Business Monitor International indicated that macroeconomic growth in the Kurdistan region of Iraq has exceeded that of Southern and Western Iraq due to increasing oil revenues, reconstruction funds and repatriated capital, which are driven by liberalizing regulatory reforms and a stable security environment.
It noted that FDI in the real estate and housing sectors attracted the majority of capital inflows to Kurdistan last year. It pointed out that the region's legal framework is perceived as investment friendly given that foreigners are allowed to own land for housing projects, which is not permitted in the rest of Iraq. It noted that the security situation in the region is significantly more stable compared to the rest of the country.
Further, it indicated that demand for housing and real estate in the region is driven by foreign firms, a return of large numbers of Kurdish expatriates, improvements in the region's aviation infrastructure, and significant economic growth potential.
However, BMI anticipated that the significant growth in the mid- to high-end segments of the housing market would not be sustainable in the mid- to longterm. It warned from high levels of speculation and the flipping of properties, and forecast the huge pipeline of projects to lead to oversupply of housing units.
It noted that housing prices increased by 70 to 80 times in some areas relative to prices 10 years ago, adding that prices in the real estate market have become increasingly unaffordable for the middle class. It said that market growth will be constrained by an underdeveloped banking system, oil disagreements between the Kurdistan Regional Government and the federal government, and an underdeveloped transport and communications infrastructure.
Source: Business Monitor International – Byblos Research