Construction Problems

Not very good news so far on Mongolia's "40,000 Homes" programme [a government initiative to ease the chronic housing shortage and encourage home-ownership amongst citizens of UB], according to the 21st June UB Post. At a recent conference of the National Chamber of Commerce, representatives of the country's construction firms voiced considerable complaints, particularly about the problem of bribery. Although the language given in the paper is a bit vague, it suggests that bribes in the region of $1,000,000 for the better areas of the city, have to be paid before a given project can commence. The bribes demanded by officials are so high that only foreign companies can afford to build there, so "Foreigners' townships will come up on lands near a water source and with pure air, while Mongolian citizens in their own country have to live in sub-optimal conditions." Even in the less desirable areas, a continual flow of back-handers has to be paid. Certainly, there is plenty of construction going on in the better parts of the city at the moment, and all quite clearly marketed at the foreign buyer. "Project 40,000" is set to succeed, however, because astoundingly, the government has said that every apartment built and sold in the country - including those developments exclusively for foreigners and the super-rich - will count towards the target. In other words, what began as an initiative to improve the standard of living of the population may only serve to push up rental prices and line the pockets of corrupt officials and property speculators.

Inevitable Rant About Property Prices

Interesting piece in the Sunday Times on the sudden surge in the number of British people investing in the luxury flats being built here. When my mother told me about the article, my blood rose as it usually does over the subject of the British mania for investing in property, particularly in the spread of this to developing countries. I used to find house prices in the South East amusing, even with its knock-on effects on the British economy - but that was before Liverpool won the Capital of Culture 2008. How we larfed when we heard about someone from down south buying a house in Liverpool's Kensington, presumably on the connotations of the name, for £40,000. It reminded me of a competition in the 80s in the Sun newspaper to 'win a house on the Bread street!' Even in the late 90s the house Ringo Starr was born in on those streets sold in auction for just a few thousand pounds. Hang on while I do a quick search on the price of 2-up 2-downs in Liverpool 8... well, it looks like you can still find one in the Dingle for a mere £90,000.

It's ridiculous to blame the Capital of Culture per se, it's property mania that's at the root of it. And of course year after year those people who repeat ' You can't go wrong with property, it only ever goes up' are proved right, so who am I to call it madness?

The prospect of an article telling me how British investors are spreading their insanity here fired all the usual rage buttons with me. Property prices in Ulaanbaatar are currently going up by 20% each year, the population is set to triple in the next ten years, and so there are more and more people desperately looking for homes. As I have already said, the average rental price for an apartment is above the average salary. [Edit: Of course, this is on the private rental market. Families fortunate enough to live in social housing allocated by the communists pay around $10 a month rent, which with utilities brings it to just under half the average monthly salary. I do not yet know how much the rent will be in the city's new '40,000 homes' scheme, nor how much social housing has been allocated since the end of communism. Many thousands of homes were built in the communist era, the last big wave being in the 1980s. Of course, all this information I'm posting is extremely flakily researched and entirely subject to failures of my understanding.]

Are people looking for holiday homes here? Of course, there is a shortage of decent hotel accommodation, but surely if you go on holiday to Mongolia, you want to stay in a ger? As it is, there are dozens of sparkling new buildings standing completely empty, while children and the destitute are living in any hole they can find. The government is trying to push a bill through parliament to allow the building of casinos that only foreigners can visit, and of course next year's Beijing Olympics should mean a big knock on growth of tourism here. At present there's only half a million visitors a year to the country.

It turned out on actually reading the article that the flats being bought by Britons are luxury apartments being built for Western high-flying business men and executives. It surprises me that there's that much of a demand for them, or that the demand is predicted to increase, but that's probably correct. If the high-flying executives are prepared to pay astronomical rents to live in their ivory towers then where's the harm? One investor in the article, Lord Newborough (now, at least - if he didn't buy his title - he's following a long and noble family tradition of squeezing the life-blood out of tenants) said “I was looking for an interesting high-yielding investment. It’s a democracy and the government are keen to see more foreign investment. Providing common sense prevails, it should be a very good long-term investment.” My failure to see how the whole world can see property prices increase ad infinitum is probably just a failure of my common sense organs - after all, the world's population is ever-increasing - it stands to reason, don't it? Before investing in the long-term Mongolian property market, I'd be interested in finding out when the Mongolian government are going to get around to ascertaining whether or not UB is the most polluted city in the world, and what they propose to do about it. Actually, the answer to the latter is bound to be 'build more homes', so no doubt the boom will continue.


