Panama Investor Blog

If it won't sell, how about a trade

In this economic climate one has to be innovative in order to survive and a friend of mine has taken this idea to a new level here in Panama. Seems everyone has assets, but cash is another story so this may be an appropriate alternative. Maybe an exchange of property would suit you if you are unable to sell in these tough economic times.  Here is some information from  Tom's website and some links. I will be curious to see how this works out.

Panama Advisory International Group is pleased to announce the launch of Panama Property Exchange, a forum set up for property owners in Panama and other parts of the world who have an interest in exchanging their properties.

A development project in Panama for one in the Florida,   an eco-resort site on an island in Panama for an estate home on the coast of South Carolina.  Maybe a condo in Panama City for one in Miami.  A hunting ranch in Texas for a large oceanfront property in Panama.

            

The list grows day by day with like minded people who understand like kind exchanges.   Please let us know how we might be of service and what questions we might be able to answer for you to see if your property might be of interest.

Peru, Panama, Brazil Lead List of Touted Markets

Panama continues to get great press as the place to invest. From fellow blogger Kevin Brass, International Property Journal comes these excerpts;

Investors looking for the next wave of residential growth should target Peru, Panama and Brazil, a new report on global markets suggests.

Strong economic growth, low interest rates and continued housing boom make Latin America, in general, far more appealing than other regions, according to the latest recommendations from the Global Property Guide, which tracks markets around the world.

The site’s analysis, which is weighted toward rental yields, is less kind to Europe, where “property markets have not sufficiently adjusted from their 15-year rise.” And while Asia valuations are skyrocketing, GPG believes the region is already “over-valued,” except for locales like Malaysia and riot-torn Thailand.

Overall, the GPG sees stronger markets around the world. Nineteen out of the 36 countries tracked posted gains in the first quarter of 2010, led by Hong Kong, Singapore and cities in Australia. In most countries with drops, the pace of declines is slowing, the site notes, except for Ireland, Bulgaria and Thailand, which are in “severe crisis,” the site notes in its quarterly report.

But for its mid-year recommendations, GPG steers away from Asia and the other hot markets to focus on the opportunities in Latin America. With low valuations, growing economies and under-valued currencies, even countries like Chile and Colombia provide better odds for appreciation than more established markets, the report concludes.

Panama, for example, offers “rapid GDP growth, good yields, lowish taxes, reasonably priced real estate, and reasonable round-trip costs make it hard not to put Panama on our list of recommended locations buying property, despite its history of corrupt government,” the report concludes.

Read the rest at IPJ....

Do Golf Courses Really Sell Second Homes?

Kevin Brass asks this question in his recent article by the same name in International Property Journal. I have my opinion on the mater which to some degree is substantiated by IPJ. There was a time when a golf course was a must for a successful master planed community, but the demographics of the buyers has been changing in the last decade and even more so in just the last few years. Even in the old days, only a relatively small number of community residents played golf, but all liked the amenities and manicured open spaces provided by the sport. If the community was large enough the maintenance fees were not so high and the added perceived and real value of a golf course home justified the extra expense. You could count on a 20-25% premium just being in a golf community.

But things have changed, especially in just the last few years with the economic downturn. Maintaining an 18 hole first class golf course is expensive and with so many home defaults, communities are struggling to keep maintenance fees down because there are less homeowners available to pay them.

Every golf course developer in Panama struggles with this cost of maintenance even though most of them make their courses available to any golfer willing to pay the fee. There are just not enough golfers in Panama to justify the cost of maintenance, so the developers end up carrying the cost of course maintenance hoping to make it up on homes sales in the future.

When I designed Valle Escondido I decided to put in an executive golf course that would provide an amenity that could satisfy a golfer and at the same time provide open green space that so many people cherish in a community where usually every square meter is devoted to housing. I had researched executive courses and found that if done properly they can be very enjoyable and provide a challenging play even for those who play it several times a week. In addition the initial cost and upkeep would be a fraction of that of a full size course.

Besides having limited space for a course (our whole project is only 125 acres), the cost of maintenance was a big factor in the decision. Where the cost of maintaining an 18 hole course might be anywhere from $25 -$60k per month for 100-200 acres, our executive course runs between $5-8K a month because the whole course covers less than 25 acres. This allowed us to charge a reasonable monthly fee and only to those who played golf rather than everyone in the community. The homeowners in the community get the advantages of the manicured open green areas, but if they don't play golf they don't have to pay for the maintenance. This turned out to a good decision for us, as most residents are happy with the arrangement.

