While on the surface the situation in Iraq looks little better than it did in 2003 there has been a substantial increase in the value of the property, especially in and around Baghdad. Even though the popular press are still running stories about conflict, fighting and scandal across Iraq with the suggestion that civil war could break out at any time in some instances this could be some way off the mark. So what exactly is going on in Iraq and Baghdad especially?
The general impression to the wider public
If you pick up any newspaper today, tomorrow or next week you are likely to see reports of carnage across Iraq and conflict between the US led forces and the domestic Iraqi population. There have also been significant reports of insurgents moving into the area to try and benefit from the mayhem and confusion which would appear to have been there for some time. However, on the ground that picture would appear to be very different and there have been great strides on the subjects of security and peace in the region.
Prior to the overturn of Saddam Hussein there was literally no property market in Iraq and everything went through the government and Saddam Hussein’s henchmen. The rich and famous were very often seen as enemies of the state and Saddam Hussein most definitely ruled the area with an iron fist. Many people have looked back to 2003 as the turning point for the new Iraq property market whereby the introduction of western regulations and rules regarding property ownership had a significant impact on the local property market.
While this has benefited many domestic investors and international property investors (those who have taken on the extra risk) a number of people in Iraq were so concerned that civil unrest would continue for decades to come that 2003 saw significant property sales at distressed prices. Concerns about the handover from the US led forces to the domestic Iraqi army, police force and government saw many prominent investors step into the breach and grab properties for a fraction of their potential worth.
Financing property transactions in Iraq
Without delving deeper into the situation in Iraq it would be easy to fall into the trap of thinking that the worldwide recession and credit crunch would have had an impact upon finance for the market. However, the vast majority of property transactions in Iraq are carried out on a cash basis therefore little or no finance is required which has seen the market effectively bypass the credit crunch. Employment in Iraq has very much been on the up as the UN led forces continue to rebuild and improve the battered infrastructure of the country which was obviously impacted by the wars although it had been starved of investment for decades.
As the property market continues to improve we are likely to see more and more Western companies moving to the area and a substantial financial market could be set to appear. The country still has some way to go to introduce a reliable and long-term financial system but each week and each month of reduced violence in the country takes Iraq a step closer to the new era.
Security has been an issue which has held back a substantial number of overseas property investors and those living in Iraq. However, there has been an explosion in the employment of private security firms in and around Baghdad which has led to a much safer environment and one which has attracted the attention of the substantially rich element of the Iraqi population. This renewed confidence in safety in and around Baghdad has led to a substantial increase in the property market with homes which were fetching 40 million Iraqi dinars (US$34,000) just two years ago now fetching in excess of 150 million Iraqi dinars (US$128,000).
While there has been marked increase in prices at the lower end and middle end of the Iraqi property market there has been a more significant improvement towards the higher end with many rich Iraqi businesspeople returning to their homeland. Security and safety seem to be the two issues most prevalent in the minds of the Iraqi people and international investors and substantial improvements in these areas have proved very lucrative for the region.
Flights to Iraq
The first commercial flight from Western Europe to the Iraqi capital of Baghdad was recently announced by Swedish-based Nordic Leisure. While not the first commercial flight to Iraq, their once a week flights to Baghdad are the first to the capital in over 17 years. This is seen by many as a substantial step in the right direction and one which will open up for the Baghdad economy and Baghdad property market to international investors.
The majority of travellers at the moment are Iraqi nationals either returning to their homeland or commuting at regular intervals from employment overseas. As the Baghdad economy continues to grow and employment opportunities continue to increase there is every chance that overseas workers could start to descend on the region. This would be yet another significant moment in the rebuilding of Iraq and Baghdad in particular.
Investing in Iraq
Amongst all the doom and gloom headlines which often surround Iraq and Baghdad in particular it is easy to forget that the Iraqi stock market has been through a boom time over the last few years as has the Iraqi property market. While it would be foolish to suggest that the hard work has been completed in Iraq, there is no doubt that significant progress has been made and this has registered on the radar of many international property investors and businesses.
There are risks associated with investing in Iraq, and they do differ from area to area and city to city, but the country has a history going back thousands of years and is well positioned to become a focal business point in the region. Whether this happens during the next 5, 10 or 25 years is debatable but if progress continues at the same pace and same rate of success then potentially Iraq could be an investment hotspot for the future.
When you scratch the surface of Iraq there are signs of a significant recovery in the economy and property market of the country although very often the impression given to the worldwide population is very different to that on the ground. However, there is still a significant chance of civil unrest in certain areas of the region, property regulations need to be defined and embedded in law and the financial markets are still very immature.
Those brave enough to invest in Iraq when there was “blood on the streets” would have made significant returns in either the stock market or the property market over the last few years. Whether this will turn out to be phase 1 of a substantial recovery and growth in the Iraqi economy remains to be seen but those who write off Iraq do so at their own risk.