Erbil Iraq real estate shows potential for growth.
Erbil is the fourth largest city in Iraq after Baghdad, Basra and Mosul. It is located 80 kilometers (50 miles) east of Mosul, and is the capital city of Iraqi Kurdistan. Erbil is considered as one of the oldest continuously inhabited cities in the world with recorded urban life dating back to 6000 BC.
Erbil is the economic capital of the Kurdistan region and maintains a significant role in greater Iraq, attracting a large number of people seeking to take advantage of the economic growth and security of the city. With Kurdistan’s large hydrocarbon reserves and safety compared to the rest of the country, the economy is expected to sustain its growth, further increasing demand for real estate and social infrastructure.
Kurdistan’s population includes the three provinces of Erbil, Suleimaniya, and Duhok was around 4. 4, million in 2008, with Erbil having an estimated population of approximately 1.3 million. The Kurdistan region is currently witnessing an annual growth rate of 3 percent with the population expected to increase to 5 million in 2013. The increasing population together with the expected growth in the economy continues to increase demand for real estate projects (residential, commercial, retail and hospitality) as well as social infrastructure projects such as educational and healthcare facilities in the region.
Political risk, however, remains the main concern. The recent physical disputes with Baghdad mirror the worsening relations between Erbil and the central government. However this is currently balanced with the increase in violence within non-Kurdish Iraq and potential peace dividends from the recent rapprochement between the PKK and the Turkish government.
Colliers International Erbil Real Estate Overview Q2 2013 provides a brief snapshot of the key factors impacting the Erbil Real Estate sector and the future outlook.
Residential Sector: The residential real estate market in Erbil shows continued growth potential. Market fundamentals remain strong supported by the slow growth of supply. Government studies estimate that a total of 112,500 housing units are needed during the next 5 years. Judging by the construction activities in the city it is doubtful however that this volume of housing units will be delivered in time. This estimate also accounts only for the growth of population and disregards demand generated from buyers from other parts of Iraq which may result in further pressures on supply.
Commercial Sector: Colliers’ demand estimates suggest that current total demand levels stand at 770,000m² of commercial space. Most of this demand is currently accommodated in secondary substandard office space across the city. Comparing this demand level to the current and the confirmed future supply indicates that the market is largely undersupplied and is expected to remain so in the short to medium term. It is expected therefore, that rental rates will continue to increase for new office developments.
Retail Sector: The retail sector in Erbil is currently also undersupplied, with increasing demand stemming from a growing population together with increasing income levels, indicating that the opportunity for developing a formal retail supply remains strong in the foreseeable future. Moreover, the safety and security of Erbil (relative to the other areas in the country) had attracted a large number of visitors from the neighbouring cities capturing high footfalls and sustaining lucrative trading volumes for retailers. However, the amount of new supply entering the market is a source of concern. Most of the new developments have shopping malls and if they are to be developed as planned, the supply will increase significantly in a very short period of time. The entrance of large space in a short period of time may exercise a downward pressure on space take-up and rental rates.