From oil to budget to central bank decisions… Baghdad’s real estate market enters a “hibernation” phase.
From oil to budget to central bank decisions… Baghdad’s real estate market enters a “hibernation” phase.
2025-04-18 06:28
Shafaq News/ Real estate prices in the capital, Baghdad, continue to decline relatively, with some areas experiencing a stagnation. Economic experts attribute this to the direct relationship between fluctuating oil prices and the failure to approve the federal budget for the current year, in addition to political challenges. All of these factors have led to a stagnation in the market due to the lack of guarantees regarding what will happen in the near future.
Experts also believe that the Central Bank of Iraq’s decision to restrict buying and selling transactions to banks has negatively impacted the real estate market, due to the difficulties buyers and sellers will face, particularly given the lack of trust in the Iraqi banking system.
The scene is complex.
Regarding this matter, economic expert Ahmed Abdul Rabbo told Shafaq News Agency, “The recent decline in global oil prices, which are Iraq’s primary source of income, has created a state of caution and anxiety in the market, especially since oil revenues directly impact overall economic activity and the volume of government spending on housing and infrastructure projects.”
He added, “The situation is becoming increasingly complex with the continued absence of a 2025 budget law, leaving the real estate market without a clear financial vision and postponing the implementation of major projects, often linked to real estate activity, whether by the state or the private sector.”
He noted that “the failure to approve the budget will have a negative impact on governorate allocations and local investments, and will deepen the stagnation in various sectors related to construction.”
To address the real estate downturn, Abdel Rabbo proposes a series of urgent and interim measures, most notably “approving the 2025 budget as soon as possible to ensure the return of government activity and the activation of urban and service projects, which will indirectly stimulate the real estate market.” He also proposes reducing interest rates on real estate loans through coordination between the Central Bank and public and private banks to facilitate citizen ownership of residential units and stimulate real estate investment.
Abdel Rabbo also pointed out the importance of launching subsidized housing initiatives targeting middle- and low-income groups, along with providing tax breaks and temporary exemptions for new housing projects. He also emphasized improving transparency in the real estate market by creating a national database for properties, prices, and demand, with the aim of facilitating planning and attracting local and foreign investors. He also emphasized linking monetary policy with housing policy by forming a joint higher committee comprising the Ministry of Finance, the Central Bank, and the Investment Authority, to coordinate decisions that directly impact the real estate market.
He stressed that these measures would encourage buyers and sellers of land and small housing units to reduce their purchase and sale prices to less than 100 million dinars, thus avoiding being included in the Central Bank’s decision.
Oil prices have fallen sharply, touching $60 a barrel, as a result of several decisions taken by US President Donald Trump regarding tariffs, as well as the OPEC+ decision.
In addition, the 2025 federal budget has not yet been submitted by the government to the Iraqi parliament for approval, and its details and deficit are unknown.
The Central Bank of Iraq had previously issued directives to the Real Estate Registration Department prohibiting the sale of real estate valued at more than 100 million dinars.
Accordingly, real estate sales can only be made through banks in order to limit money laundering, according to the Deputy Director of the Central Bank’s Anti-Money Laundering and Combating the Financing of Terrorism Office. He emphasized that the decision was neither sudden nor random, but rather the result of studies and experiments spanning two full years. A strategy was developed in 2022, including setting a ceiling for real estate sales through banks at 500 million dinars. A decision was then made to gradually reduce this ceiling to include a wider range of real estate sales.
Political challenges
For his part, Iraqi Parliament member Jamal Kocher told Shafaq News Agency that “current political challenges, external threats, and the threat of a drop in oil prices are behind the decline in real estate sales and the recession in this sector.”
He added, “Any discrepancy or disruption in foreign relations directly impacts the real estate market in particular,” noting that “the lack of liquidity in the hands of investors was also one of the reasons for the decline in real estate prices.”
Real estate prices in Baghdad previously reached record levels, approaching those of major world capitals. In some areas, the price per square meter exceeded $5,000, and buying and selling operations were proceeding normally.
Decision and “supply and demand”
For his part, Ali Tariq, Executive Director of the Iraqi Banks Association, told Shafaq News Agency, “Real estate sales and purchases must be conducted through banks.”
He asserts that “this will eliminate any money laundering, because anyone purchasing a property will be required to disclose the sources of their funds. If someone earns a monthly income of one million dinars and has no inheritance, they will be unable to purchase a property worth more than one hundred million dinars.”
Meanwhile, economic expert Nasser Al-Kanani told Shafaq News Agency, “Whenever supply exceeds demand, prices will fall, and this applies to any commodity or property.”
He points out that “demand in the real estate market previously exceeded supply, which led to higher prices and record high property sales. However, the current oversupply has led to a decline in prices.”
Paralysis reaches the “workers”
The decline in real estate prices has led to a decline in sales and purchases, which has in turn impacted the construction sector, with construction workers now working intermittently.
“I haven’t been working for two months, except for a few days, due to the lack of work,” says Nizar Hammadi, a 35-year-old builder from Al-Furat neighborhood.
He added to Shafaq News Agency, “We are a group of relatives and friends who work in construction. We created a WhatsApp group to communicate about work, but no one has contacted me to ask me for work for about a month.”
Hamadi notes that “the stagnation in the construction labor market is due to the halt in home buying and selling, to which our work is directly linked.”
Ali Saadoun, a 22-year-old worker from the Al-Jihad neighborhood, told Shafak News Agency, “Construction has stopped and there is very little work at the present time. It has become difficult to obtain work easily, as was the case in previous years.”
The suspension of construction work has affected many other construction-related businesses, leading some to leave their usual jobs.
As Saif Al-Saadi (18 years old) from Al-Turath neighborhood explains, “I work in installing electricity in newly built houses.”
He added to Shafak News Agency, “My work was affected by the halt in house construction, which forced me to leave my profession and look for a new job.”
The impact didn’t stop there, as real estate offices were also affected by the recession, and their owners now spend most of their time drinking tea, chatting, and doing little work.
In this regard, Karim Al-Lami, 55, owner of a house sales and rental office, said, “We have become almost unemployed after the decline in house sales and purchases.”
He added to Shafaq News Agency, “We now only deal with homeowners who wish to buy or sell for an amount less than 100 million dinars, in order to obtain our profits directly, away from the complexities of banks.”
Al-Lami explains that “banking procedures are extremely difficult and slow, and can sometimes take years, which is why people don’t risk selling their properties.”
Many citizens attribute their refusal to link sales to banks to a loss of confidence in Iraqi banks, says citizen Aya Yahya.
Yahya had intended to sell her house, but she backed out of the move after the decision, telling Shafaq News Agency, “I fear depositing the money in the bank, only to have it seized overnight and the Lebanese experience repeated in light of the unstable international situation.”
shafaq.com
