An article in this morning's La Estralla puts forth the idea that although the city speculative market has dried up, the projects scattered around the country are still doing well. I would have to argue this assumption because I hear from many developers and buyers on a daily basis.
There are few second home buyers or speculators looking around Panama. We still see a flow of people looking for a safe haven for a primary home, but they want bargain prices. Many still have to unload unsalable properties back home. Just because projects are continuing construction does not mean the sales momentum has continued. Many projects have the initial sales and bank commitments to complete, but unless there is a lot of interest from new buyers this will soon end.
The case in point is the project sighted in the article, Isla Saboga which is next to Contadora. I am familiar with the project because I worked with the land owner to locate and contract the current developer over three years ago. The project had all the right ingredients for success. A beautiful island with a power generation plant, fresh water, close to an airport with scheduled flights, small village where labor is available etc.. The main challenge the developer has encountered is one of timing. It has taken so long to get the project underway that the market conditions are no longer viable. Now instead of developing the property, they are looking to get some other party to come in and take the risk even offering to finance the property as well. How successful they will be in this tumultuous market remains to be seen. Few developers are interested in new projects in this economic environment and fewer still will be in a position to get financing for speculative development.
There are literally dozens of projects scattered around the country in a similar situation where they waited to long to get underway and now there are few buyers and no funding available for construction even if they had buyers. Projects that are well underway with infrastructure and amenities already in place have a much higher chance of continued success, but they will find market pressure on pricing as buyers know that cash is king. Few buyers are now willing to risk buying a home to be built in the future along with the many amenities shown in the brochures and on-line computer generated graphics. I don't expect things to change much in the near future. All developments must have sales and construction momentum to succeed. Projects that take forever to get out of the gate and then just drag on are doomed for failure.
Grooming island for investors
01-26-2009 | MARIJULIA PUJOL LLOYD
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In the middle of a crisis, a company is setting up the necessary infrastructure in Saboga in hopes of attracting property developers
Panama Star The representative of the Isla Saboga project, Armel Gonzalez Muhs said that in the long term his company is planning to invest $1.5 billion to create an island paradise that will have hotels, restaurants, houses, condominiums, spas, a marina, a yacht club, a country club, and a beach club within ten years.
Gonzalez explained that his company is not planning to build anything per se, but is putting in place all the permits and regulations and establishing relations with the islanders, in order to sell it to investors and property developers, who can then carry out different projects.
Isla Saboga company is going to give financing to those people who want to invest in this project, but investors will have to follow the rules of the organization.
Currently Saboga has over 100 inhabitants that earn their living fishing, transporting tourists who are island hopping, extracting sand which they sell to developers and working on construction on the bigger island of Contadora.
The island lacks water, roads and the sewer system is non existent, but the organization said that it will invest $20 million creating the necessary infrastructure, that will not only benefit the inhabitants, but also possible future developments. The project contemplates job creation in hotels, restaurants and other similar facilities, as well as the creation of training centers to give trade to the islanders.
The concept of Isla Saboga will be completely environmentally friendly, with spas with a holistic approach and integrating the community into the project.
Gonzalez did not reveal how much his company paid for the island, but claimed that it has already managed to sell 20 percent of the project.
Las Perlas Islands have gone through an unprecedented development over the last five years, but only time will tell if there is space for new ones at a time when the financial crisis has meant the cancellation of some projects before they start.
DEVELOPMENT IN PANAMA
Every single beach, mountain and jungle in Panama appears to have some
sort of development going on. While in the capital city projects are
being suspended for lack of buyers, in the interior they seem to be
progressing well.
On the negative side, some investors are
staying away, wary about the current financial crisis and the
repercussions it may have in the future, especially when it is obvious
that the real estate boom appears to be coming to an end in Panama.
However, the new projects that are sprouting up on beaches and islands
are showing that foreign property developers believe in Panama and its
potential as a tourist destination, but tourists will only come if they
have enough money to invest on a holiday.
MARIJULIA PUJOL LLOYD
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