A Tour of Ulaanbaatar

Today I was taken around on a property tour around Ulaanbaatar by Jess Lampe, the Director of Mongolian Properties (and my tour guide for the day). What a city. We started at the office on Seoul Street at 9:30 and made our first stop in Zaisan at the Zaisan Soviet Monument, which commemorates the friendship between the Soviet Union and Mongolia. The Zaisan Soviet Monument is at the highest point in Ulaanbaatar, up on a hilltop. Even from there all I heard were echoes from the multitude of construction sites in the city. From that point I was able to see Ulaanbaatar in its entirety, and to appreciate its enormous scale.

Residential buildings are springing all over the city, and you come to wonder if there are enough people to fill them with Mongolia's total population at 2.8 million, and Ulaanbaatar's at 1 million. Assuming there are, the next question is if they can afford to live in these new and expensive apartment complexes. 60% of Mongolia's population currently reside in the gerr districts, living in Yurts, and burning coal for heat in the winter. The average income is around $3000 per year. Many of these new apartments start at several tens of thousands of dollars.

This seems at first like a terrible bubble, and it very well could be. However I can guess at two reasons off the top of my head why this situation is not as dire as one might first believe.

1. "the Mongolian government has just given each citizen 538 shares in the Erdenes-Tavan Tolgoi IPO. If the IPO hits its anticipated $10 billion, each Mongolian shares would be worth about $360." (http://oilprice.com/Energy/Energy-General/Investors-Salivating-Over-Mongolian-Energy-Resources.html) There is a holding period on those shares, however, in which the Mongolians are not allowed to sell their ownership of the Tavan Tolgoi mine.
538 * 360 = $193,680
Right about now, I wish I was Mongolian.

2. The Mongolian mortgage market is starting out, making it possible for families to begin occupying these apartments now.
I'll look into the mortgage rates and write about it in my next post. I feel like the rates would be high.. MBS anyone?

Next we drove through the 3rd and 4th micro-districts area. Jess told me about an acquaintance of his that owns a mid-sized multistory box shaped building which houses a bunch of flea market type stalls and makes $100,000 per month on rent. I'd need to look into real estate prices in that region, but it sounds like one of those situations where if I had some money lying around I'd go buy a nice property on the main street in the bustling 3rd and 4th micro-districs.