Erbil property has been one of the best investments in Iraq over the past year. While the ISX is up about 50% over the last twelve months, prices for residential and office space in the Kurdish capital have more than doubled. 600 sq m single detached houses in the city’s Italian Village development, for example, are now listed at US$ 1.5 mn, up from only $600,000 a year ago.
Meanwhile, along Erbil's 100 m ring road numerous projects are under construction. When completed these will add hundreds of new units of both high and low rise supply. (Several of the international hotels mentioned in this post are coming to this area as well.)
I have also been told that land is selling for prices similar to those in Baghdad. This despite the fact that Erbil still has many large and well situated empty sites available for development.
Are these signs of a bubble?
In any ordinary city you would have to say yes. But Erbil has some special features that make the usual signs of overheating unreliable indicators.
As John Drake points out in his latest post, Kurdistan is an oasis of peace in comparison with the rest of the country. The region thus has an obvious role to play as a “gateway” to Iraq. For foreign investors and vendors and their local partners and clients, locating in Erbil will be a no brainer.
And Iraq’s coming oil bonanza virtually guarantees that the foreigners will keep coming. (John's observation that many of them don’t yet even realize that Kurdistan is safer than the rest of the country is another bullish sign.) They will come not only to work on oil and gas projects but also to participate in the whole spectrum of activities necessary to Iraq’s reconstruction. They will also come because the Kurdish region, with 70 bn barrels of oil and 200 tr cm of natural gas, is on the verge of a fossil fuels boom of its own.
Finally, property bubbles do not usually occur without leverage. And the Iraqi banks have yet to really start lending. Most of the ten thousand dollar “blocks” of US hundred dollar bills being used to pay for properties are evidently not borrowed money.
Until this changes, it is still much too early to call a top in Erbil property.
(Photo by Aysegul Ozge Ozgur. Used by permission.)