When I hear a developer plan a golf course community in these challenging economic times, I cringe and consider the project doomed before it even gets started. The world is awash in examples of this losing situation of finished and unfinished courses and no or low home sales. In my opinion it will be many years before this reality will change and during these years the new generations interest in golf may not be that of their fathers or grandfathers. Now they want gardens, health spas, tennis or other sports that require a lot less space and upkeep. And as the world's inhabitants are forced to be more austere due to continued economic realities, the dream of a second home on a golf course in a far off land may be impractical and even frowned upon. 

Excerpts: from International Property Journal.

Talking to Nicaragua developer Kevin Fleming the other day, the subject turned to golf—specifically the value of golf in a modern second home resort.

Plans for Fleming’s 923-acre Seaside Mariana Spa and Golf Resort include a Jack Nicklaus Signature course, which will be a milestone for Nicaragua. The course and the Nicklaus name are a key asset in marketing the project, he says.

But Fleming is also among a group of developers who wonder about the importance of golf in future projects. His studies show 15 to 20 percent of potential clients are interested in the game, compared to 50 percent who love the idea of a spa.

“There’s more interest in eco-adventure [than golf],” Fleming says. “I don’t think you can go to market as a complete brand if golf is the only amenity.”

While not a new debate, this is an increasingly common discussion these days, as developers wonder if turning over a huge chunk of a property to an expensive course is really the best way to sell homes.

A marina sells more home, Ashley Bretecher, executive director of marketing for the Los Sueños Resort and Marina in Costa Rica, said in a recent interview. “Golf doesn't bring us real estate clients.”

The worst sector hit by the economic downturn, (the report found), were courses associated with residential developments, with 78 percent reporting a “negative impact.”

Read the whole story at IPJ

Brief report from Expo Real in Europe

My friend Jeff Hornberger is managing director of commercial Real Estate at the NATIONAL ASSOCIATION OF REALTORS. He sent me an email with a  brief of how Europe is faring and his impression of the Expo Real commercial real estate exposition. With his permission I post his email here.

Expo Real was interesting.  Yes, I see green shoots in real estate business.  Its always good to get the European view of things which is why Expo Real is so good.  In Europe 35% of the FDI comes from the USA (still) so we are not seen as "empire on the decline".  And, oh boy do they love Barack Obama who is very popular in Europe perceived as "cut from the REAL American stuff" so as an American abroad there's a better feel good vibe from folks!  The investor type there seems to think the US real estate market has hit bottom about now and interest in US (commercial real estate) investment is growing, at the expense and chagrin of markets that are competing for European FDI (ex, Eastern Europe).  The doom and gloom about the US seems to be more pervasive stateside than abroad; markets such as Spain and Ireland are in much more dire shape than we are and the conventional wisdom over there seems to be that the US is down, but not out.  

Traffic at the NAR booth was non-stop with high quality folks very interested in the US market.  I attended the conference also and the "Americas Market Session" was standing room only which I didn't see for any of the other regional sessions.

One anecdotal thing I experienced while in Germany was the unbelievable amount of Americans over there in every subway car, restaurant, street, hotel, etc..  They seem to be there on business, pleasure, or whatever.  One night I walked into the posh "Rathskeller" restaurant in downtown Munich and the place was packed, all with Gringos.  I had not been to Europe in almost 2 years, so expected due to the economy and exchange rate that the Americans wouldn't be there but I did not find that to be the case.

Well, that's the view I got from the other side of the pond; but time will tell how this economic mess sorts itself out..

regards..  I hope to make it to Valle Escondido soon!


Keep in touch.. JEFF

New study on the current status of Panama Real Estate

Encuentra24.com, the portal for real estate listing in Latin America has come out with a report based on a series of interviews with "professional" real estate brokers in Panama. I guess there are forced to go to this rather biased source as there is no MLS in which to review data and come out with the real facts. I find the answers from the agents both disingenuous and misleading.

