Thursday, October 20, 2005

Baghdad real estate market is booming despite escalating violence

18/10/2005
Source: Yahoo News


A five-bedroom river-view house sold three years ago for $45,000. Two years ago it sold again, this time for $80,000. It sold a third time in August. The latest price tag? $300,000.

It's not in Charlotte or Kansas City or Philadelphia; it's in Baghdad. The market here is booming.

As Rime Allaf, an Iraq expert with London-based research center Chatham House noted, it doesn't make sense from the outside: "Who buys houses in Baghdad right now? The place is a disaster, and keeps getting worse."

Still, despite steadily increasing levels of violence, a great deal of money flows into Iraq, enough that property values have increased close to 1,000 percent in the past three years in parts of town.

Baghdad's economy is also surprisingly strong. Streets are jammed with traffic. Cell phones are everywhere. The bare shelves of retail stores from the Saddam Hussein era are now piled high with imported goods.

But it's Baghdad, after all, and the risks of business are more about suicide bombers and execution squads than mundane concerns such as bankruptcy and foreclosure.

Real estate agent Raad Jassim al-Shimary stepped from his Amirayah office in August to a hail of bullets from an insurgent in a passing car. He was killed by six shots to the chest. Other real estate agents and people on the street are convinced he was killed because he owned a realty office.

"I liked the business more back before the war," says Abu Mohammed, who's been in the business for 15 years in the Amirayah neighborhood. "Maybe there wasn't as much money then, but I know 10 men who owned agencies who have been murdered."

Abu Mohammed is not his full name, but like every real estate agent contacted by Knight Ridder for this story, he believed that giving his full name would be dangerous.

The murders are political. Iraqis cite a grab bag of reasons for insurgent executions: sold to Iranians, dealt with Americans, or even made a profit on property that, in the end, belongs to Allah. The exact number of murdered real estate agents is unknown (murders are so common that they frequently go unreported here), but Shimary's death was ordinary enough not to cause a stir in a country where violent death outpaces life, and money, no matter how dangerously earned, must be pursued.

Real estate is hardly the only business that carries a potential death sentence. Liquor stores and hair salons are targeted for being against Muslim law, restaurants for feeding policemen, and government offices for cooperating with the United States.

Even in hyper-violent neighborhoods such as Amirayah - near the airport and, depending on the time of day, controlled by insurgents - people are finding ways to keep their agencies open. People are making several years salary by selling off their backyards, and home and business property values are just about tripling every year.

Buyers believe that once the violence stabilizes, property near the airport will be very valuable - as foreigners will want a quick exit from what is likely to remain a very dangerous city for years to come.

"The neighborhood doesn't matter. People just want to buy property," said real estate agent Bilal al-M., who's been in the business almost 20 years. "This month, the market has flattened out, because people are worried about security. But there's still too much pressure for prices to fall, and if security improves, we should see prices increase another 25 percent by next year."

Consider the 6,500-square-foot villa in Jadriyah, south-central Baghdad, that sold for $75,000 during Saddam Hussein's last year, but brought just over $500,000 this summer. It's a market fueled by money from foreign investors, ex-pats looking to help their families, pent-up frustration at 30-year-old Baath Party laws that strictly regulated property ownership in Baghdad, and even the cash made from looting as the capital fell.

In the market, fixer-uppers - houses or business properties that have suffered extensive bomb or bullet damage - are particularly hot.

"The price is lower, of course, but the man who fixes up such a place can resell it months later for enormous profit," Belal said.

Home selling here is a fairly low-profile business. Rarely do real estate agents advertise sales, and many places sell without so much as a "for sale" sign. When there is one, the seller often paints the details on a sheet and ties it to the security walls that surround most homes in Baghdad.

A typical house in Baghdad is two stories high, with tiled floors and at least one palm tree in the tennis court-sized front yard. It will have large rooms with high ceilings and with large windows. Most importantly, it will have second-story outdoor patios in front and behind the house, as well as a third patio on the roof for sleeping during the height of the hot summers.

Bilal noted, however, that while customers with a lot of money are looking for any investment, those looking for a home are most concerned about a safe street, something that changes almost month to month here.

For instance, until a year ago, places near the Green Zone - a central, walled district protected by U.S. and Iraqi military - were sought after. More recently, as the Green Zone area has been more frequently the target of insurgent attacks, and guards have become increasingly trigger happy in their defense of it, the area has lost its luster.

Safaa runs the same realty agency his father started 50 years ago. Today, customers come to his small office through a razor-wire maze. Concrete blocks on the busy street out front discourage parking nearby. Yet inside, it's a real estate office, down to the office calendar and photos of available properties.

"Many of my customers made their money through looting," he admits while discussing the market situation. "After they had the money, they wanted some place safe to put it, and a house made sense."

Former residents also wanted to move back, or more likely buy property in case they decided at some time it was safe enough to move back. Many did so and put their new properties up for rent, and prices in the rental market have shot up at the same ferocious pace. Apartments that used to rent for as little as $2 a month are now going for $300.

Safaa notes that business has slowed down lately. A lot of people with money have used it to flee, or to pay ransoms to get family members returned. And while there is still a steady stream of customers, he doesn't expect the property frenzy to return before the security situation becomes clearer.

Still, he says he won't leave a family business, and notes he's made more money in the last two years than ever before.

"Before in Iraq, the houses were cheap," he said. "Now, the houses are expensive, but the lives are cheap."

Regards,

Marcel Heersema
Iraqi Dinar Info

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