Winners and Losers in Baghdad Property Boom

Friday, 19 December, 2008

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Basim al-Shara

IWPR-trained reporter

Mohammad Sadun wants to step back in time to 2006, when the killings in Baghdad had reached a peak – and he still had a house to his name in the city's violent Al-Doura district.



The 59-year-old transport ministry worker says the property he sold for 40 million Iraqi dinars (34,000 US dollars) two years ago would fetch 150 million dinars (128,000 dollars) on the market today.



"I felt Al-Doura will never come back to life again and the insurgents will control it forever," he said, explaining why he sold up in haste.



The return of relative stability to the Iraqi capital has sent property prices soaring. But as investors and estate agents capitalise on the boom, others like Sadun curse their luck.



His landlord has just ordered him to vacate the property he currently rents – a 100 square metre house in the central Al-Hurriyah district, whose value has climbed from 50 million to 90 million dinars in the last two years.



"House prices have risen to the point where I will never be able to buy a home for my family, not even in a hundred years," Sadun said.



A deepening recession is wiping billions off property values across the world, but Baghdad is uniquely placed to buck the trend.



Its economy is immune to the havoc wrought in the West by risky mortgages, as most homes in Iraq are acquired in a single cash transaction.



More importantly, the capital has been the most visible beneficiary of a drive to stem the sectarian violence that engulfed Iraq after the United States-led invasion in 2003.



The number of US troops deployed in and around Baghdad was boosted as part of the "surge" policy. Vast concrete walls were erected to fence in troubled sectors of the city.



Sunni insurgents disillusioned with al-Qaeda were recruited into US-backed vigilante groups, organised around neighbourhood or tribal lines. Meanwhile, armed followers of anti-American Shia cleric Muqtada al-Sadr were held in check by his declaration of a ceasefire.



According to Muin al-Kadimi, chairman of Baghdad's provincial council, families displaced by the fighting have been returning to their old neighbourhoods, driving prices up. Demand for housing far exceeds supply.



"Baghdad must build tens of thousands of residential units to meet the need for more homes," Kadhimie said.



Though no exact figures exist, the capital’s seven million inhabitants are estimated to live in some one million homes.



The city's housing shortage began in the 1980s and was exacerbated by subsequent wars and internal conflicts.



Throughout this period, more and more people sought refuge here, while planning for new homes remained on hold.



During the last two years of relative calm, estate agents say the price of property has risen threefold.



Sami Badir, an estate agent from Kadhimiya district, says the biggest increases have been in the upper-class neighbourhoods of Karada and Kadhimiya, where some properties have sold for billions of dinars.



In working-class neighbourhoods like Hurriyah, Sadr and Shuala, houses with a floor-span of between 100 to 150 sq m are being sold for upwards of 100 million dinars, Badir says.



He says he is "astonished" by how the rise in prices has extended even to the slums of Baghdad that are without basic services.



Better security in Baghdad is also attracting the interest of wealthy Iraqis from further afield. They once again regard a property in the capital as a viable investment.



According to Muthana Mohammad, the owner of an estate agent in Karada neighbourhood, "rich families from the south and from Ramadi province have started to buy property in Baghdad again".



Baghdad's property market has been open to investors from outside the city since 2003, when the authorities ended restrictions imposed by Saddam Hussein on the purchase of homes.



He had passed a law banning all Iraqis not registered as Baghdad residents in a 1957 census from buying land in the capital.



Ostensibly aimed at curbing unchecked migration into the capital, his law effectively benefited Ba’ath party insiders. Its scrapping five years ago fueled an earlier rise in property prices in Baghdad.



Mohammad believes demand from businesses will continue pushing up the price of homes here, even as they become unaffordable for most locals.



"Many of the local and international companies are trying to get real estate in Baghdad, no matter how much it costs them," he said.



The demand for new housing is not likely to be met any time soon, according to Haider al-Ibadi, head of Iraqi parliament's economics committee.



"Iraq needs a long-term plan to build homes, which will take five or ten years to achieve," Ibadie said.



The country's economy may not be reeling from reckless mortgage lending but the global financial downturn has other ways of making itself felt.



According to Ibadi, the huge drop in the price of oil – Iraq's main source of revenue – has prompted parliament to reassess the budget it had set aside for building new homes.



As a result, he says, the time allocated for completing the new housing has been prolonged – it is now nearer the ten-year mark.



He says his committee is revising its plan to build new homes, taking into account the altered economic climate.



Basim al-Shara is an IWPR-trained journalist.