Encuentra24.com Performed An Economic Poll About Panama's Real Estate Market 2009

Encuentra24.com Panama Classifieds performed a economic poll where Panamanian Real Estate Professional real estate brokers where interviewed on their experiences, the current economical crisis, property sales and market behavior.

Panama, Rep of Panama. (PRWEB) August 27, 2009 -- Encuentra24.com Real Estate and Classifieds listings Portal announced yesterday the result of its most recent economic poll, this time about the property purchase, sales and rental market in Panama.

panama-real-estate-poll

This poll was conducted by the marketing team of encuentra24.com who performed a phone interviewed to 50 professional real estate broker in Panama. The interviewed are actively dedicated real estate professionals in the Panama territory. Each had the opportunity to contribute their personal and commercial experiences in the subject of real estate.

Encuentra24.com informed them that a complete copy of the poll would be posted in online soon Encuentra24.com/panama. Boris Metraux CEO of Encuentra24.com added that other results of this property trend poll is a valuable reflection of the economy and current real estate market. The insight on exactly were do top 5 real estate buyer's originate, or sectors the experienced a drop in prices or what have been the repercussions of the economic crisis in Panama. They offer a market study in order to determine any future business decision.

1. The interviewed were asked they impression on current sales prices versus past sales prices in Panama. 46 percent said prices have remained the same, 34 percent believed they have dropped ten percent, 14 percent believed that prices have dropped 20 percent and 6 percent believe they have dropped a 30 percent.

2. When inquired about the zone or area that has experienced a reduction in prices, 31 percent respond San Francisco, 23 percent responded the Avenida Balboa area, 21 percent responded el Dorado and 18 percent believe Costa del Este and 8 percent responded Punta Pacifica.

3. They were also asked, what type of property has experienced the highest decrease in rental and/or sales prices? 31 percent said apartments, and condos, 13 percent said homes, 2 percent said vacation houses, 2 percent said offices and commercial spaces.

4. On the banking subject, real estate broker were questioned if they believe to have support from national and international banks towards expatiate processing of mortgages and loans? Only 16 percent responded yes, 12 percent responded no, while 72 percent said that only some entities helped in the loan subject.

5. As to what was the nationality of buyers interested in Panama real estate? 39 percent said Panama, 35 percent said Venezuela, 20 percent said the U.S. and only 6 percent from Europe.

6. In order to determine if property owners were ready to make a correction in prices according to the market demands? A 45 percent selected maybe, 17 percent selected no and 38 percent selected yes.

7. As to the purpose for buying a property, 52 percent real estate brokers agreed that purchases were for investment, 29 percent agreed they purchased as a permanent residence and 19 percent agree as a temporary residence.

8. On the rental subject, everyone was asked about inventory vs demand. To this 39 percent said their were more property than demand.

9. Towards determining the type of property with the most demand, a 55 percent of real estate brokers agreed that apartments, 19 percent agreed that houses, while 12 percent said vacation property and another 3 percent said office space.

10. Their opinion in sensing if the global economical crisis of 2009 was already showing negative effects in Panama, 66 percent responded barely, 22 percent said yes, and 12 percent said no.

Conclusion:
The encuentra24.com Marketing team concluded informing the website has experience a surge in properties for sale, on foreclosure, while the type of property mostly posted online by publishes including real estate broker and owners are were properties with elevated prices. This poll was made to also increase the listings according to popular demand. Encuentra24.com® has reached over one-million monthly visits and over 30,000 properties listed.

RE Brokers say there is an oversupply in city

A short article in La Prensa today has the association of real estate brokers stating that certain areas of the city have an oversupply of apartments. Of course they blame the speculators as if the agents did not know they were selling to them when they where buying two or more apartments at a time. The developers and real estate agents were complicit in hyping the projects over the last few years.

  Real estate oversupply in exclusive zones

MARY TRINY ZEA MARY ZEA TRINY
mzea@prensa.com mzea@prensa.com

  "Ganga! Excellent investment in San Francisco ...", overlooking the coastal strip ...", these are some of the most common ads that are read in the classifieds.

  If a reader gives a look at these warnings will notice that there is an oversupply in San Francisco, Paitilla, Punta Pacifica and Balboa Avenue.

  "We were flooded by speculators who bought houses, but have been unable to sell them at a competitive plan with the developers," said Oswaldo Lau, board member of the Association of Real Estate Brokers (ACOBIR).

