Baghdad: Mirage Of A Real Estate Market?

These days, the word Baghdad conjures up ugly pictures in most Americans' minds: War. Terrorism. Heat. Desert. Bombings. Real estate.

Excuse me? Did you say real estate?

Coverage within the past month about Baghdad’s real estate market–a result of Iraqis' mass exodus from the city–has investors worldwide buzzing. Rents and home prices dropped significantly as Iraqis fled the city in search of more stable living conditions.

With supply declining, Iraqis are stuck between a rock and a hard place, many searching for homes that simply do not exist. In the face of over 46,000 Iraqis returning to Baghdad from places like Syria, demand is high and supply is null.

What does this mean for U.S. investors?

Some may argue nothing and say that investors willing to risk buying in such a volatile market may as well invest in San Diego, or Seattle, for that matter, and call it good.

The market contains everything from small homes which sell quickly, often after bidding wars, to larger multi-million dollar homes.

Others say Baghdad's real estate market is significant. Rising population and real estate prices in any city equal more development, more development means more jobs and more jobs mean…well, you get the point.

But why the sudden interest in real estate in this war-torn city?

Many of the larger homes have inflated prices because buyers, who have made money off government contracts, corruption and looting, are willing to pay 10 to 15 percent more than the home's value.

Some homes are dropping in value–owners desperate to unload properties in less-than-safe neighborhoods. Those homes sell, too–and fast. Both factors are resulting in serious opportunities for investors willing to take the risk.

As an investor, would you consider Baghdad?

I’m quick to say no–but stopping to think twice.