Having said that, there is very little data maintained on property prices in the area – as a nation Iraq does not publish a house price index - so it’s hard to find meaningful numbers. The numbers that do exist indicate that house prices have quadrupled, and in some cases, even risen tenfold, since 2003. All the hallmarks of a housing bubble are there – you can see it just by looking through any real estate agent’s brochure in Erbil or Sulaymaniyah, the two largest cities in the region.
Before the 2003 US-led invasion of Iraq, property prices here were seriously undervalued for obvious reasons. However, since the fall of Saddam Hussein, prices have risen dramatically. And while the Kurdish Regional Government is investing heavily in commercial property, public demand appears to be driving the residential market.
And the off-plan market is the new investment craze. Demand is high in this area but the lack of consumer protection means the potential for malpractice and fraud is also rising.
Due to high prices, private properties are fast becoming unaffordable for young people and first time buyers in Iraqi Kurdistan. The government has been trying to tackle this issue by introducing financial schemes to enable younger people to get on the property ladder. This includes, for instance, offering government employees the option of an interest free loan. The state provides 30 percent of the financing for an off-the-plan project, depending on the age of the recipient. The recipients need to reside in Iraqi Kurdistan and they usually won’t pay any interest for around 20 years. The policy has proved popular although it is not completely fair as it is only aimed at public sector employees.
Initially these kinds of government initiatives will only push housing prices higher until the market catches up and more properties are built. The majority of buyers are cash purchasers but there will come a point where property prices are so high that newcomers to the market won’t be able to buy outright and will require mortgages. Apart from various government schemes though, the mortgage market is almost non-existent.
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