Panama City’s Casco Viejo “A Cultural Cornerstone” Says New York Times

Panama City’s Casco Viejo neighborhood is receiving more praise as Panama City’s hottest neighborhood and was called “a cultural cornerstone” rivaling Miami’s South Beach in the New York Times. Panama City’s up-and-coming historic neighborhood has attracted the attention of international media outlets. Last month Casco Vieio was featured in an article in The Guardian. The Times article describes the neighborhood as conjuring images of Havana, yet bursting with energy as historic colonial buildings are being renovated and converted to luxury apartments and boutiques.

At a time when other real estate sectors are slouching, Casco Viejo provides interesting opportunities for real estate and development, particularly for anyone willing to take on historic preservation and reservation.

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“Is The Panama City Condo Market Going The Way Of Southern California?” Asks “The Panama Report”

 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.

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Panama City’s Casco Viejo Neighborhood Is “One Of The Hippest Barrios In Latin America,” Says The Guardian

The Casco Viejo neighborhood of Panama City (also called Casco Antiguo) is “one of the hippest barrios in Latin America,” according to a recent article in the Guardian. The article describes the growing popularity of Panama’s capital city as one of the fastest growing tourist destinations in Latin America. Once a stopping off point for tourists visiting the Panama Canal, Panama City is now becoming a base for tourists due to its bustling nightlife, close proximity to both Pacific and Caribbean beaches, and access to unique tropical ecosystems teeming with biodiversity. Panama is also gaining a reputation as a cultural center in Latin America, particularly in the realm of music. Local bands have begun to receive more regional attention throughout Latin America, in addition to a thriving jazz scene in and around Panama City.

This article highlights many of the strengths in Panama’s growing tourism economy. Given the level of media attention the country is receiving in the United Kingdom, due in part because of the scandalous ‘canoe man’ incident, and the upcoming James Bond film, it is likely that tourism from the United Kingdom and Europe will likely increase. Given Panama’s currency’s ties to the dollar, it is almost certain that the country will increasingly gain attention from European travelers for the foreseeable future (or until the euro and the pound begin to lose value to the dollar).

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Panama Building First Diamond Market In Latin America

Panama is currently building the first diamond market in Latin America. The 50 story diamond bourse will include safes, a gemological institute, laboratories, polishing and cutting facilities, and a trading hall.The diamond market is expected to attract 300 traders, and will serve growing markets in Brazil, Chile, Mexico and Argentina. The $200 million project in Panama City is scheduled to be completed in 2010.

Despite modest diamond and gem production in South America, the region has relied on exchanges in the United States and Europe to supply gemstones for jewelery. The creation of a diamond bourse in Panama City will be a tax-free zone and is expected to lower the retail prices of diamonds in Latin America. The creation of a diamond market in Panama City, recognized by the World Federation of Diamond Bourses, will continue to increase Panama’s reputation as a major trade hub in the Americas.

Source:

Panama To Open Up Latin American Diamond Market (Africa.reuters.com)

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Trump Plans Oceanfront Casino In Panama City

Donald Trump’s company Trump Entertainment is planning on opening a casino on the Pacific Ocean in Panama City. The casino would be Trump’s first gaming facility outside of the United States, and is likely to feature slots and assorted table games. The casino will be part of the Trump Ocean Club hotel and condominium complex currently under construction, and will likely open to coincide with the condo in either 2009 or 2010.

The details of the new casino, which has yet to be named, are still being negotiated. The development comes amid financial problems for Trump in the United States, as his company is currently selling off the under performing Trump Marina casino in Atlantic City, New Jersey. The company is hoping that the small casino, which is part of the $400 million project in Punta Pacifica, will help bolster the Trump’s international reputation. In addition to Panama, Trump Entertainment is also considering expanding their gaming empire to locations in Uruguay, the Philipines and the Ukraine.

Trump Hopes To Expand His Entertainment Empire Outside Of The US

Source:
Panama In The Cards For Next Trump Casino (Pressofatlanticcity.com)

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Photographs Of The Panama City Construction Boom

Panama City has seen incredible amounts of construction in recent years. A slide show from La Prensa includes photographs documenting the construction boom in Panama City.

Here is a link to the slide show, translated by Google. Clicking on the individual pictures should provide an English translation. The original Spanish version of the slide show can be found here.

Panama City (from Wikipedia.org)

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Copa Airlines Continues To Beef Up Fleet With New Orders For Boeing 737s

Copa Airlines, the national airline of Panama based out of Panama City’s Tocumen Airport, has announced an order for two additional new Boeing 737 aircraft, which will increase their current order to nine new jets. The expanding airline currently offers nonstop flights between Panama City and locations in the United States including Miami, New York, Los Angeles, and Orlando. Copa Airlines serves a total of 22 countries in North, Central and South America, as well as the Carribean. The airline’s fleet currently has forty aircraft total, twenty seven of which are Boeing 737s.
 
