Newsroom Panama - Panama News and Events in English

Panama’s real estate market has seen good times and bad times, and 2012 is predicted to be a mixture of both depending which end of the buy-sell spectrum you sit on.

This is the second of six extracts from a recent of a recent in depth study compiled by Kent Davis of Panama Equity Real Estate.

They are not the views of Newsroom Panama, and Kent is not an advertiser on the site. We are publishing them at length as a perceived benefit to readers, buying, selling or renting.

The changing face of Paitilla

They will be  numbered 1-6, so if you miss any, go to search and type in “Real Estate” and the number. Your own comments and experiences will be welcomed by Newsroom and the author.

The series will cover the history of the boom years, the current situation and projections for the future. Enjoy

2011  was an interesting year for real estate agents in Panama with several large real estate agencies either closing up shop or massively downsizing due to the increased competition in the marketplace. It was also a year that weeded out those who were in real estate for the easy buck.

The Panama real estate boom will continue in 2012, but In order to make any sort of prediction about trends in 2012, one has to take a look back namely the boomtown years of 2005-2008, the correction and plateau period from 2008-2010, and the slow yet steady year that was 2011. Who was buying, what was getting built, and what areas are currently safe bets for appreciation?

Back in 2005, Panama was still relatively undiscovered by North American buyers. Business travelers and tourists totaling less than 800,000 a year were coming to Panama because they recognized opportunity. The newly elected Martin Torijos was seen as one of Panama’s first progressive presidents and his policies and his constituents opened the doors for foreign investment and more importantly real estate development.

2005 was the benchmark year when a number of construction projects on Punta Pacifica and Costa del Este broke ground. Investors were snatching up preconstruction condos in luxury buildings at prices around $800.00 per square meter and Panama was still relatively undiscovered as real estate markets around the world were peaking. Developers published newer, higher price lists every few weeks showing strong inventory absorption and thousands of condos were being sold over the phone, site unseen. With only 10-30% down, investors were seeing 100% returns on their money by flipping their contracts and buyers were easily found..

Enter 2008 and the economy and real estate market in Panama were still red hot. GDP was pushing 10%, tourism was an emerging industry, and places like Costa Rica and Belize were on the backburner. Everyone was thinking “Panama” because,  lots of money was being made on real estate flips and there was no end in sight.

But in the fourth quarter of 2008, the bottom fell out of the financial markets and real estate movement in the US ground to a halt. Prices began to plateau in Panama as investors still tried to realize gains like in prior years, with local developers, property owners, and foreign flippers standing firm on their asking prices and refusing to believe that the world economy could affect the Panama buying fever.

The 24 months following January 2009 saw across the board pricing corrections in the Panama City and beach real estate markets, deflating the bubble and slowing down a red hot market.

Buildings like Sky, Ocean One, and Aqualina saw price per square meters prices that had peaked at close to $3,000 per square meter ($280.00 per square foot) come back down to earth and settle out around the $2,200 -$2,300 per square meter range, a correction of roughly 20% to 25%.

The Panamanian economy slowed, but unlike its neighbors to the north, still showed positive GDP and very few construction project failures. The Panama Canal expansion project was voted through, and Ricardo Martinelli was elected to office with promises to make Panama a global hub for business and a benchmark for urban infrastructure improvements.

 Real estate prices remained flat during the first half of 2011 as the Panamanian economy started, to pick up steam. Massive foreign corporations relocating entire departments to Panama, government tax breaks like Law 41, and a general uptick in global freight movement all led to another year of double digit GDP growth.

Compared with 2010, there was  a pick up in activity in three main segments in 2011: the luxury property, strong rental demand, and a higher transaction volume for condos sold on both new and existing inventory.. Fellow agents in our broker network reported stronger sales numbers compared to 2010, with only moderate price reductions on list price.

During the last six months of 2011 we estimate a roughly five percent listing price correction occurred on city condos for sale above $100,000. Generally deals were being made anywhere from 90% -100% of asking price on existing resale units, with additional discounts being given by developers off their published prices up to 15% off of list price.

The majority of condos priced between $80,000 and $1,000,000 in 2011 were purchased by Latin American buyers: Venezuelans, Colombians, Mexicans and Panamanians. Our estimates are that approximately 50% of the real estate transactions in Panama in 2011 were Latin American buyers. We would also speculate that the other 50% of buyers were 20% from the US, 15% buyers from Canada, 10% from Europe and 5% from the middle east and Asia.

While there are a fair number of expats who have decided to make Panama their home, the lion’s share of property owners in Panama from other parts of South America are investors who are looking to generate cash flow via rental properties, both residential and commercial. The North American buyer’s market all but dried up in 2010, but is starting to make a resurgence as the economic picture improves or at least becomes more transparent.

We saw a lot of traffic from places like Atlanta, Washington DC, Miami and New York in 2011. The frequency and affordability of non-stop flights is certainly a factor, but the economic ties are also not to be overlooked. Large port towns like Savannah, Houston, and New Orleans have hosted high-level trade delegations that have resulted in increased visibility for Panama in those specific markets.