Owning a home has long been considered a cornerstone of a stable life, unfortunately, for young families and middle-income Mongolians, that dream is slipping further out of reach with each passing year. Why have housing prices climbed so steeply? Is owning property becoming a pipe dream for ordinary citizens? Has household purchasing power simply failed to keep pace? These are the questions on everyone’s lips.
A quick scroll through any classifieds group tells the story. A modest one-room apartment now fetches 120 million to 150 million MNT. For a citizen earning the nominal average monthly wage of 2.5 million MNT, that price tag would mean saving every last tugrug of five years’ salary, without spending a single tugrug on food, clothing, transport, or anything else, just to afford four walls and a roof. “In this era of runaway inflation and relentless price hikes, how on earth is anyone supposed to rent, let alone buy, these sky-high apartments? I spent several days combing through classifieds groups, trying to understand how people manage it,” one citizen wrote on his social media account, echoing a frustration shared by many.
The figures bear out the frustration. New apartments in Ulaanbaatar averaged 4.76 million MNT per square meter in February, up by 8.18 percent from a year earlier. That single statistic tells the story on its own. At that rate, a modest 50-square-metre flat now runs to roughly 238 million MNT before a buyer has so much as haggled over the price. And this is not a one-off spike. Residential prices in the capital surged in 2023, with new apartments up 15.2 percent, or 6.8 percent once inflation is stripped out, and older apartments climbing 10.5 percent, or 2.4 percent in real terms. Even after accounting for the tugrug’s own troubles, homes have simply been appreciating faster than pay packets.
Economists point to a tangle of factors driving the surge in the cost of construction materials, land, labor and financing, along with population concentration in the capital and demand that far outstrips supply. There is also a policy dimension that rarely makes the classifieds groups but shapes the market from behind the scenes. Since 2013, the government and Mongol Bank have run a subsidised Housing Mortgage Program, and researchers who studied more than 90,000 subsidised loans issued between 2013 and 2023 found that housing prices rose whenever the subsidised rate was cut further, with the sharpest hikes concentrated in Bayangol, Khan-Uul and Sukhbaatar, precisely the districts where young families most want to live. Cheap credit, in other words, has been a double-edged sword: it puts a mortgage within reach on paper, while quietly bidding up the very prices it was meant to make affordable.
That trade-off is now colliding with a tighter monetary climate. The average rate on loans drawn under the Housing Mortgage Program stood at 6.5 percent in February, only marginally down from 6.64 percent a year earlier, and relief may be a long time coming. Mongol Bank held its policy rate at a lofty 12 percent in March, unchanged since a 200-basis-point hike the previous year, citing intensifying external and geopolitical uncertainty even as domestic conditions improved. The mortgage market itself is showing strain. New mortgage lending grew by a modest 9.23 percent in 2025 to reach roughly 3.3 trillion MNT, a sharp comedown from growth rates of 49.1 percent in 2024 and 45.3 percent in 2023, and in the first two months of 2026 alone, new mortgage issuance actually fell by 6.21 percent year on year. Fewer people, in short, are managing to get a foot on the ladder, even as the rungs above them keep rising.
Wages, meanwhile, have been running to stand still. The minimum wage was raised by 20 percent to 792,000 MNT a month in April 2025, a move officials framed as a boost to workers’ purchasing power, though that figure remained a fraction of what a family needs to make ends meet, let alone save for a deposit. On August 17, authorities went a step further, deciding to raise the minimum wage again, this time by 26.3 percent, to one million MNT a month, effective January 1, 2027. It is a welcome move on paper, but set against a one-room apartment selling for 120 million to 150 million MNT, even this new wage floor would still take a worker over a decade of every last tugrug earned just to cover. Average net salaries, meanwhile, diverge sharply by gender, with men earning roughly 2.3 million MNT a month against 1.7 million MNT for women, meaning many households are stretching a single modest income across rent, food and everything else, with nothing left over to set aside. Against this backdrop, inflation averaged 8.61 percent across 2025, continuing to nibble away at whatever cushion households manage to build.
Put simply, while the growth of people’s wages has roughly tracked inflation, the fact that housing prices have already parted ways with the economy’s real capacity to support them has become a “teething disease” for ordinary citizens. The numbers bear this out starkly. In 2018, a citizen earning an average income could, in theory, save up for a 50-square-metre apartment within nine years by living frugally. Today, that timeline has doubled. Middle-income earners, already stretched thin by everyday expenses, are being priced out of the market entirely, and increasingly forced to turn not to real income but to commercial loans carrying steep monthly interest, a stopgap that only chips away further at their financial footing and purchasing power down the line.
