ERBIL, Iraq (Reuters) - The offensive to retake Mosul from Islamic State has damaged thousands of structures in the historic Old City and destroyed nearly 500 buildings, satellite imagery released by the United Nations on Thursday showed.

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Iraqi forces backed by the United States have pushed Islamic State into a 250-square-metre strip of territory along the Tigris River, prompting fighters to ramp up suicide bomb attacks, commanders said.

More than eight months of warfare have displaced 900,000 residents - about half the city’s pre-war population - and killed thousands of civilians. The destruction is far greater than expected and is likely to cost billions of dollars to fix, according to the United Nations.

Images taken a week before the offensive began on June 18 showed damage to 2,589 structures with 153 destroyed. The Iraqi military and the U.S.-led coalition backing it pounded the city for months with air strikes and artillery before the onset of the ground offensive in October. Islamic State also may have destroyed some buildings.

Five days later, as bombardment intensified, another 1,451 buildings had been damaged, including 43 more destroyed homes, according to the imagery documented by the United Nations Institute for Training and Research.

In the first 12 days of fighting inside the Old City, in which Islamic State deployed dozens of suicide bombers, a further 1,496 structures were damaged, with 294 more destroyed. More damage is expected before the fighting ends.

Islamic State rigged the historic Grand al-Nuri Mosque with explosives and razed it to the ground a week ago. The Old City along with 17 July district and areas around Mosul airport are the most heavily affected parts of the city, the U.N. has said.

In some of the most damaged areas of the Old City, such as Ammu Baqqal, Bab al-Tub and the Bazaar, almost no buildings appear to have escaped damage.

A statement with the maps called the analysis preliminary and said it had not been validated in the field. The dense construction of that part of the city, it said, meant the destruction might be underestimated.

The cash-strapped Baghdad government is expected to appeal to international donors to help rebuild Mosul. The U.N. is working with local authorities on plans to rebuild health, water and energy infrastructure.