Panama Investor Blog

Panama, a history of booms and busts.

This is graph showing Panama/a cycle of booms and busts from 1979 until 1990. Click the image to enlarge. Sent by David Saied regarding his piece on How long the boom in Panama might last from last week.

The longest boom since 1970 has been 4 years 1991-1994.

How long will the Real Estate Boom last?

Friend and specialist in economic and financial markets analysis, David Saied, wrote this astute piece.

Panama's Real Estate boom is in full swing.  Land prices are rapidly increasing, in some areas at phenomenal rates.  Beach and ocean front properties have, in some cases, doubled, and even tripled, in just a few months.  The same is happening in certain areas of the interior, like Boquete, Volcán and Bocas del Toro.  Prices of new homes and apartments are also rising rapidly, particularly in areas of the city that are close to ocean or that have an ocean view.  At the same time, hundreds of new units are being built--construction permits reached over 1 billion dollars in 2006, an increase of 10.1% over 2005.  So, what's fueling this real estate market boom?  And how long can this boom last?
The history of Panama's real estate and construction market has been one of boom and bust.  In the seventies a similar third world inflationary boom and the creation of our banking center created a construction boom, especially in the Obarrio banking district and in Punta Paitilla.  The late seventies boom ended with a flagship year when in 1982 construction grew 21%.  The oversupply of units forced a contraction in the sector by falling 31% in 1983 and 17% in 1984.  The bust ended in 1985 when the negative growth ended.  A similar post-invasion construction boom developed between 1990 and 1994, where the sector grew 55% in 1992 and 32% in 1993. 

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Government say's they should sell land before the boom goes bust!

An article form the paper today is about the Social Security department selling land they have held for many years. What is interesting is that they sight the recent run up in property property prices as the motivating factor and they staet "The real estate “boom” is in its best and maximum development", said Carrasquilla, warning that "you must sell them at the best moment, because later they are worth less". Here is the article in English.
Panama, August 3rd, 2007

Elizabeth Gonzalez- Panama America

Real estate “boom” allure Social Security

The real estate “boom" in Panama has attracted the Seguro Social (CSS), to the point that the organization initiated the process to sell at least $200 million in land. At the moment the Seguro Social has $500 million in land, explained Eduardo Carrasquilla, national director of income of the CSS.

Based on experts repports, according to the govt officer, "it is the best moment to sell land, due by the high demand, and the investors will pay excellent prices". This was authorized by the Board of directors, to obtain the best prices and to turn them into assets. (What are they now?)

Next is to bid the property of the UVA in San Carlos, value $30 million. Also they are the lands of Amador, with a value of $90 million. Those of Costa del Este are valued in $50 million; while in New Panama they are worth $20 million. 

The real estate “boom” is in its better and maximum development", said Carrasquilla, warning that "you must place them at the best moment, because later they are worth less".

Panama Builds on Economic boom

Here is an article from the Financial Times about Panama's booming economy. Much of the article focuses on the London & Regionals new Mega project, Panama Pacifico,  at the old Howard Air force base. From L&R website "In one of the largest real estate deals ever recorded, London & Regional Properties (L&R) has acquires the landmark 2,750 acre former Howard Air Force Base in Panama City, Central America." That's big.
Thanks to Richard Illingworth at the FT for allowing us to post this article.

Panama builds on economic boom

By Richard Lapper and Adam Thomson in Panama City

Published: July 11 2007 18:59 | Last updated: July 11 2007 18:59

President Martín Torrijos of Panama on Wednesday unveiled what could become one of the biggest investment projects in the country’s history, with a value of up to $10bn (€7.3bn, £4.9bn).

The creation of an urban centre the size of central London on the outskirts of Panama City is the latest sign of an economic boom that has invited comparisons between Panama and bigger international business centres, such as Dubai.

Panama City; The latest developement boom story in Latin America

This is the headline for from Overseas Property Mall's story on Panama today. Again Paul McBride is quoted several times making himself even more popular amoung the developers and RE agents in the city.

Excerpt; The conclusion to draw seems to be that speculative investments in Panama City real estate are definitely risky and that an owning to occupy approach is wiser.

Read the story at OverseasPropertyMall.com

Latin America's real estate Panamania

Fortune magazine quotes Prima CEO throughout this article that will appear in the July 9th edition of the magazine. CNNMoney.com

Once a sleepy Latin American capital, Panama City has become one of the world's hottest real estate markets. How long can the fever last?

