|PANAMA REAL ESTATE 3: How 2012 could unfold|
|PANAMA REAL ESTATE 3|
How do you find the deals?
The best deals come just after the developers start calling for the final deposit: here, timing is everything. In most cases, the price point of units in a specific building can fall dramatically during this brief window, only to recover to “market” levels once the desperate sellers are out.
We saw it happen in the Trump Ocean Club, we saw it happen in buildings like Destiny and Sky, and we are going to see it with Rivage, Yacht Club Tower, White Tower, Waters Tower, Arts Tower, and Yoo Tower, all of which are slated for delivery this year. There are some exceptional deals out there right now, you just have to find the right sellers. Very few of the best deals are ever published on the internet, so it’s up to the savvy buyer to work with an equally savvy real estate agent (or building administrator, lawyer, or anyone else with access to the “distressed” sellers).
if you buy right now, you can buy in anticipation of the correction and either find a tenant immediately or enjoy your condo and resell once the market has recovered.
In 2013, Panama will be a city that has undergone a complete face-lift: new Metro commuter rail, newly expanded Panama Canal, fully operational Coastal Beltline, and a world economy slowly working its way out of a recession. That means new buyers and a totally new Panama City.
We’re bullish on the real estate market and Panama in general over the next 3-5 years, however we believe that sellers must be realistic and buyers must be calculative.
The math of a deal
Most of the buyers along Balboa Avenue got in anywhere from $1,700 to $3,200 per square meter, depending on when they purchased. Most of these buyers (you can call them sellers now) have anywhere from 20 to 40% deposits down with the balance coming due when the building receives its occupancy permit. To use a very general example, let’s say a new buyer has $90,000 down on a $300,000 condo. The developers in most cases are probably still sitting on at least 20% of their unsold inventory in this particular building, and we can conservatively speculate that another 20% will be defaulting and/or trying to liquidate their positions.
In the example above, let’s say our buyer purchased a 150 sq meter two-bedroom condo back in 2009. That condo in today’s market is worth about the same amount that they paid, maybe slightly less, but what happens when 100 other condo owners in the same building cannot close? (And don’t forget about the developer who is sitting on their unsold inventory and will be bank motivated to burn out their units).
This will force the price point lower as distressed sellers fight to recoup any portion of their deposit that they can and developers scramble to unload their remaining inventory. I know of a small handful of developers right now who are slashing their prices multi-fold in anticipation of the correction. They see the writing on the wall and, when the offer is presented properly, are prepared to come down to an aggressive purchase price point rather than lose a buyer. There are, however, some developers who refuse to acknowledge a market correction and are unwilling to negotiate off of their list prices.
Add to the mix of sellers in preconstruction projects the owners in existing buildings along Balboa Avenue like Bayfront, Grandbay and Sky who decide for whatever reason to put their condos up for sale. They’ll have to compete against brand new inventory entering the market, meaning prices will face further pressure. And who is going to pay $1,700 per meter in a neighborhood like San Francisco when they can get an equivalent ocean front unit for only slightly more along Balboa Avenue?
*The views expressed are those of the author who has no affiliation with Newsroom, other than as a contributor. He is the founder of Panama Equity Real Estate.