A recent post in The Panama Report investigates the current condo market boom in Panama City. The author of the article, a real estate development consultant based in Panama City, discusses the fundamentals of the condo market in Panama City, which have led him to conclude that the market may be on the verge of busting. Many condominiums are now selling between $300,000 and $600,000, with a median price per square meter of $3,000. The author worries that as banks in Panama become more conservative with loans in response to the conditions in the United States, it is likely that developers are going to take the brunt of the damage as speculators fail to make payments. Most deposits on units range from 10 – 30%, meaning many developers could be left with 70-90% of the cost if investors begin to back out of the market.
I have to say that I agree with what Mr. Quesada warns of in this article, and admit that I would be pretty nervous if I was developing upscale condominiums in Panama City right now. I do have a few caveats though. While I do think that there are similarities between the current situation in Panama City and in the United States several years ago, there are several important differences. Unlike the United States, Panama does not offer mortgage backed securities. While this will tighten lending in the country and decreases liquidity, it should prevent the bubble from becoming too large too fast as it did in the United States – particularly as it did with the subprime mortgage mess.
Another potential factor in Panama City’s condo market are European investors. Depending on how the euro and pound sterling fare, Panama City could continue to be a relative bargain for Europeans. While the infrastructure in Panama City still lags behind cities such as London or New York, the cost of living is not likely to be quite as expensive as these cities.
There is no doubt that the condo market in Panama City is likely to cool off in the near future. Yet the city continues to be promising as a long term investment, particularly once the bubble begins to deflate and a better price equilibrium is reached in the market.
Real Estate prices have tripled over the last year and the price HYPE or BUBBLE as we call it is all based on Speculation and a false wave hype that has creating a DEMAND that is not there yet. Most prices you will come across are Inflated and BLOWN UP by 30% – 40% and developers are masters at selling under the suspense of “there’s only one unit left”, when in fact there are probably at least a dozen units left and a long line of FLIPPERS waiting to FLIP the units they bought a year ago and now “their situation has changed” (when referring to their buying power negatively affected by the U.S. economic slump).
So what is the Solution? And is there a Real Investment Opportunity in Panama?
Answer is YES! However, today- to fully take advantage of the current real estate investment opportunity you must be informed and have access to recent pricing trends for analysis of actual accurate pricing, going back to January 08 or even further back 12 – 14 months. Research what’s developments are on the drawing board that may affect your investment?
Inform yourself with recent laws proposed that may affect your pocket, for example a recent law proposed by the government to have property owners in the Avenida Balboa area pay an additional tax for funding of the construction of the new highway (cinta costera) currently under construction.
To take full advantage as an investor you have to be exposed to “the next phase” or “future growth areas” in Panama. And you have to be shown ground floor opportunities so that you can buy- in low (at the first initial offering price) and possibly flip at the high end of the price curve. At the current trends you can make thousands of dollars or millions of dollars depending on your investment scope budget on ground floor opportunities.
After Sept. 29, one has to seriously think about the impact of the US market crisis on Panama.
http://www.businesspanama.com/panamablog/
Expect apartments above 150 sq m to go the way of the SUV: unsold inventory until the next good years. 3 bedroom condos will still be in demand from Venezuelan, Colombian immigrants and the local market.
http://mypanamalawyer.blogspot.com
I Am about to close on a condo,on
Balboa ave [Destiny]
I started this as a preconstruction deal,nov 05.The developer added 9 floors,1 year & 5% $ .to the project.In the meantime.i have lost a big % of my assets.I do not want to lose my 20% deposit,but am afraid of crashing market.Renting it is an option.
Any insight?
ron