The UB Post interviewed B.Javkhlan, a real estate expert with 10 years of work experience in Singapore and Mongolia. He is CEO at real estate portal www.oly.mn in Mongolia. In the following interview, he talks about the real estate market in Mongolia.
There are many new construction projects in Ulaanbaatar. Do you see any significant changes in this sector from previous years?
Right now there are 350 active construction projects in the market in Ulaanbaatar. It is a very large number. From a consumer point of view, there are a lot of choices, but a little bit difficult for users to get the information they are searching for from one source. But, there are many good changes compared to 10 years ago. Mongolian construction companies are researching and studying international standards and implementing them. First of all, there is a change in the real estate sector due to changing customer demand. Ten years ago, they used to buy four walls and a ceiling, but now they buy a more comfortable and better lifestyle. In recent years most of the projects were combined with services and housing. Construction companies are providing services for residents, including supermarkets and pharmacies, depending on the size of the area and number of residences.Second, the industry has begun producing technology-based innovative products. For example, apartments are smarter – occupants control heating, curtains and other things with one click. Construction companies are also keen to use eco-friendly technologies. I see these changes.
You just said about 350 projects are active. Is supply high because of high demand?
Yes, you can say that. It is true that people prefer to live in apartments, because of the landslide, air pollution and environmental pollution. There is a real demand if the building is in a profitable location and knows the target market based on research. However, if the construction plan is not good and the location isn't optimal, it'shard to sell.
What kind of accommodation sells the fastest?
Many were surprised when they started selling 20 or 30-square-meter apartments. Now the biggest selling apartments are small apartments. In addition, mortgage loans have a size limit, so it has affected customer choice. And planning is very important. If you cannot use every corner of your house, there is no need to buy a big apartment. In addition, it is important that schools, kindergartens, and hospitals are close and accessible.
What determines the price per square meter?
According to the latest reports, the average apartment price in Ulaanbaatar is 2.2 million MNT per square meters. In general, construction companies calculate their cost per square meter. There are two biggest factors that influence price. The first is land price. The second is infrastructure. However, after the construction and commissioning of the building, they give the infrastructure they built along with the apartment to the state for free. Furthermore, there are many expenses from construction materials and labor force. The cost of materials is relatively small compared to those mentioned above, as many different construction materials are being manufactured in Mongolia.
How much does housing prices match with people's purchasing power?
Actually, it is not the price of a few private companies. It depends on macroeconomic indicators, inflation, and demand. Especially our economy depends on mining. At one point, the pricing bubble in the real estate sector has now been quite stabilized.
How long do you expect the price stability to last?
Everything in the economy has a certain cycle of growth, decline, and stability. Looking at the last three seasons, prices are quite stable. In my opinion, it is now stabilizing, so prices will grow slightly. But it's hard to say very confidently because everything in Mongolia is related to politics. Just when the economy starts to grow, the next election takes place and may affect growth.
People say that they are going to buy an apartment and sell it in the future when it is expensive. Is now the time to buy? Or should you wait for prices to fall?
If someone who has an understanding of the economics believes prices will fall, they can wait for a little. Real estate is an investment like securities, stocks, and savings. But if you want to make money in a short time, a real state is not the right choice. You need six or seven years at least. You are going to make more money if you sell you an apartment purchased seven years ago and you lived there during this time. If you can calculate well, you will realize that real estate value never lost and is a very good investment.
Most of the foreigner rent apartment in Mongolia. What do you think about the real estate renting market in Mongolia?
There are few rental apartments for only foreigners. But mostly they are expensive, with a monthly rent of five to six million MNT. As the Mongolian economic is growing and widening, some mining and investment companies have come to Mongolia from abroad. Of course, not everyone is a CEO. I think the real estate renting service for middle-class foreigners looking for affordable service, security and moderate price is inadequate in the Mongolian market. There is a potential market because people always come here.
Buying an apartment is not like buying clothes or other things. If you make a purchase, it will not move and you might have to live there for a very long time and the price is big. What would you advise people seeking to purchase a home?
Location is everything for all real estate as customers must pay important attention to that. Is it near to your children’s school, your work, the main road, bus station, and other services? Where are the police station and family clinic? Costumers have to research. On the other hand, the quality of construction is also very important. But it's hard to know if not- professionals are looking from the outside. My advice is to do research about the history of the company's construction project and see the project they built five or six years ago. Also, you need to learn more about the company building the apartment and the union, and always pay attention to their operations as unions of apartment owners are responsible for providing you with health and safety living environment and the heating service company supplies water and heating to your home.
Where do you see the real estate sector developing in the future? What will be important to making progress?
The information technology is impacting all areas of business, public services, and finance, not just in the construction sector. Information technology is being utilized in all processes of construction, like design, planning, building, marketing and sales, and management. Design firms used to use just 3D, but now they use 4D and 5D software. People stopped raising money solely from commercial banks. Mostly, they are seeking investment from real estate platform companies or people. Generally, this sector is expanding. If construction companies are properly managed and the government provides some support, Ulaanbaatar will develop fast. I think the Mongolian real estate sector is moving forward. For example, the best contractor companies have been identified. Many foreign investors are interested in Mongolia for investing in real estate. If everyone fulfills their own role, we will see faster development.