A Burst Housing Bubble Could Leave Kurdish Region in Tears

In Iraqi Kurdistan, locals are enjoying a property boom. As demand outstrips supply, buying off-the-plan is more popular. But if this housing bubble bursts, the region could face severe economic and political consequences, according to this article from Niqash.

Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

In the semi-autonomous state of Iraqi Kurdistan, an area that is generally more secure and more open to international investors than many other parts of Iraq, there are more and more people climbing onto the property ownership ladder.

And one of the latest trends in this property market is buying off-the-plan properties from larger developments; they’re very much in demand and often popular projects sell out almost immediately. Even before a popular property development is completed, buyers may have been able to cash in on up to a 40 percent increase in the property’s value.

As well as being semi-autonomous in terms of legislature and security, Iraqi Kurdistan has a semi-independent economy. Since the fall of former Iraqi leader Saddam Hussein after 2003’s US-led invasion of Iraq, the economy in this area has accelerated rapidly; in fact, over the past four years it has literally boomed. A combination of increasing oil revenues and the money poured into reconstruction efforts along with lax regulation have been the main drivers of this boom.

Oil production has been increasing quarter on quarter – even though it is not always being sold through conventional channels – that is, the oil supplies are trucked and do not go through the Iraqi government’s pipelines. The fact that Iraqi Kurdistan receives 17 percent of Iraq’s budget and that oil prices have risen and remained above US$80 per barrel for almost a year now have kept the regional government’s finances in good shape.

As it is in the rest of Iraq, the government is by far the largest employer in the region. The private sector makes up a tiny proportion of the economy although large telecommunications and construction companies promise to increase private sector employment, as does the banking sector which looks likely to be the fastest growing sector in Iraq in the near future.

The oil money comes in and is distributed through payment of inflated wages by the state. Yet ordinary people have little or no access to any kind of investment. Banks are not yet fully trusted and the local stock market has a long way to go – the local population have very little knowledge of how it works.

So property is by far the most attractive form of investment.

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