 The expert notes that there is an offer unsatisfied demand, but that the market self-regulate the situation.

  "Many are selling at any price to get out of their business," said Lau.

Valle Escondido Home Price Comparisons

With the busting of the housing bubble in the U.S. and condo market in Panama City, we expected to see more homes come on the market in our project. Before the current economic turmoil we had about 10% or 15-20 properties on the market at any one time. With many of the properties having been purchased when credit was flowing so easily I would have expected to see more properties on the market, but it seems to be holding about the same as before the crisis.

We have a website with listings of resale homes,  and lots available in Valle Escondido, which will give you an idea of home prices in a finished community with many amenities in Panama. Homes in developments of this type in the U.S. usually sell for a premium of 20%  as opposed to homes of equal size outside a planned community.

With condo's and villas selling for just over $110 a square foot, it puts them well below property prices of comparable size in and near the city. The single home prices listed start at about $120 a square foot, which considering land, infrastructure and amenities is very reasonable IMO. The larger homes listed are well above this per square foot price due to the size of the lot and type of finishes. We have homes in Valle Escondido over 20,000 square feet and upwards of $4 million in value that are not on the market at this time.

Take a look at them here.

Tax havens buck European property slump

This is a short but, very important article that Panama should take advantage of. It tells us how countries who maintain their sovereignty and low tax codes fare much better than those that don't. We are seeing a similar trend here in Valle Escondido. Clients are looking for a safe Haven from what they see as a future of ever increasing taxes and a government that will be looking to those that have anything to pay for the mistakes of a whole generation. Right now the U.S. government is only looking at taxation, but many believe there will come a time in the not to distant future when anyone wanting to leave the U.S. will pay an exit fee for any money they want to take with them. While Europeans enjoy the fact that they are taxed only on monies generated in their home countries, U.S. citizens are taxed on their worldwide income, making moving their business offshore of little tax advantage. But living offshore does allow them an exemption of over $80,000 of income per year which is certainly better than what they experience in the U.S.. Small business owners may find other advantages if their business can be done from a foreign location.

Excerpts;

Most offshore tax jurisdictions within easy reach of Britain are bucking the European property market slump as wealthy Britons prepare to avoid UK tax rises, according to a survey released on Monday.

A report from Sovereign Group, the advisory firm, said property prices in Monaco and and Gibraltar were holding firm or increasing, while prices around them on the Côte d’Azur and the Costa del Sol have plunged up to 50 per cent.

“For many months now, 20 per cent of all new business at our London office has been from wealthy individuals looking to move offshore to escape what they expect to be increasingly harsh tax rises,” he said. “Very often, these clients are looking to take their businesses with them.”

Read the article here at Financial Times....

Hoteliers complain of unfair compititon.

As more buildings are completed without people who plan on living in them, the owners turn to the potential revenue source of operating as a hotel. This is all well and good when the demand for rooms is greater than the supply, but this year thousands of more hotel rooms will be coming available precisely at a time when many high rise building will be finishing too. Developers have a legitimate complaint regarding the 10% tourist tax that should be collected if you act as a hotel. Of course the hotels could just lower rate in order to be more competitive, but occupancy rates are already way down and all areas of competitiveness must be looked into. I find it difficult to believe that some nightly rental apartments  are experiencing occupancy rates of 70-80%.

From Financiero
RONI MARION LAWSON
rlawson@prensa.com rlawson@prensa.com

ATRACTIVO. Cute. Alquiler a corto plazo de apartamentos.  LA PRENSA/David Mesa Short-term rental of apartments. LA PRENSA / David Mesa

El sector hotelero está  inconforme con las actividades comerciales que realizan los propietarios de apartamentos que lucran con alquileres de corto plazo. The hotel industry is unhappy with the commercial activities performed by apartment owners who profit from short-term rentals.

Estos alquileres son promocionados con tarifas diarias, semanales y mensuales,  compitiendo de esta forma con los hoteles y centros de hospedaje autorizados por la Autoridad de Turismo de Panamá (ATP), sin pagar el impuesto de 10% diario por cada cliente recibido. These rentals are advertised rates daily, weekly and monthly, thus competing with the hotels and accommodation centers authorized by the Tourism Authority of Panama (ATP), without paying the tax of 10% per day for each client received.