By Eliza Barclay, Fortune Magazine

July 3 2007: 3:44 AM EDT

(Fortune Magazine) -- Off in the distance, where Panama Bay becomes the Pacific, container ships loaded with merchandise bound for the U.S. bob in the haze. Closer in, a flock of construction cranes hovers over densely clustered high-rises. Fourteen stories below, on Balboa Avenue, cars inch along, their windows sealed tight against the sweltering heat.

The view belongs to Jim and Imogene Buckley, a retired couple from Greensboro, Ga., who purchased their one-bedroom condo a few years ago, before it was built, for $140,000. The apartment, which they'll use every other winter month, alternating with another couple from Wyoming, gives them a ringside seat overlooking one of the world's hottest real estate markets.

   

Construction workers on the Punta Pacifica construction site.

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Panama facts Population: 3.2 million GDP growth: 8.1% in 2006 Median apartment price in Panama City: $232,000 Canal's capacity: expanding from 300 million tons to more than 600 million tons Permanent-residency visas for U.S. citizens 55 and over, 2003--06: 1,379

"Panama looked like a good investment and a place to have a good time," says Jim Buckley, 76, a former U.S. Air Guard pilot, while admiring the view. "You don't need a lot of sense to see that it will increase in property value."

Panamania -  See the boom

Panama City is in the midst of an unprecedented real estate boom that is transforming the skyline of this once-sleepy Latin American capital. More than 30,000 units worth about $5.7 billion have come on the market since last July, according to Paul McBride, CEO of Prima Panama, a real estate marketing company. Read the rest of the story below or click to cnnmoney.com.

2 fast 2 furious

Public transport is horrific with buses weaving in and out rushing to pick up the waiting crowds before the competition gets there first. Now lets add to this mess unprecedented construction with the amount of traffic they create, as well as the destruction of roads by the heavy equipment. Lets add to this the tearing up of roads for additional infrastructure required for all these new buildings. Water mains, electric lines. sewage treatment and public transportation are all needed. These things have not yet started, but believe me, they must soon or there will be buildings without utilities.
I will be posting articles that point to these problems in the hopes that the government and private sector will wake up and take action. The only action that is practical right now is to slow down the growth until infrastructure is in place to handle it. In every respect this would be good for Panama as a boom that goes bust is the worst thing to happen.
Here is a sample just this weekend  of what is happening.

Panama on the rise

Accurate article from the Boston Globe about the construction boom in Panama.
Worth the read...

Construction, global interest booming, eclipsing long-range worries

By Indira A.R. Lakshmanan, Globe Staff  |  December 27, 2006

PANAMA CITY -- Long a freewheeling shipping hub and offshore banking center for the Americas, Panama is enjoying a building boom on a scale unmatched since the construction of its famous canal 92 years ago.

The country is luring investors and expatriates worldwide, with interest further boosted by the recent approval of a $5.2 billion plan that will double the canal's capacity.

The Economist Magazine askes.. Panama, Property boom or frenzy?

Here is an article just published this morning on the Economist.com website from the Economist intelligence unit about the property development boom in Panama. They site our Prima Tower study along with comments by developers and promoters. Looks like they share our concerns about the market. The site was down earlier today but you can read it here.

Panama industry: Property boom or frenzy?
October 25th 2006   

COUNTRY BRIEFING
FROM THE ECONOMIST INTELLIGENCE UNIT

Panama's real-estate market is in the midst of an unprecedented explosion. A
combination of easy credit, foreign demographic trends and, most
importantly, quite a bit of speculative momentum appears to be behind the
surge in investments in the luxury residential market. The intense level of
enthusiasm is raising questions about the sustainability of demand, the
likely strain on infrastructure, and the potential risks to some investors
and end users should the market suddenly burst.

Panama’s Real Estate Boom is Real!

My friend Jon Hanna responds to a recent article in Latin Business Chronicle where Walter Molano claimed that  “the real estate boom in Panama City may be a bubble”. The LBC was kind enough to allow a rebuttal. I don't necessarily agree with all of Jons analysis, but I sure hope he is right.

Panama is a healthy, growing economic phenomenon following a carefully orchestrated plan.

BY JON HANNA