ERBIL, Kurdistan Region - Kurdistan is going through a building boom. About half of all the investment in Iraqi Kurdistan is put into stones and building, and that is about double from what is invested in the Kurdish industry.
For the first time the statistics and analyses of this development can be read in a carefully researched report. IKG Property, an independent real estate advisor in the Kurdistan capital of Erbil recently published its Market Overview Report.
“Investing in stone is a matter of mentality,” says Chairman Mario al-Jebouri of the IKG Group, during an interview in its villa in Erbil. “Here in Kurdistan people love real estate. They feel you cannot lose when you invest in housing.”
Most of the investments go into residential building though, and the report that focuses on the third quarter of 2013 shows this as a main problem in Erbil. While Kurdistan is booming and the oil business is growing, the amount of office space is far below the demand.
Erbil even does not have any office buildings in the highest segments, only B and C quality and below. And of the B/C quality, almost all of the available 70,000 square meters is already in use. As a result of the high demand, many companies and firms have moved into areas that were set up as residential, such as the English and Italian villages.
This is not much to their liking, says managing director Edward Carnegy of IKG Property. One of the problems is the lack of maintenance, he says, and the fact that the location does not fit the status of some companies. Nor are they visible enough in the enclosed compounds.
“If a company rents more than one villa, they have more than one landlord to deal with, and as a result different contracts. Some of the landlords don’t feel shy to ask for a yearly 25 percent increase of the rent.”
The good news is that, in the next couple of years, some 430,000 square meters of good quality office housing will become available in the Kurdish capital. Carnegy expects the bigger firms and oil companies to move there.
He does not foresee much non-occupancy in the villas though. “As the work of oil companies will only grow, so will the amount of services and expats they need.” He expects those firms to fill the void in the villas, “but they will no longer agree to pay rents of $5,000 per villa, as this housing cannot compete with the newer that does offer maintenance.”
At the same time, the chances are that landlords leave their properties empty. This is one of the characteristics of the Kurdish market, al-Jebouri says. “The owner has paid the property. He has no loans to worry about. He does not need the rent as he has income from other businesses. For many it is the prestige of owning property in a classy compound, with a real estate price that has almost tripled in four years.”
That is why a landlord often will not agree to lowering the high rent he demands, and leaves the property empty. “He also does not want the headache of having a renter. If companies like ours manage that for these landlords, then you will see more of these empty houses will get occupied.”
That help might be needed, because IKG predicts that the apartment segment will suffer from over-supply, as some 15,000 units will come available in the near future. As renters have more choice and a better position to haggle, the rents may drop.
The IKG-top does not like to call this a “housing bubble” that might burst, even though housing prices that have risen enormously for a couple years may drop dramatically. “There is no debt situation here. The owners have paid in cash for the housing. So if prices go down, they do not have a mortgage they cannot pay off anymore.”
Half of the investment in housing comes from outside Kurdistan, mainly from the rest of Iraq. The latest development in the housing market is the entry of buyers from Gulf countries like the United Arab Emirates and Kuwait.
“Gulf investors prefer to step in when the market has got more regulated,” says al-Jebouri. He expects their number to increase in the near future, as the government has recently installed standards for qualities in building, made regulations for master plans and improved the legal environment for the transfer of property.
More is still needed, he says: “Regulations and standards should be more than paper. We would be happy to help the government implement and impose them.”
All the predictions of IKG are based on continued stability and safety in Kurdistan, al-Jebouri admits. But he notes that there is a general trust this will be the case. “After the September bomb attack in Erbil, people were concerned for about two weeks. Now we see no effect at all anymore.”
Comments
1 0 Darin | 10 hours ago
Invest in infrastructures first and then Think about office buildings, Soth Kurdistan is in desperate need of thousands of new schools (not too crowded classrooms with double-shift or multiple-shifts school like now). South Kurdistan is in desperate need of good care health system with a lot of new hospitals . South Kurdistan is in desperate need of good roads, bridges and highways. South Kurdistan is in desperate need of a functional public transportation system like Railways, tramways and metro. South Kurdistan is in desperate need of clean drinking water 24 hours a day.
