Mongolia: Buy-to-Let Apartment Boom in Capital as Expats Pursue Trillion-Dollar Mineral Wealth www.newsweek.com

Stood, square-jawed, beside the gold-hued Zaisan Monument in Mongolia's capital, the proprietor of a Hong Kong real estate portfolio beholds the flurry of activity below him in Ulaanbaatar. Like the Saker falcon, revered for its keen eyesight — and still beloved by the nomads who inhabit Mongolia’s steppe — the investor (named James) is also hunting, in a sports coat of Italian silk, which glints, subtly, in the morning sunshine. His intended quarry is not small mammals — but the newly completed residential stock which dots the central business district of Ulaanbaatar. He’s here to buy. This east Asian capital commands far juicier returns than anything he’d acquire on home turf. 

In a country where explosive growth in the construction sector has been repeatedly stymied by stark recession, James knows his attention cannot alight on dormant building sites. As he explains, the debt market — which is known for its cripplingly high interest rates — has arrested the completion of older developments. Moribund projects have not been released to market. Many may form ghost-towns on the sidewalk for years to come. Any attempts to rejuvenate buildings begun during recessions past will likely idle. There’s a growing and immediate need to house incoming workers, in apartments that pass the prime (or “luxury”) bar mandated by international conglomerates. With Mongolia recording a 43.9% increase in industrial output in the first half of 2017 alone according to the National Statistics Office of Mongolia, expatriates are returning to the city in numbers which will likely be higher than this country has ever known. The 44.2% increase in trade with China during the first two quarters of 2017 only further illuminates why expatriates are arriving in droves.

Since the collapse of the Soviet Union — but primarily in the last decade — Ulaanbaatar has oscillated between construction boom-town, and a city shaken by stark recession, forged by predatory lending patterns and bad loans. While the city’s house price index has shown only modest growth since its initiation in 2013, buy-to-let properties in the city’s most desirable buildings are delivering very strong returns for investors. Kacper, who owns ten apartments, is a Central Asian businessman — with investment channeled from both Beijing and Moscow. Like others, his mantra of “buy in Baatar” — which echoes in marble board-rooms, expat dining-spots, and even neighboring countries — makes financial sense. It’s a lucrative formula, forged forward by a class of moneyed apartment buyer who possesses liquid capital and fosters trust with foreign investors.

“Expatriate workers are returning to Mongolia in droves, and mining companies have shown an economic commitment which outstrips any involvement we’ve known before,” Kacper explains. “The demand for high quality apartments that are actually complete and ready for market, outstrips what can be delivered this year,” he reiterates. Even as he eats French fries fried three times over in one of Ulaanbaatar’s swankier eateries, he scours the cityscape himself — like a golden eagle, in Must de Cartier shades. He skips dessert to countersign for his latest acquisition — with a wide prospector’s smile, and a rose-gold pen by Dupont. 

While no substantive study has been conducted to measure the actual availability of rental stock in Ulaanbaatar compared to demand, four real estate developers I spoke to concluded that requests from expatriates for residential rental stock will come close to either meeting or exceeding the limits of their portfolio by the 4th quarter of 2017. During the first two quarters of 2017, mineral extraction — which still contributes as much as 50% to Mongolian GDP — showed exceptional results.

Figures from the National Statistics Office (NSO) illustrate the change in Mongolia’s fortunes in no uncertain terms. Coal exports in June were 281% higher than those in the same month of the preceding year. Possessing the 12th largest copper deposits in the world, the metal accounted for nearly 50% of exports in 2016. Correspondingly, the final quarter of 2016 and first quarters of 2017 led to a flurry of announcements to either commence or expand extraction by mining companies. All analysts concur that rising copper prices can only result in substantial capital inflows. As Kacper notes, “Mongolia can only cash in.” 

There no doubt whatsoever that Kacper is correct. The mining licences issued thus far illustrate his point. Rio Tinto is not only continuing planned investments, but has restarted exploration for copper after a five year pause. Aspire is raising a private placement to develop its Nurestei coal-coking project. Kincora has acquired a new exploration license for copper and gold. Petro Matad has extended its options for oil exploration in the Taats Basin. The government has doubled the amount of land for exploration, prompting Xanadu Mines to predict a boom of similar size. 

Most mining staff come to Mongolia for short periods of time. They tend not to be apartment buyers, as often they have family and settled lives elsewhere. What they do tend to have, however, is large housing allowances, underwritten by even larger multinational funds. Executives crave amenities and home comforts. They do not care for long commutes on congested highways. Much like both James and Kacper they express a preference for City Centre districts such as Sukhbaatar, and, to a lesser extent, Chingeltei.

Lee Cashell, who is CEO at Asia Pacific Investment Partners, believes that yields of 9%-12% are fully achievable in brand new, prime buildings. He’s also clear that these investors are likely to ride the crest of the UB buy-to-let wave:

“Rents are likely to grow rather than decline, meaning better returns on initial acquisition prices. There are strong prospects for capital appreciation too. Prices have tended to reflect economic growth. The International Monetary Fund (IMF) predict an 8% expansion by 2019, placing Mongolia’s among the fastest growing economies in the world. When you combine this with the poor financial position of many developers, and a lack of land, there’s already an upward pressure on sales prices.”

In the recently opened Belgian beer bar in the Shangri-La complex, as foreign contract workers mingle over Lindemans Framboise and moules frites there’s a sense that “Minegolia” may well be back in business for foreign buyers.

