Large Increases in Prices of new Ulaanbaatar Apartments
Ulaanbaatar's Residential Real Estate is back on the increase.
Ulaanbaatar apartment prices have already considerably increased within the last year, part of this growth in prices is blamed on the government's "100,000 Apartments Project".
As the Mongolian Government’s housing project “100,000 Apartments Project” gets started, the demand for residential property shows no sign of weakening and prices keep rising.
It is estimated that within the last year, new properties within the city centre of Ulaanbaatar have increased on a per square meter basis by as much as 400USD. It is also widely believed by construction companies and Mongolian Real Estate professionals that not only will the 100,000 Apartments project not reduce prices, it will be impossible for the government to maintain the advertised rates unless the project is itself very heavily subsidised.
The 100,000 Apartments project is spread over 6 distinct locations, the current plan is for the Government to provide funding (447 billion MNT) to deliver infrastructure projects for this area such as sewers, electricity and water so that the overall construction price would be cheaper. This subsidy might well be negated by the fast rising construction costs linked to the high price of raw construction materials as well as the 10 to 30% profit margins demanded by construction companies linked to the project.
The government has further promised that the construction standards will be equivalent to what is commonly known as Grade A but of course it will be up to the state agencies to decide what constitutes a Grade A and if this project meets the required standards. It is also now become clear that the majority of large construction companies in Mongolia will be involved in the project, therefore preventing them from spending resources and man-power on other projects in the city centre. It is feared that those construction companies will be hampered by the government, bureaucracy and general corruption to complete the project in time and on budget and will therefore waste too much time on a project that doesn’t work while not adding to the supply of other properties to the city.
Critics of the projects maintain that the state is launching this project simply to gather votes for the upcoming 2012 election but have not thought through the feasibility of this project, in the same way as the political parties promised money if they were elected in the last election. Some people expect the project to be dropped after the elections.
The main blame being thrown at the project is squarely aimed towards the 6% mortgage rate proposed by the state for the project as a lower mortgage rate is expected to further drive up property prices as the number of people then able to acquire property will be exponentially bigger and higher demand with low supply will only drive prices further up. It is also feared that a few wealthy individuals will be in a position to take advantage of this lower rate through their connections and corruption and therefore make a great investment while the citizens will not be able to access this cheap financing.
As any real estate agent will tell you, location, location, location is the most important factor. The area around the National Park as well as the city centre near the State Department Store are becoming the most expensive where prices reach on average 2.5 million MNT per square meter for a 3 to 5 bedroom apartment. It is Mongolia’s elite, who are able to pay in cash, that will live in those apartments while the rest of the country cannot get the means to buy into the new apartments.
Source : GoGo
Ulaanbaatar apartment prices have already considerably increased within the last year, part of this growth in prices is blamed on the government's "100,000 Apartments Project".
As the Mongolian Government’s housing project “100,000 Apartments Project” gets started, the demand for residential property shows no sign of weakening and prices keep rising.
It is estimated that within the last year, new properties within the city centre of Ulaanbaatar have increased on a per square meter basis by as much as 400USD. It is also widely believed by construction companies and Mongolian Real Estate professionals that not only will the 100,000 Apartments project not reduce prices, it will be impossible for the government to maintain the advertised rates unless the project is itself very heavily subsidised.
The 100,000 Apartments project is spread over 6 distinct locations, the current plan is for the Government to provide funding (447 billion MNT) to deliver infrastructure projects for this area such as sewers, electricity and water so that the overall construction price would be cheaper. This subsidy might well be negated by the fast rising construction costs linked to the high price of raw construction materials as well as the 10 to 30% profit margins demanded by construction companies linked to the project.
The government has further promised that the construction standards will be equivalent to what is commonly known as Grade A but of course it will be up to the state agencies to decide what constitutes a Grade A and if this project meets the required standards. It is also now become clear that the majority of large construction companies in Mongolia will be involved in the project, therefore preventing them from spending resources and man-power on other projects in the city centre. It is feared that those construction companies will be hampered by the government, bureaucracy and general corruption to complete the project in time and on budget and will therefore waste too much time on a project that doesn’t work while not adding to the supply of other properties to the city.
Critics of the projects maintain that the state is launching this project simply to gather votes for the upcoming 2012 election but have not thought through the feasibility of this project, in the same way as the political parties promised money if they were elected in the last election. Some people expect the project to be dropped after the elections.
The main blame being thrown at the project is squarely aimed towards the 6% mortgage rate proposed by the state for the project as a lower mortgage rate is expected to further drive up property prices as the number of people then able to acquire property will be exponentially bigger and higher demand with low supply will only drive prices further up. It is also feared that a few wealthy individuals will be in a position to take advantage of this lower rate through their connections and corruption and therefore make a great investment while the citizens will not be able to access this cheap financing.
As any real estate agent will tell you, location, location, location is the most important factor. The area around the National Park as well as the city centre near the State Department Store are becoming the most expensive where prices reach on average 2.5 million MNT per square meter for a 3 to 5 bedroom apartment. It is Mongolia’s elite, who are able to pay in cash, that will live in those apartments while the rest of the country cannot get the means to buy into the new apartments.
Source : GoGo
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