes, Mongolia.
It may sound like a bit of a left field suggestion, but just a little investigation into Mongolia’s resources and the predicted future of its economy and real estate schemes can present an extremely compelling argument.
Lee Cashell, the man behind investment company Asia Pacific Investment Partners (APIP), sets out the situation: “We have been doing business in Mongolia for nine years and started the first real estate business here, called Mongolia Properties. At that time, lots of Canadian companies were setting up shop and looking for mining opportunities. It was just a trickle of interest back then, but as people discovered more minerals and commodities prices rocketed, the trickle has turned into a flood.
“In 2008, things moved from the exploration phase to the mining phase, which means that the economy is now looking at growing 15-25% a year, which could make Mongolia one of the world’s fastest growing economies. Plus it’s a democratic country, with low tax rates, no capital gains tax and no high rental yields – possibly one of the best places to invest in property in the whole world.”
Big UK firms such as Foster + Partners are already persuaded, and the architect is in discussions with APIP about two projects – a 50,000m2 residential and hotel scheme with an anticipated $100m-plus sales revenue, and a 200,000m2 mixed-use complex with expected proceeds of $200m.
So what opportunities might await the adventurous in the country of Genghis Khan?
A gold mine
Mongolia is seen by many as the scene of the next construction rush, according to Cashell. Since the discovery of gold and copper five or six years ago, the country’s GDP has been growing at one of the highest rates in the world. Foreign direct investment has soared from $25m in 1997 to $344m in 2006 and a colossal $1bn (£620m) in 2010. The country has over 8,000 different deposits of 440 minerals, all adding to its financial kudos and stability.
Unlike many emerging markets, where foreign companies must weigh up tempting opportunities against the difficulties of doing business, Mongolia has a stable political system and few problems with corruption. According to the World Bank, Mongolia ranks 73 out of 183 countries in the world for ease of doing business – higher than any of the BRIC countries. It is understood that this stems from the fact that, following a period of Soviet influence up until the early nineties, Mongolia went through a transition period from communist nation to free-market democracy. The current president, Tsakhia Elbegdorj, has pledged to continue fighting corruption and uphold freedom of speech and of religion. And, according to the CIA World Factbook, Mongolia has no “ongoing disputes or conflicts” with any other country.
It’s a democratic country, with low tax rates, no capital gains tax – possibly one of the best places to invest in property in the world
Lee Cashell, APIP
In terms of construction opportunities, property development in Mongolia is expected to be one of the fastest growing sectors over the next three to five years, according to APIP. The price of property in Ulan Bator, Mongolia’s capital, has rocketed, says Cashell, due to an existing shortfall in supply. At an apartment building called The Regency Residence that APIP sold to Property Frontier, a London broker, individual flats that sold for $800/m2 off-plan in 2007 are now being sold for $2,200/m2 in the secondary market to wealthy Mongolians.
Office space is also at a premium. “The arrival of multinational companies such as Ernst & Young and PwC in Mongolia is driving the demand for quality office space,” says a spokesperson for APIP. “Demand for high-end residential units has increased hugely due to the large number of expats arriving in Mongolia in pursuit of mining jobs or other business opportunities associated with the country’s increasingly renowned economic growth. Combine this with very limited supply in the capital, it is expected there will be a severe imbalance between available units and demand in the coming years.”
So – the work is there. But how easy is it for UK construction workers to join the hordes? Cashell says that he is already having discussions with foreign construction companies and architects and that there are certainly opportunities available – especially given the shortage of construction professionals in Mongolia.
Due to the nature of the work project managers, masterplanners, architects and anyone with legal or accountancy knowledge are in particularly high demand. Also sought after is anyone with experience designing and building condominium-style residential units where there are facilities such as a concierge, lobby, food shop and gym all contained in one space. Temperatures in Mongolia can fall to -30ºC in the winter – and so another area of specialist knowledge that is in demand is of the kind of housing that offers residents everything they need without having to go outside – is another key skill required.
Demand for high-end residential units has increased hugely due to the number of expats arriving in Mongolia in pursuit of mining jobs
The cold is one challenge that has a significant impact on construction companies – it means that there is a short building season in the country. While a development would be completed in 18 months in a warmer climate, it is likely to take nearer two to three years in Mongolia.
That aside, Cashell says that now is a good time for UK firms and individuals to take a trip out east: “We have one of the biggest land banks in the whole country,” he says. “And we are seeking UK construction partners and individuals to work with on this. We have about 10 years’ worth of development projects in our pipeline so there are long-term opportunities. We keep getting larger, which means we are outgrowing the skills in our little construction company.
“And since 1990 there has been very little investment in infrastructure. Now the government is getting richer through the revenue from mining, there will be opportunities here too with roads, airports, power stations. And the school and healthcare facilities need a lot of investment too – which in turn will create yet more construction opportunities. Now is the time.”