property boom: a burst housing bubble could leave kurdish region in tears

International stock exchanges and stock market efficiency


The business areas of the stock exchange has been modified in a considerable way from past may decades. The stock exchange is termed as the marketplace for selling and purchasing of the explanations of the flexible forms of securities. Within most of the cases, the securities do not deal with the point that what is identified as bonds, shares and stocks on which dividend, is to be paid at the time of earning. Stock exchange has been found as a profitable business area and large number of people has been selected to be stockbrokers, thus this business area provides satisfactory outcomes (Zaeem, 2012). 


There are large numbers of international stock exchange available and they have contributed more towards an economic development. When money is positioned within the stock market, this is done to generate a proper amount of return on the invested part of capital. Various investors make efforts for making a profitable amount of return and also they try to break the market.  The stock market efficiency can be measured in three ways: strong, semi-strong and weak. The strong efficiency states that all available information (private or public) in a marketplace is reported for a stock price. 


In case of European stock market, random walks within the stock returns have become important to test the weak market efficiency in its marketplaces. In an efficient stock marketplace, the stock prices include all related information, so the returns of stock will be shown as random walk attitude of it. 


For an example, trading on cross border within Europe has gained popularity just after giving shape to the European Union. The broader approval of equity as well as an introduction of European currency ‘euro’ has motivated the investors to be involved in the transactions at cross border level for profit generating chances (Goldberg and Radecki et.al, 2002). The stock market is more efficient and the increased level of interest in the cross-border trading has provided a broader chance or incentives to the international stock exchanges for the purpose of developing diagonally to the national margins.

 Another example In  Iraqi Kurdistan, locals are enjoying a property boom. As demand outstrips supply, buying off-the-plan is more popular. But if this housing bubble bursts, the region could face severe economic and political consequences.

In the semi-autonomous state of Iraqi Kurdistan, an area that is generally more secure and more open to international investors than many other parts of Iraq, there are more and more people climbing onto the property ownership ladder.

And one of the latest trends in this property market is buying off-the-plan properties from larger developments; they’re very much in demand and often popular projects sell out almost immediately. Even before a popular property development is completed, buyers may have been able to cash in on up to a 40 percent increase in the property’s value.

Oil production has been increasing quarter on quarter – even though it is not always being sold through conventional channels – that is, the oil supplies are trucked and do not go through the Iraqi government’s pipelines. The fact that Iraqi Kurdistan receives 17 percent of Iraq's budget and that oil prices have risen and remained above US$80 per barrel , this  kept the regional government’s finances in good shape.


The oil money comes in and is distributed through payment of inflated wages by the state. Yet ordinary people have little or no access to any kind of investment. Banks are not yet fully trusted and the local stock market has a long way to go - the local population have very little knowledge of how it works.

So property is by far the most attractive form of investment.

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 . Demand is high in this area but the lack of consumer protection means the potential for malpractice and fraud is also rising. 

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.

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”.

Should the property bubble currently inflating in Iraqi Kurdistan burst, the crash could have a damaging effecon the region. For many people, property really is their only investment option and a market correction would be a severe blow.t 

The economic impact of a failing property market could have severe consequences for Iraqi Kurdistan’s fragile economy. Property transactions are one of the main economic activities in the region and falling property prices would be directly linked to falling consumer confidence as well as business stagnation in the area. 

However policy makers in Iraqi Kurdistan do not seem to have grasped the seriousness of the housing bubble the region is sitting on and its consequences if the bubble eventually bursts. There are no real policies in Iraqi Kurdistan to try to control the property market and currently local politicians appear to be content for the general public to feel wealthy, while they see the value of their property continue to rise. The state’s Ministry of Finance is also happy to benefit from duties paid on property transactions.