“The drone attacks have mostly affected neighborhoods located near the airport and the coalition forces base. This has had a significant impact, discouraging many people from buying them,” Sardar Azad, owner of Amlak chain of real estate offices, told Rudaw English.
"When suggesting these areas to our clients, they frequently reject the idea of purchasing due to concerns about drone attacks, unwilling to jeopardize their safety. The desire to buy properties in these neighborhoods has plummeted by approximately 70 percent, leading to a 10 percent decrease in prices," he added.
US troops based in Iraq and Syria have been targeted by pro-Tehran militias at least 140 times since mid-October, according to the Pentagon. The Islamic Resistance in Iraq, a network of shadow militia groups backed by Iran, has claimed most of these attacks, linking them to Washington’s support for Israel in its fight against the Palestinian Hamas Movement in the Gaza Strip.
A significant number of these attacks targeted forces of the US-led global coalition against the Islamic State (ISIS) based at Erbil International Airport. One suicide drone hit a residential building near the airport on December 8, but inflicted no casualties.
Kurdistan Region President Nechirvan Barzani last Saturday told Iraqi politicians at an event in Baghdad that “these attacks inflicted a lot of damage to the security and the lives of the citizens of the Kurdistan Region.”
Sangar Osman, a realtor with Baghy Shaqlawa, believed that the drone attacks did damage to the real estate sector a few months ago but argued the impact has gradually faded away.
“When the first drone attack was conducted [in late October], many people were alarmed but when the attacks recurred, people got used to it and things returned to normal,” he said.
Mahdi Salam, CEO of Haji Salam chain of real estate offices, agreed that the impact of drone attacks is “temporary.”
“All unfortunate developments affect the market,” he told Rudaw English on Sunday.
The drone attacks show no sign of abating. On Thursday, a suicide drone targeting the base near the airport was intercepted and destroyed. Security threats also emanate from Iran directly. Tehran on Monday attacked Erbil with a barrage of ballistic missiles on the grounds of targeting an alleged Israeli Mossad base. Four people, including Kurdish multi-millionaire Peshraw Dizayee and his 11-month-old daughter, were killed in the strikes that reduced their opulent mansion to rubble.
Litany of factors drive Erbil’s real estate roller coaster
The security risk is just the latest factor to hit Erbil’s real estate sector that has seen several recent ups and downs. The market was severely hit with the rise of ISIS but bounced back after the defeat of the terror group and before the spread of the coronavirus in 2020. Now it is again on a downturn.
“Several factors contributed to setbacks in apartments and houses in the Kurdistan Region, including instability in the dollar rate, political issues, the salary issue in the Kurdistan Region, abundance in residential apartments, and drop in trust in the market due to failure to finish some residential projects,” Osman said.
Salam agreed with Osman’s assessment and added another factor: “stability in Iraq’s southern and central [provinces] is among the reasons behind the return of the people of southern Iraq to their homes.”
Hundreds of thousands of people fled federally-controlled provinces after the US invasion of Iraq and when ISIS seized control of swathes of Iraqi territory in 2014. Many of them sought refuge in the Kurdistan Region. The territorial defeat of the terror group has paved the way for the restoration of security and stability in their home provinces.
Interest in residential apartments in Erbil also experienced a significant downturn following two earthquakes in Turkey in February last year that resulted in the tragic loss of over 50,000 lives. The quakes shook Erbil but did not cause any significant damage. Many people, however, began to question the safety of apartments in the Kurdish capital.
An economic downturn has also inflicted damage on the real estate sector.
Turkey stopped the flow of Kurdish oil through the Iraq-Turkey pipeline after a Paris-based arbitration court last March ruled in favor of Baghdad, saying Ankara had breached a 1973 pipeline agreement by allowing Erbil to begin independent oil exports in 2014. Despite several talks between Kurdish, Iraqi, and Turkish officials, oil exports remain suspended. As a result, many oil companies have halted production and the Kurdistan Regional Government (KRG) lost its main source of income.
The KRG received billions of dollars from Baghdad as a loan late last year to pay its civil servants who have not been paid in full and on time for nearly a decade. Public employees have not been paid for the past three months, however, and the government is reportedly planning to skip these months and instead pay January salaries.
“I remember buying an apartment for a client for $75,000 in 2022, but now it is worth around $60,000 and no one is willing to buy it,” recounted Osman.
He and Azad agreed that prices of residential apartments have plummeted by around 25 percent in the past year.
Osman said one of the main reasons behind the setback is the fact that most transactions in federally-controlled provinces are done in Iraqi dinars while the Kurdistan Region uses the US dollar. A dollar is worth over 1,500 Iraqi dinars in the market.
“They sell their property [at home] in dinars but should buy it in dollars here,” he said, explaining that many Arabs bought property in the Region for rent purposes, but now with the difference in the exchange rate they can earn more at home, especially now that some Iraqi provinces have started building new properties.
After years of construction, there is also a glut in the market, leaving many residential units in Erbil empty.
According to figures from Haji Salam company, the average number of empty units in each residential project has not exceeded ten percent. But the government has stopped granting licences to new residential projects in a bid to prevent further inflation in the real estate market, said the company CEO.
In 2023, the KRG allowed the establishment of more modern, gated neighborhoods known as “cities” in Erbil compared to previous years, according to data Rudaw English obtained from the Erbil investment directorate.
These “cities” have eased some of the government’s burden, helping it expand urban areas with less cost as investors take on the responsibility of all services. Most of these new neighborhoods rely on wells for water as well as private generators and public electricity for power - two necessities that are scarce in the capital city.
Although the government oversees the process, urban planning has been criticised after some of these investors changed the direction of water, causing floods. An investor was arrested in 2021 for “illegally” making changes to his residential project in eastern Erbil that subsequently caused devastating floods. He was compelled to compensate the affected people.
Osman is hopeful that once the KRG is able to pay its civil servants on time, the real estate market will get a boost.
Last Sunday, Baghdad decided to pay the Region 618 billion dinars to cover January salaries as part of the Kurdish government’s share of the federal budget. This followed intense efforts by President Barzani who held several meetings with Iraqi officials and influential politicians, lobbying for the Iraqi government to pay the KRG’s share and convince lawmakers to amend the budget to ensure uninterrupted payments to Erbil.
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