A new development of luxury apartments just behind the Zaysan Tolgoy, beneath the Bogd Khan Uul -the 'Holy Mountain'- the world's oldest protected National Park. Also, conveniently within sight or just two minutes walk of the Children's Prison.

Admittedly, the idea of owning my own home is as attractive to me as to anyone else. I'd quite like to settle in Mongolia. I could probably buy a flat like mine in one of the nicer old soviet buildings for around $30,000. By next year it wouldn't surprise me if the same would cost $60,000. I guess I could buy a fully kitted-out ger for $1000.

Certainly, some of the poorest people in the city are getting rehoused - I imagine that the rate it's happening at is slow, but it is happening, and I believe that if they want to, the government here can get on top of the situation. I was giving my college students an end of term speaking test the other week. The student I was speaking to didn't have much English and so we chatted about his family. He lives with his mother and two sisters.

"Do you all live together in an apartment?"
"No, ger!" he replied with a smile.
"Well, uh, what do you think of living in a ger?" I asked.
"Ger is good," he replied proudly.
"So your family moved to the ger districts from the country...?" (he nodded) "How long have you been living in the ger district of UB?"
"Ten year!"
"Are you going to, would you ever move into an apartment if, er, if one was available?"
"Yes. Next year, next year we get," he said and his smile now broadened.
"So, you're going to be rehoused?" (nods) "Are you happy about that?"
"Yes, apartment wery good!"

The lad was about twenty years old, but he looked thirty or over. Living in the ger districts of UB is not great for the skin.

[My apologies to anybody reading this who buys-to-let, and who might take offense at my views on property investment. It is my personal opinion that spiralling house prices are harmful for a society and that, broadly speaking, there should be some kind of law against it. I'm a fan of social housing, where that can work positively alongside encouraging home ownership I am very happy. Where rents increase faster than salaries, then landlords are, as I see it, taking food from the mouths of their tenants. I am aware of the counter-argument that investing in property is investing in the infra-structure of a country, and is all for the nation's long-term good. I hope that it proves to be so]

One Million and Counting

A ceremony was held in Ulaanbaatar on May 8th to honour the birth of the city's one millionth citizen (born April 11th). Actually, the honour was bestowed on three babies born around the same time. After the birth of the children, the President and other worthies rushed to congratulate the families and speak proudly of this milestone event. All well and good, but a Mongolian friend remarked to me that all this celebration seemed a poor joke to him, considering the problems facing the city. The city's real millionth citizen was clearly born some while ago now and possibly to one of the uncounted thousands of people living here off the census books. Some estimates put the city's unofficial population at 1.2 or 1.5 million, with the ger districts growing and getting more crowded, and an unknown number of homeless people still living under the city in the heating system. The estimate for growth of the official population, as quoted in Thursday's UB Post, predicts 3 million citizens by 2015.

New apartment blocks are being built everywhere, but it seems that the demand must be well ahead of supply - for one thing property values are currently increasing by around 20% each year. I am hopeful that if the '40,000' homes scheme - which aims to use public money and private investment to build a new stock of social housing - begins to look like working then the government here might increase the project, as it's my guess that 40,000 homes ain't enough.

Happily for the city's three 'one millionth' citizens there need be no concern over their future housing. The one month olds were each presented by UB Mayor Ts Batbold with keys "too big for their little fists to grab" (UB Post) to single-bedroom apartments. Yes, in a city where people live in the sewers and the monthly rent for an average sized apartment is three times the average wage, the Mayor is handing out flats to babies.

I'm curious about these flats, but there weren't any other details included in the paper. Have they been handed over with any conditions? I mean, do they belong to the babies or their parents? I'm hoping that, however small these flats are, this means that at least three ordinary families here will get a chance to move into their own place and start building a better future - but maybe the flats will just be moth-balled for twenty years until the babies can make use of them - or sold so Dad can buy a Humvee.