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Real estate inflation
Economic 2024/09/18
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Real estate inflation is a new economic concept, or rather a new economic term, that has begun to emerge on the scene by a number of economic experts around the world.
In order to trace the stages and causes of this economic variable, it must be noted (as a reminder) that there is a prevailing belief that keeping a property (ownership) for the long term is the best way to save in the hope that prices will rise and benefit from their difference.
This was taking place in a different economic situation, where the number of owners was small compared to the population according to this perspective.
Perhaps what reinforced this belief was the housing crisis that expanded in direct proportion to the growth and increase in the population size, especially in Iraq, and led to the ingenuity of disposing of areas and dividing lands into small areas for the purpose of profit and benefit, but at the expense of the basic design and pressure on the insufficient infrastructure, and this is another topic.
As for real estate investment, it is intended to purchase residential units for the purpose of investment by selling them after a while or renting them to obtain additional income. For the purpose of analysis, I recall the American mortgage problem that caused a global financial crisis whose effects are still affecting many economies around the world.
Here lies the lesson, or rather the warning, about the danger of expanding real estate investment without planning.
The phenomenon of investment inflation has become clear in the Kurdistan Region during this period for several other reasons, including the decline in demand from the center after the security improvement, as real estate investment has become somewhat unprofitable, and an indicator of this is the decline in real estate prices that do not equal the purchase amounts due to the expansion in real estate investment that exceeds the actual demand, regardless of other reasons and causes, just to define the meaning of real estate inflation.
Now you can get a housing unit with a modest down payment and pay the rest in installments over medium-term periods. This phenomenon is suitable for addressing the housing crisis, but it is not suitable for real estate investment.
The capital, Baghdad, is now witnessing a great rush for profitable real estate investment compared to the need for housing, but in the medium term it will be unprofitable for investment and profit due to the housing projects that the government has launched and will launch later.
An important note is that there are analyses circulating about real estate investment that are not based on reality and may seem correct in some aspects, but the economic logic and feasibility of expansion and our perspective on the subject from an economic perspective require sound planning to keep the country away from falling into the global mortgage problem in the future, just a point of view open to debate.
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