Mongolia Financial Sector Assessment : Housing Finance
As the Mongolian mortgage market grows rapidly, and the Government of Mongolia (GoM) pursues an ambitious social housing agenda, there is an urgent need for a holistic sector approach. The following three key areas require attention from policymake...
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| Format: | Report |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/865831468277491376/Mongolia-Financial-Sector-Assessment-Program-development-module-housing-finance-technical-note http://hdl.handle.net/10986/26815 |
| Summary: | As the Mongolian mortgage market grows
rapidly, and the Government of Mongolia (GoM) pursues an
ambitious social housing agenda, there is an urgent need for
a holistic sector approach. The following three key areas
require attention from policymakers: first, there is a need
to better balance housing supply and demand, which requires
the authorities to focus on prudent mortgage lending
standards and supervision, as well as on provision of
housing infrastructure and zoned land. Second, it will be
important to ensure effective implementation of ongoing and
planned public housing finance programs, with a focus on
preventing mortgage market distortions in pricing,
emphasizing robust planning and rigorous transparency and
governance. Third, authorities should aim for better balance
in the composition of mortgage funding, with a focus on
improvement in the legal and regulatory framework for
capital markets, as well as Mongolian Mortgage Corporation
(MIK) governance, products and operations. The Mongolian
mortgage market is exhibiting strong growth, with portfolio
outstanding increasing by 190 percent to Mongolian Tughrik
(MNT) 656 billion (US$482 million) between 2009 and
end-2011. This represents 8 percent of 2010 gross domestic
product (GDP) and 12 percent of the 2011 banking loan book.
The sector is highly concentrated, with top 4 lenders
accounting for 89 percent of the market, as well as
spatially in and around Ulaanbaatar. Housing prices have
risen sharply in the last two years, particularly in 2011,
when the increase for the predominantly mortgaged market
segment was over 36 percent. While mortgage lending growth
rates are consistent with the overall growth of household
credit, real estate prices significantly outpaced Consumer
Price Index (CPI) and GDP growth in 2011. Currently
non-performing loans (NPL) are very low due to the
unseasoned mortgage portfolio; however, high debt-to-income
(DTI) ratio levels may exacerbate future loan age-related
and cyclical delinquency increases. Due in part to extreme
climatic constraints, shortage of zoned and serviced land,
and infrastructure bottlenecks, housing supply is severely
constrained. Large-scale, publicly-funded, subsidized
housing initiatives, such as the '100,000
Apartments' Program, need to be carefully planned, so
that they cause minimal distortion to the broader housing
finance market. |
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