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For an emerging economy with a difference, look no further than Mongolia
October 15, 2013Article by Ray Withers
With a rich history and a population that remains 30% nomadic or semi-nomadic to this day, Mongolia is a country of fascinating contrasts. Despite being the 19th largest country in the world, it has a population of just 2.9 million people, making it the most sparsely populated independent country on the planet.
Mongolia shot to global attention in 2011, with Citigroup analysts flagged it as a Global Growth Generator, earmarking it as one of the most promising growth prospects for 2010-2050. At the same time, the World Bank upgraded this emerging market from a low to a middle income country, while Mongolia led the world to become the fastest growing economy that year, with a growth rate of 17.5%.
Things have certainly moved fast for Mongolia. Mineral deposits estimated to be worth USD 1.4 trillion have led to rapid economic expansion, with growth for 2013 predicted to reach 14% according to the International Monetary Fund. In just three years, from 2008 to 2011, the Mongolian Stock Exchange quadrupled in size. A year later, the International Finance Corporation’s Doing Business report saw Mongolia move up from rank 88 in 2011 to position 76 in 2012 – an indication that the ease with which business could be done in Mongolia improved significantly in just 12 months.
The move from a communist regime to a more market-led existence has coincided with the economic impact of Mongolia’s mineral deposits. Real income rose 20% between 2008 and 2011, while the number of retailers in the capital of Ulaanbaatar increased by an incredible 34% in the two years to 2010.
Demand for western brands and western-style retail experiences has experienced a massive surge in recent years. Between 2003 and 2011, annual per capita spending on clothing went up by 500% and the result has been a rising need for new retail developments that meet the demands of Mongolia’s increasingly cash-rich population.
Nowhere is this more in evidence that in the capital, Ulaanbaatar. Back in 2007, Property Frontiers’ pioneering residential developments in Ulaanbaatar earned investors an average return of 24% and 300% capital growth over four years, capitalising on the city’s real estate price rises, which have increased eightfold since 2001.
Ray Withers, CEO of Property Frontiers, comments,
“As one of the first property agents in the world to offer investment opportunities in Mongolia, this is one emerging market which lies close to our hearts. Home to some of our most successful projects, both in terms of capital growth and rental income, Ulaanbaatar still presents a wealth of opportunity for investors keen to cash in on the thriving commercial property market.”
From residential to commercial
Indeed as is commonly seen in the west, commercial rental prices are now following suit from residential highs, having moved upwards from a range of USD 15-35 psm in 2009, to USD 35-70 psm this year. That’s why Property Frontiers is once more working with the same award-winning developer in order to launch a brand new asset class in Ulaanbaatar.
In the city’s upmarket ‘Billionaire Valley’ area, The Village @ Nukht is a luxury, western-style shopping and leisure centre, already under construction and on track for completion by the end of Q4 2013.
The prime one hectare site will include a number of freehold high end retail units. Strong yields with expected rental returns of 14.8% NET (with an assured yield of 12% for 24 months) and anticipated capital appreciation of 15-20% per annum, are attracting keen interest from the global investment community.
With investment from USD 254,000, retail opportunities at The Village @ Nukht are expected to sell fast, which is far from surprising given the explosive growth of this dynamic country. While the wider world watches with interest, smart investors are ensuring that they are part of Mongolia’s fascinating and rapidly evolving history.
For more information on our high end retail investment in Mongolia, please get in touch today.