Ulaanbaatar’s housing market is heating up, with prices rising by 9.9% year on year in April. The average cost of a square metre of new housing reached ₮3.5 million ($1,000), according to official data.

But the city’s property boom is uneven, with wide variations across districts and types of housing. Older houses are 5.7% cheaper than new ones on average, and the price gap between the most and least expensive areas is more than ₮1.2 million per square metre.

Khan-Uul, the city’s uptown district, has the highest average price for new housing at ₮3.8 million per square metre, 8.8% above the city-wide average and 35.2% more than Songinokhairkhan, a district in the west.

The surge in housing prices reflects several factors, including rising construction costs, a weaker currency, and increased mortgage lending.

• Construction costs jumped by 30.9% in the first quarter compared with a year earlier, driven by a 10.1% increase in the price of materials, a 1.8% rise in the cost of renting machinery and a 0.5% increase in wages.
• The depreciation of the tugrik against the US dollar has also pushed up the cost of imported building materials. The tugrik fell by 23.5% year on year in April, meaning that $150 worth of materials that cost ₮427,400 a year ago now costs ₮527,700.

Mortgage lending, which has been a key driver of housing demand in recent years, is expected to slow down as the central bank tightens monetary policy to curb inflation. This could dampen the outlook for housing prices in the coming months.

As the capital of Mongolia attracts young and rural workers with its promise of better jobs and services, Ulaanbaatar has experienced a surge in construction over the last few decades. Yet, many still struggle to afford housing in the city, where prices are high relative to incomes.