Fear Drives Baghdad's Housing Bust

By Megan Greenwell
Washington Post Staff Writer
Friday, September 21, 2007

BAGHDAD -- Esad Ismael broke the most important promise he ever made.

As his father lay on his deathbed two years ago, Ismael, 43, vowed never to sell his family's home. His father and grandfather had spent all their savings to build the sprawling two-story house in Baghdad's wealthy Mansour district 70 years ago. Family memories were tucked between every tile on the floor.

But Ismael, a Sunni clothing merchant, was living in an area that was falling under the control of the Mahdi Army, Iraq's largest Shiite militia. Mindful of his promise to his dying father, he refused to move even after he began finding death threats pasted to his front door. After his brother was murdered, he gave up.

"It's bad that I sold our home, but what is worse is that I sold it for only 145 million dinars," Ismael said, naming a price equivalent to about $118,000 -- less than half the house's appraised value in late 2003. "It's an insult to my father to sell it so low. But what choice did I have? They would have killed us."

With hundreds of thousands of Baghdad residents having fled their homes for the relative safety of segregated neighborhoods or foreign countries, a clandestine system of buying and selling property off the books has supplanted more traditional real estate practices. If families being pushed out are lucky, they are able to sell their homes for some small price, as Ismael did. Wait too long, and their houses might be seized at gunpoint.

Real estate agent Mahir al-Sultani said business has all but dried up -- ironic, he admits, considering how many people are moving in and out. Without exception, half a dozen real estate agents said that houses are still being bought and sold, but that licensed agents have been largely cut out of the equation.

"It all happens so quickly and in secret," Sultani said. "What if the real estate agent is a militia member, and then you trust him with your money? Nobody trusts anybody, of course, so they don't want a man in the middle."

Sultani has sold three houses this year, each of which had been on the market for more than six months and sold for about half of its 2003 value. Meanwhile, residents in Karrada, the affluent district where he lives and works, say that at least a half-dozen properties have sold off the books within a few days of their owners deciding to flee.

Immediately after the U.S.-led invasion in 2003, home prices in Baghdad skyrocketed, fueled by widespread expectations that the war would end quickly and foreign corporations would pour money into Iraq's economy. Rich families who had left the country under the rule of Saddam Hussein returned, buying extravagant homes in upscale neighborhoods such as Karrada, Kadhimiyah and Mansour. Scores of new real estate companies opened across Baghdad.

"All my friends were asking me how to become a real estate agent. Some weeks, I was selling a home every day to people as investment properties," said Jawad al-Maliki, who operates a real estate company in Kadhimiyah, in western Baghdad. "They thought when all the foreign investments came Baghdad would be the new Dubai."

But as the war dragged on and insurgent groups gained power, property values began a free fall that real estate agents say has not yet hit bottom. The wealthy families who had returned to fancy homes in Baghdad left again for the stability of Jordan or Syria, in many cases leaving their houses empty. Lower- and middle-class people, desperate to afford the high cost of emigrating, rushed to sell their homes for any price. Altogether, nearly a million people have been displaced from Baghdad, according to the Iraqi Red Crescent Society.

"The neighbors told us how much we could get for it based on how much the militia would pay," said Sabah Nouri Motlaq, a Sunni who helped sell his brother's house in Sadr City, an overwhelmingly Shiite slum controlled by the Mahdi Army in eastern Baghdad. "They didn't have any choice, and if we had said no, they would have pushed us out for no money or killed us."

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