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Strike It Rich With Property In Mongolia
January 12, 2009Article by Ray Withers
You could literally end up sitting on a gold mine if you invest in Mongolian property. Property in Mongolia may seem an unlikely investment decision – but the country is riding the wave of a gold, copper, and coal-mining bonanza. Big players like BHP, Rio Tinto, Ivanhoe, and Centerra Gold, are swarming around the sparsely populated and mostly unexplored country. With them are commercial missions and politicians.
The good news is they are all looking for Mongolian property for their workers. To upgrade Mongolian real estate standards, the government will grant foreigners an Immoveable Property Ownership Certificate, which is equivalent to freehold ownership. Frenetic building is taking place in the capital Ulaanbaatar, and the jewel in the crown is The Olympic Residence. This iconic building is planned as the tallest building in the city at 18 storeys high and will dominate the Ulaanbaatar skyline Currently under construction, the building will have over 100 apartments varying from studios to six bedroom penthouses, all finished to a high standard. At the street level, the building has shops, restaurants and a food court.
Based on the current rental rates the apartments should generate a net yield of at least 10%. Property Frontiers has an exclusive allocation for the development with discounted prices starting from £88,600 for a one-bedroom apartment. The property market is in an early phase, and it’s difficult to find concrete figures showing recent growth. Most of the existing property is poorly maintained concrete apartment blocks dating from the Sixties. Mongolia’s mineral resources are enormous. The country has the world’s largest copper mine, expected to provide over $100 billion of ore over the next 40 years. Copper prices have risen 250% between 2002 and 2007. Ready outlets are available as the country is sandwiched between resource hungry Russia and China. The Olympic Residence is close to the city’s administrative and business districts and is expected to serve the long-term needs of diplomats and businessmen.
In 1990 Mongolia abandoned 70 years of Soviet communism and introduced political and economic reforms. Democracy and privatisation were protected in a new constitution. The economy fell apart after the Russians withdrew, leading to widespread poverty and unemployment. Exploitation of mining reserves, especially coveted by China, is expected to launch the country in to the 21st century. Rental income and capital gains are taxed at 10%. Mongolia property investors may also have to pay a property tax of about 0.6% of the property’s registered value with the government. Flights are available direct from London Heathrow to Ulaan Bataar by Aeroflot or by flying to China and taking a short-haul flight. The return cost from London is about £750 per person in economy class.