Mongolia provides a highly attractive investment destination amongst frontier markets. The legal system is strong and independent, and accords foreigners extensive ownership rights in sectors such as real estate. Taxes are low, with no capital gains and income tax fixed at 10%. In addition to a favourable tax and legal environment, Mongolia is blessed with extensive resource wealth and proximity to major regional markets . GDP growth peaked at 17.1% in 2011 – making it the world’s fastest growing country at the time. Investors can ride the wave of this rapid economic development.

Mining Opportunities  –  Seeking out mining projects that have real value can be a daunting prospect, especially in a foreign market. However, good projects exist and need access to project finance       Mongolian Metals Corporation (MMC) owns the 37,000 hectare Khongor license in Southwestern Mongolia, adjacent to Erdene Resources’ (TSE: ERD) main Bayan Khundii site which features copper and gold porphyry.  The Khongor property is prospective for similar porphyry and epithermal styles of mineralization. Results from 2016-2019 geological mapping and geochemical analysis of rock chips, stream sediments and soil samples have identified numerous medium to high grade gold, silver and copper deposits with maximum grades of 3.35% Cu, 83.7g/t Au and 728g/t Ag.  Further exploration of these exciting deposits are warranted to determine the magnitude of the resource.  MMC is looking to raise US$800,000 in an equity private placement.

Real Estate – The real estate market is highly focused on the capital city, Ulaanbaatar, which is under pressure due to a fast rate of urbanization; supply constraints due to capacity, weather, geography and capital; and the rising wealth of its residents.   Ulaanbaatar’s inhabitants account for approximately 46% of Mongolia’s population of 2.8m. Forecasts indicate that by 2020 this will grow to 54%, representing about 1.5m. Mountains either side of the city restrict where the expanded population can live.  

Demand  –  Rapid economic growth is expected to continue at double digit pace in the medium term  Significant urbanization and demographic changes  Rapid increase in the number of international investors and expats, looking for international standard accommodation and commercial space  Rises in real wages for a substantial segment of Mongolian society, moving from low to middle income status  An emerging class of extremely wealthy Mongolians  Rapid development of the mortgage market is reducing financing constraints for homebuyers  Peace Boulevard is the sole direct connection between the East and the West parts of the city. There are nine administrative districts in the capital with the center, Sukhbaatar, home to the parliament, as well as government buildings and all but one of the country’s Grade A office towers.  Real incomes were 20% higher in 2012 than in 2008, causing the World Bank to upgrade Mongolia from a low to a middle-income country.  Key drivers and supply constraints in Ulaanbaatar’s real estate market include the following:   Supply Supply chain issues are hampering transportation of construction materials  Lack of available land in high demand areas in the center of Ulaanbaatar  Spatial development constraints, as projects effectively cannot be built outside Ulaanbaatar’s existing heating grid  Geographical constraints caused by the city’s surrounding Ger districts, with plot owners enjoying strong land ownership rights allowing them to halt developments.  Lack of access to financing for many local developers

Market Outlook–  Mongolia’s economy is forecast by the IMF to grow 14% yearly through to 2016, underpinned by a thriving mining industry and China’s increased demand for coal.  With the expansion of the mining and financial services industries, including the country’s insurance and lending sectors, the demand for high quality Grade A and B office space is expected to grow substantially.  As more and more international brands consider entering the Mongolian market to capture demand from the increasingly affluent population, it is those retail scheme that are well designed and strategically positioned that will benefit from full occupancies and will set market rental levels.  All of the positive macroeconomic dynamics have led to unique investment opportunities, in terms of high rental yields and strong capital appreciation. Mongolian real estate is likely to feature higher rental growth, land values and sale prices for the next five years. Click here to view the latest forecast for the Mongolian real estate market, generated by our dedicated research team.  Mongolian real estate is proving to be an attractive portfolio diversifier for a growing number of private and institutional investors worldwide. This is an incredibly exciting time to be entering the market that offers rare first-mover advantages. 

National Development Agency of Mongolia

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