Este es el argumento que utilizan los  representantes del sector de turismo para considerar la actividad, como una “competencia desleal”. This is the argument used by representatives of the tourism sector to consider the activity as an "unfair competition".
Jaime Campuzano, presidente de la Cámara de Turismo de Panamá  (Camtur) explica que “están compitiendo de manera ventajosa, ya que no pagan impuestos”. Jaime Campuzano, President of the Chamber of Tourism of Panama (Camtur) explains that "are competing so advantageous because they do not pay taxes."

Por esta razón,  el sector turístico a través de Camtur está solicitando a la ATP  auditorías en los establecimientos en cuestión y que  se aplique la regulación competente. For this reason, the tourism sector through Camtur ATP is requesting the audit on the premises in question and apply the regulation authority.

A petición de Camtur, la entidad realizará las investigaciones y luego expondrá los detalles frente a una comisión, formada por representantes de los operadores de turismo y  hoteles. At the request of Camtur, the entity will carry out research and then explain the details in front of a committee formed by representatives of tour operators and hotels.

Algunas de las empresas que se dedican a promocionar el alquiler de apartamentos a corto plazo, con autorización de los propietarios  son Panama Rental Solutions y Panama Corporate Living. Some of the companies engaged in promoting the rental of apartments in the short term, with the permission of the owners are Panama Panama Rental Solutions and Corporate Living.

Los apartamentos que administran estas empresas  tienen una ocupación del 80% y 70%. The apartments they manage these companies have an occupancy of 80% and 70%.

info panamacorporateliving.com info panamacorporateliving.com

Update on apartment rental rates in Panama City

A little over a 6 weeks ago, I posted a spam email I receive on apartment rentals available in Panama City.  This is only one company and I don't know anything more about them than what they put on their email and website.

I received another email today which I assume are apartment still available and it is interesting to look at the change over the past six weeks. This should give us an idea of volume that is moved by at least this one company. keep in mind that I gave them a major boost to over 7000 readers of my blog, most subscribe as investors or potential investors in Panama. Many would be potential renters.

In comparing the two available sheets I find only one that is not there and one new one in its place. Based on this, we can assume that one unit may have been rented and with that average it will take 2 years to get through all 20 or so listings.

Here is the email list I recieved on the 18th of May. You cn compare it to the one posted here about 6 weeks ago.

Aqui le mando un listado de Apartamentos FULL AMOBLADOS para Alquiler para le mes de Mayo 2009.

 **LISTOS PARA OCUPAR, PERFECTO PARA EJECUTIVOS.**

Si desean hacer cita para visitar, porfavor llamar a:
ROGELIO CUCALON
Tel: 6678-1311   ó enviar e-mail a: rcucalon27@gmail.com

--Oferta del MES: Local en San Francisco, PLANTA BAJA, excelente para showroom, 110m2, excelente ubicacion.  P/Alquiler: $1,800.

1. Punta Pacifica, Edif. Pacific Wind, 2 rec, 2 baños, compleamente amoblado, linda vista. P/Alquiler: $1,400.

2. Area Bancaria, Torre Cosmos, 98m2, 2 rec, 2 baños, Amoblado. P/Alquiler:$1,500.

3. El Cangrejo, Edif. Mont Royale, 2 rec, 2 baños, Amoblado. P/Alquiler: $1,600.

4. Paitilla, Edif. Marisol, 110m2 2 rec, 2 baños, 1 est, Amoblado. P/Alquiler: $1,650.

5. Cangrejo, Edif. Mont Royale, 125m2, 3 rec, 2 baños, balcon, Amoblado. P/Alquiler: $1,700.

6. Punta Pacifica, Pacific Blue, 94m2, 2 rec, 2 baños, balcon, 1est, Amoblado. P/Alquiler: $2,000.

7. Costa del Este, Imperial Tower, 127m2, 2 rec, Den, 2 baños, 2est, Amoblado. P/Alquiler: $2,000.

8.El Cangrejo, Edif. Mont Royale, 125m2 , 3 rec, 3 baños, piso alto, balcon, Amoblado. P/Alquiler: $2,200.

9. Calle 50, Vista Obarrio, 215m2, 3 rec, 3.5 baños, balcon, buena area social completa. P/Alquiler: $2,300.