About 13 years ago, as part of the government’s medium-term program to stabilize the prices of major commodities and goods, Mongol Bank and the Ministry of Construction (now the Ministry of Urban Development, Construction and Housing) jointly approved the “Supporting the Construction Sector and Stabilizing Apartment Prices” sub-program. Under this framework, the central bank extended short-term financing at an annual interest rate of four percent to participating commercial banks, which in turn issued mortgage loans to citizens at eight percent annual interest over terms of up to 20 years, later extended to 30 years from March 2017. To date, more than 140,000 households have secured housing through the program, drawing on a combined 10.7 trillion MNT in financing. The value of securities backed by these mortgage loans has climbed to 4 trillion MNT, and loan terms have doubled in length. The central bank maintains that the program has done its job in shaping the development of the housing market.
The program has not stood still over the years, either. In 2024, the government moved to intensify it further, channeling dividends from strategic mineral deposits into the country’s wealth fund’s Accumulation Fund and freeing up an additional 500 billion MNT for housing mortgages, on top of the roughly 700 billion MNT previously earmarked each year. More recently, in January 2025, the US International Development Finance Corporation approved a landmark 150 million USD financing deal with the Mongolian Mortgage Corporation, the largest such Mongolian transaction in the agency’s history, aimed at giving commercial banks fresh capital to extend to low and middle-income families. That the country’s housing troubles have drawn financing on this scale from an American development agency says something about how deep-rooted, and how internationally visible, the affordability crisis has become. It is also a reminder of how much ground is still to cover: close to half of Mongolia’s population lives in the capital, and roughly 60 percent of Ulaanbaatar residents still live in informal ger areas lacking basic infrastructure, a segment of the apartment crisis that classifieds-group price tags do not even begin to capture.
Unfortunately, none of this fresh capital has been enough to outrun the program’s own side effects. It has been blamed for distorting the market and stoking inflationary pressure, and swelling demand for the subsidised loans has left more than 5,000 to 6,000 citizens stuck in the queue for five to six years, according to an official source. In light of this, the relevant ministries now face pressure to put the program on a new legal footing. Minister of Urban Development, Construction and Housing E.Bat-Amgalan submitted an initial draft law on Housing and a Specialised Housing Finance Bank last June, a bill that would regulate the phased handover of the six percent mortgage program to the government, alongside the initial capital investment in the newly established Housing Finance Bank. According to the minister, the new bank is designed to diversify funding sources by issuing domestic and international bonds, a mechanism officials hope will shorten waiting periods and increase the number of approved borrowers two to threefold. Rather than competing with commercial banks, the specialized institution would operate with a narrower mandate, training its focus on low-income citizens and young families who have so far struggled to get past the front of the queue. The draft Housing Law, for its part, is meant to tackle the supply side of the equation, while the Housing Finance Bank bill is intended to shore up demand-side financing.
Asked to weigh in, one economist did not mince words. “The subsidised mortgage loans rolled out by the government do not fully reach their intended target group, and with limited resources on hand, they have inflated a bubble in the market,” the economist said. “When banks tighten their lending criteria and the queue drags on for months at a time, only those with ready cash, and the sellers on the other end of the deal, come out ahead. The downside is that it manufactures artificial demand among citizens who genuinely need a home, which only drives prices higher still,” he added.
For those still waiting their turn, the frustration is palpable, and the proposed reforms feel a long way off. “I doubt I’ll ever get this loan through the normal channels,” said one citizen currently in the queue for a mortgage. “I didn’t want to give up my place in line, so I have waited two years for nothing. My hope is fading fast.”
The next pressing issue is that the construction industry imports more than 70 percent of its materials, meaning any weakening of the USD or the CNY, along with potential transport and logistics bottlenecks, drives up the basic cost of building from the ground up. On top of that, hidden costs, special permits, land rights, engineering network connections and the paperwork generated during the State Commission’s acceptance process, are all quietly folded into the price per square meter, out of sight but never out of the final bill. Compounding matters further, the fact that most of the capital’s schools, kindergartens, workplaces and service centers remain crammed into the city center is no secret, and it has pushed demand for housing in certain locations well beyond what is reasonable, sending prices soaring past what the market can actually justify.
If this real estate “bubble” is left unchecked, the volume of non-performing loans across the banking and construction sectors risks climbing to dangerous levels, eventually triggering falling prices, or in a worst-case scenario, a market that grinds to a halt entirely. Internationally, this is a problem other countries have already grappled with, and solved, in several ways. In Singapore and certain Canadian cities, for instance, owners of more than one apartment are subject to a progressive tax, and even a locked, unused apartment does not escape taxation. This ensures that housing stock actually reaches the citizens who need it, rather than sitting idle as an investment vehicle. Closer to home, our own experience has shown that propping up demand through government-subsidised loans does little more than push prices higher still. Instead, those in the know argue that the real fix lies in expanding infrastructure into the suburbs, allocating land through open auctions, and developing satellite cities to widen the range of options available to ordinary citizens.
It is worth remembering that now is the time to pursue a comprehensive policy that brings down basic costs by expanding infrastructure and adjusting tax regulations, rather than tightening belts and waiting for a loan market that may or may not return to normal. This “bubble,” so disconnected from economic reality, should not be allowed to keep blocking people’s chance at a decent, comfortable life.
