High property prices may well lead to a mortgage market opening up in the region, which would also be a catalyst for the multinational banking sector’s presence in Iraqi Kurdistan - although an overpriced market may mean that banks are reluctant to lend a great deal if, and when, they decide the time is right to enter the Kurdish market. Lack of financing and a shortage of new capital could eventually catch up with the market and deter buyers.
Meanwhile, the rental market has risen outrageously and rental yield – that is, the amount of rent the property earns over a year expressed as a percentage of the purchase price - in the populous city of Sulaymaniyah, for example, appears to be go between 6 to 17 per cent. To compare, average rental yields in Germany sit at around 4 percent, in the USA around 5 percent and in Egypt they are around 7 percent. This rise in rental yield in Iraqi Kurdistan has made the commercial property market particularly attractive and investors have been rushing to cash in on what the market has to offer.
All of which means that the appetite for investments in properties and land appears to be unquenchable with new developments offering deals and selling properties off-plan.
However this doesn’t mean the good times will last forever. Ask around estate agents in Sulaymaniyah and it quickly becomes apparent that rental demand for commercial property in other than central city locations has been sluggish; property owners are starting to lower rent prices. This could be the start of a pattern that may spread into other parts of Iraqi Kurdistan’s property market.
But as with other property bubbles, such as those recent ones in the US and in Europe, those involved convince themselves that the market is resilient and search for any excuse to prop up their convictions. Researching the property market in Kurdistan, you will often hear people using the same arguments that one would have heard in the US and UK prior to 2008, when the housing bubble there burst. They says things like: the economy is strong and will keep growing at more or less the same pace, there’s more demand than supply and even: “they don’t make land anymore”.
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