In recent years, Iraq has experienced significant economic effects due to fluctuations in the dinar’s exchange rate against the US dollar. These changes have directly influenced property prices, construction costs, and citizens’ purchasing power.
Although the real estate sector is typically one of the most stable sectors, it has become a clear reflection of the broader economic situation in the country.
1. How Does the Exchange Rate Affect Real Estate Prices?
The relationship between the US dollar exchange rate and real estate prices in Iraq is very close, as most construction materials and financial transactions rely on the US dollar.
According to Shafaq , the rise of the dollar leads to:
- Higher construction and import costs for materials like steel, cement, and paints.
- An increase in land and new housing complex prices by up to 15–25%.
- A decline in purchasing power among citizens whose salaries are paid in dinars, reducing real demand for property purchases.
2. Inflation and Rising Prices
When the exchange rate rises, inflation increases as well, meaning that prices rise across all sectors.
In the real estate market, this appears in several ways:
- Higher rents, especially in major cities.
- Smaller apartment purchases, as buyers opt for more affordable options that fit their budgets.
- Growth in agricultural land and suburban property sales as people move away from expensive urban areas.
3. The Role of the Central Bank of Iraq
To combat inflation and the rise of the dollar, the Central Bank of Iraq has raised interest rates to reduce liquidity in the market.
However, this policy has had side effects on the real estate sector:
- Higher interest rates mean that mortgage loans have become more expensive.
- Fewer people are able to borrow to buy homes.
- A slowdown in real estate development projects that depend on bank financing.
The result: liquidity decreases, sales drop, yet prices remain stable or even increase due to limited supply.
4. Purchasing Power at Risk
The middle class, which represents the largest group of buyers, has been hit the hardest.
With the dollar’s appreciation, salaries have lost value, meaning it now takes longer for citizens to save for down payments or repay housing loans.
At the same time, some buyers have started purchasing properties directly in dollars to protect their savings from currency volatility.
5. Future Outlook
Despite the current challenges, analysts believe Iraq’s real estate market could gradually stabilize if the Central Bank succeeds in:
- Maintaining a stable exchange rate within a defined range.
- Introducing new financing tools with lower interest rates.
- Encouraging affordable housing projects targeting middle-income buyers.
Conclusion
Dollar fluctuations and inflation are not just abstract economic indicators, they directly shape people’s daily decisions, especially in the real estate market.
Unless balanced policies are implemented to ensure monetary stability and accessible housing finance, the dream of home ownership will remain out of reach for many Iraqis.