But while construction is a familiar industry to Mongolia, which will still be stimulated by mineral extraction, if handled appropriately the pressure for a luxury finish in an unremitting climate can also foster many of the new skill-sets sought by local developers and tradesmen. Focus on construction which simultaneously provides local people with transferable skills will benefit Mongolia — in a manner which FDI, alone, cannot always provide.

First-ever media and commentator workshop concludes in Ulaanbaatar www.the-afc.com

Ulaanbaatar: The Asian Football Confederation (AFC), under the AFC League Development Programme, staged the first-ever Media and Commentator Workshop in the Mongolian capital of Ulaanbaatar which concluded yesterday.

More than 30 members of the Mongolian Football Federation, Mongolian Premier League, Mongolian Premier League clubs and national television and media attended the workshop in the Mongolian Football Federation headquarters.

Major trading firms post gains in profits www3.nhk.or.jp

President’s office directs Ministry of Finance www.montsame.mn

Ulaanbaatar /MONTSAME/ On August 4, Chief of Staff of the President of Mongolia Z.Enkhbold has delivered an official letter on cooperation on offshore account with the international organizations to the Ministry of Finance.

Innovation helps desert tourism flourish in Inner Mongolia www.chinadaily.com

Residents in desert areas in northern China's Inner Mongolia autonomous region have shaken off poverty and embarked on much better-off lives, after desert tourism driven by innovation was brought in.

The Kubuqi Desert in Ordos, the seventh-largest in China with an area of 18,600 square kilometers, was once the source of frequent sandstorms hitting the country's northern areas.

The desert's harsh environment resulted in poverty for local residents, most of whom only lived on raising livestock.

In the past 30 years, great efforts were made to tackle the desertification and improve residents' living standards.

Then, an innovative business model that incorporates governments, companies and locals was introduced with the aim of greening the region and creating jobs.

With guidance of governments and investment by the companies, farmers and herdsmen started to plant herbs, build solar power stations and develop tourist facilities.

In 2006, local governments and Elion Resources Group－a company engaged in ecological environmental protection－invested in building a new village.

Doodgatsaa village gathered 36 scattered households and provided them with free training, after which villagers started to run their own businesses.

"In the past, we lived in shabby houses built with dry grass and mud," said Tserenbaabuu, a 41-year-old herdsman in the village.

Tserenbaabuu and his family now live in a 110-square-meter house.

He added their total income has increased to 200,000 yuan ($30,300), 10 times as much as in the past when raising livestock was the only source of earnings.

It is the prospering of tourism in the region, he says, that has changed their lives.

A national 4A tourist site－Qixinghu Desert Eco-tourism Spot－emerged, as developers began tapping desert tourism resources. It attracts more than 120,000 tourists annually.

The site helped boost tourism in nearby villages, including Doodgatsaa village which has been equipped with 32 home-style hotels.

In partnership with two herdsmen, Tserenbaabuu bought 20 vehicles for off-road driving in the desert, with the help of banks in Ordos.

"A vehicle can hold three tourists, and traveling across the desert will cost each of them 240 yuan," he said.

He also hired 10 villagers as drivers and pays 4,000 yuan to each monthly from May to October, the peak season for desert tourism.

To support the business, he constructed a family hotel that can hold 20 tourists, accompanied by a restaurant to serve meals.

"When the hotel is full at peak season, I can earn 2,000 yuan each day," he said.

A household like his can earn 120,000 yuan annually on average, up from around 10,000 yuan before 2006.

"It's really a great change for me," Tserenbaabuu said.

China has total desert area of more than 2.6 million square kilometers, according to the sixth Kubuqi International Desert Forum held last week.

The experiences accumulated in the Kubuqi Desert can be a model to share nationwide and worldwide, said attendees at the forum.

China, Kazakhstan feel port's benefits www.chinadaily.com

The logistics terminal in Jiangsu province's Lianyungang Port, built by China and Kazakhstan, has served as an important platform to improve economic cooperation, according to officials.

Former Mongolian health minister sentenced for corruption www.news.mn

Former Minister of Health and Sports G.Shiilegdamba has been sentenced to 5.1 years in prison for corruption. In addition, O.Davaasuren was sentenced to 1.6 years in prison for giving bribes, G.Ganchimeg, former state secretary of the Health Ministry was fined for MNT 19 million and E.Gantulga, an executive of ‘Metro Network’ LLC for 14 million.

Mongolia's Foreign Trade review www.mongolbank.mn

Overview: As of June 2017, cumulative trade turnover increased by 36.4% or USD 1344.4 million from that of the previous year and reached USD 5,036 million compared to the same period of previous year. Exports increased by 42% or USD 912.9 million and imports increased by 28.8% or USD 431.5 million. During the reporting period, trade balance recorded surplus of USD 1,175 million, which was USD 481.4 million higher than that of the previous year.

SoftBank invests $250 million in U.S. online lender Kabbage www.reuters.com

NEW YORK (Reuters) - Kabbage Inc, a U.S. online lender for small businesses, said on Thursday it had raised $250 million in equity funding from SoftBank Group Corp (9984.T), the latest fintech investment by the Japanese technology conglomerate.

Mongolia preparing for another harsh winter www.news.mn

The Mongolian National Emergency Committee met earlier today (3rd of August) to discuss measures and strategies for preparing for the coming winter. According to the Ministry of Food, Agriculture and Light Industries, this year 150 soums (districts) have been hit by drought and, as a result, have not been able to prepare the fodder which the livestock need for the winter. To remedy this situation, Mongolia is planning to buy 400 thousand tonnes of fodder from its northern neighbour, Russia.