Copa’s continuing growth is good news for investors, as it now has one of the youngest fleets in the Americas. As Copa Airlines begin to offer new routes and more frequent flights on existing routes, Panama City will continue to increase in prominence as a Latin American transportation hub.

Source:
Copa Airlines Announces Orders for Two Boeing Next-Generation 737 Aircraft (Marketwatch.com)

Photo of Tocumen Airport courtesy of Wikipedia.org

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More On The Panama City Condo Boom: A City With Growing Pains?

News about the real estate boom in Panama City seems to be in never ending supply (making this my third Panama City update this month, read here and here).  This week the honors came from the LA Times, in an article they ran entitled “Panama City: A Boomtown With Growing Pains.”  The title alone seems to sum up the situation in Panama City well.  Yes, Panama City is booming, but will it be a completely painless process?  Probably not.  The article goes on to discuss the overall positive economic situation of the city, such as the major canal improvements currently being undertaken, which should bring short-term construction jobs to the city as well as bolster Panamas reputation as an international crossroads of goods and services.  Multinational corporations such as 3M and Hewlett-Packard are also flocking to set up shop in Panama City to take advantage of the “location and friendly atmosphere” (which is apparently corporate jargon for ‘tax-haven’).

Yet, as the “growing pains” portion of the title from the LA Times article suggests, the arguments for economic prosperity in Panama City are not without caveats.  One of the biggest problems facing the growing city is that the growth seems to be outpacing infrastructure development.  Traffic congestion is horrendous, the electrical grid is extremely strained, and 6% of the Panama population is without running water.  This is not to mention the fact that Panama is still trying to separate itself from its historical reputation as a hangout for corrupt despots, drug lords, and sleazy businessmen.

So what does this mean for real estate investment in Panama City?  As a short term investment the city is looking increasingly risky.  The speculative nature of the condo market and lagging infrastructure development in the city are worrisome.  The canal project isn’t scheduled for completion until 2014, and while the influx of workers should keep segments of the real estate market booming, will these workers be in the market for the multitude of luxury high-rise condominiums currently slated for construction?

Fortunately, as a long term investment the situation in Panama City is looking positive.  As multinational corporations continue to move to the city, and the canal project goes ahead as planned, Panama City should be on track to becoming a world class city, and a major regional hub for cargo and telecommunications.  Yet given this, you still aren’t interested in weathering the fallout of a potential condo bubble in Panama City?  Investing in hotel and hospitality industry is always an interesting possibility… according to the same article a shortage of rooms has caused rates to double in the past year.

Source:

Panama City: Boomtown with growing pains (Latimes.com)

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Report On The Panama City Condominium Market: Is The Bubble Bursting?

A recent post on the International Herald Tribune’s blog “Raising the Roof” mentioned a recent report put out by CB Richard Ellis on the condominium market in Panama City. The report, which can be found here, has some interesting statistics related to the current market in Panama City, including the fact that there are currently 204 active condominium projects in the city, and that the average sale price for A-class condominium units rose 12% between 2006 and 2007.

Despite the generally rosy outlook the report describes, there are a few problematic pieces of information that it outlines. For example, the report acknowledges the fact that there has been a slowdown in absorption rate from last year, and that of the 21,710 total units actively being developed only 9,875 are currently under construction. To quote the report:

“Absorption continues steadily, albeit at a slower rate. In 2007, the amount of units on the market almost doubled compared to 2006, while the amount of units under construction grew at a lower rate. This shows that not all the projects have achieved the minimum presales required to start construction, however, Panama continues to be attractive for foreign investors, most of which originate from the United States, Canada, Spain, Colombia and Venezuela.”

I find this information to be particularly troubling, especially given the current economic woes of the United States. The declining dollar, rising fuel prices, and foreclosures in similar California and Florida markets will undoubtedly have an impact on American investors, many of whom will probably be cautious to enter a market that is admittedly fueled by speculation. Depending on how the potential (inevitable?) US recession ends up playing out, it is easy to imagine that the data from this report is showing the tip of the iceberg in a growing downward trend in Panama City’s condo market.

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Construction Boom In Panama City Sparks Fears That The Market Is Becoming Overbuilt

An article published today in NuWire Investor investigates the current construction boom in Panama City, taking a look at how the large influx of condominiums coming on the market in the next few years may make Panama much less appealing as a short-term investment. Nearly 50,000 preconstruction condos are currently for sale in Panama City, with many currently slated to be completed in the next few years. This construction boom has been primarily fueled by speculators, with up to 80% of the preconstruction sales in the city being bought by short-term investors. With only 8,000 new condominiums finished in the past three years, some analysts fear that the rampant speculation may not be reflective of the actual demand for housing in the city, and that many of the projects may run aground as a result.

Panama City has not been the only region in Panama that has been affected by the real estate speculation. Boquete has also seen a slowdown in end-user demand for housing, and has seen a contraction in new development in the region. Despite signs of a slowdown, many remain confident that Panama will remain a strong bet as a long-term investment, given the countries modern amenities and popularity among American and Canadian baby-boomer expatriates.

Read the full article on the panama city condo craze at NuWire Investor

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