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A hot spot -- for housing too

With violence down in Baghdad, home prices are up as Iraqis flock back. For many, the cost is too steep.

January 29, 2008|Kimi Yoshino and Caesar Ahmed | Times Staff Writers

BAGHDAD — Soaring prices. Precious few homes. Bidding wars. Sound like Southern California a few years back? Welcome to an unexpected bright spot in global housing: Baghdad.

Attracted by news of decreased violence, thousands of displaced Iraqis returning to Baghdad's safer neighborhoods are fueling a bit of a real estate frenzy.

Last year, home prices plummeted and rents dropped as Iraqis left town in search of more stability. But now, some say it's almost impossible to find a suitable place to live, with sales prices doubling in certain neighborhoods and the most affordable homes being snatched up as soon as they're on the market.

"Day by day the prices are increasing, and I keep on decreasing my options," said Hussam Jassem, 35, a government worker who earns about $400 a month, a typical middle-class salary. A 750-square-foot home in a lower-middle-class neighborhood costs about $150,000. In the upper-middle-class neighborhood of Karada, a 2,300-square-foot plot of land alone costs $350,000.

"I will end up with nothing if I don't find something soon."

Jassem isn't asking for much: an affordable home in a safe neighborhood with enough space to fit his parents, two sisters and brother.

But in a city like Baghdad, where insurgents have descended on entire neighborhoods and kidnappings and bombings are still a danger, Jassem's task isn't easy.

In the last two months, he and his family have scoured the city, inspecting more than 40 homes, only to be stymied again and again by rapidly increasing prices and a shrinking pool of homes.

In December alone, an estimated 46,000 Iraqis returned to Baghdad from Syria, and more than 67,000 have come back since mid-September, according to the Iraqi Red Crescent Organization.

"The displaced people are coming back," said real estate agent Mohammed Hassan, who sells homes in Shaab, a lower-middle-class neighborhood in northeast Baghdad. "There is plenty of demand and I have nothing to supply them with."

In September 2005, Jassem, a Shiite Muslim, and his family left Dora, a southern Baghdad neighborhood that Sunni Arab militants from the group Al Qaeda in Iraq had claimed as their base. Last year, insurgents drove Christians from the area, demanding that they pay a special "tax" or leave.

"When the security started to become bad, people sold their property for any price because of terrorism," said Haji Ranzi, another Baghdad real estate agent. "They just wanted money to leave the country. Now they come back, but they spent all their money."

Jassem, for example, sold his family's five-bedroom home, valued at about $165,000, for $75,000. After such a loss, he can afford only $100,000 for a new house. Nearly all Iraqis pay for their homes in cash, and banks rarely offer home loans.

He said he's exhausted "every option" in finding a place to live, with friends, relatives and real estate brokers all on the lookout.

"We found a suitable house; it was a very good house," Jassem said. "It was like a beautiful rose in the middle of garbage."

But radical Shiite cleric Muqtada Sadr's Mahdi Army militia controlled the property, he said. The small, two-bedroom home cost $150,000 -- way out of his price range.

He found another house that he figured was worth about $115,000. "But because the security situation is better there, the seller asked for $210,000," Jassem said. "We couldn't even make an offer."

Ranzi said the smallest homes are the quickest to sell. They're gone almost as soon as they hit the market, sometimes with multiple bidders. Prices have risen so much that even large families are cramming into smaller units.

But Ranzi also has a stock of million-dollar homes, some costing as much as $3 million. These massive compounds, complete with marble floors, sparkling chandeliers and state-of-the-art security systems, are also surprisingly in demand.

Prices for the bigger homes have increased a more modest 10% to 15% in recent months, Ranzi said. The buyers include former high-ranking military officers, doctors and members of Iraq's nouveau riche who have made their money from government contracts, business deals or in less legal ways, such as looting and corruption.

On a recent day, Ranzi was trying to seal the deal on a $1.5-million home with two men who said they were in the car import business.

"You see the neighborhood?" Ranzi said. "It's a good neighborhood, better than all the neighborhoods in Baghdad. God will make you see the good when you take this house."

After 20 minutes, the men were still haggling over whether the furniture would be included. They parted ways, with Ranzi promising to take their counteroffer to the owner.

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