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Panama real estate at the close of 2010

By Juan Carlos Martinez

construction

After the 2008 economic downturn the real estate bubble in Panama was expected to burst very badly. While there has been a noticeable slowdown in this sector real estate has survived and still chugs ahead. Two years ago due to the boom and the ensuing unexpected downturn it was expected that prices would come down significantly and that there would be 8,000 unsold apartments. The reality now in 2011 is there are 3,773 surplus apartments. Between 2010 and 2013 it is expected that 15,360 new apartments will come to market however 9,276 are pre-sold. The sector even showed modest growth in 2010 as it grew 4.3% from January 2010 to October 2010.

The sector is in an adjustment period. Those builders who can are re-adjusting the projects "to supply and demand mode" for apartments below $100,000.00 where the demand is greatest. Several Class A projects are still going up and Panama still leads Central America in terms of the tallest apartment buildings. These projects are currently being marketed in US, Canada and Europe.

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Sources indicate that the price readjustment in terms of properties for sale was 20% in the last two years and it is not expected that prices will go down any lower. Surprisingly and evidencing the strength and flexibility of this sector, construction and property development industry redirected its efforts into low cost housing and in some commercial properties such as offices. Commercial properties in general have shown price increases as residential properties decrease in price. The increase in commercial property is due mainly to the relocation of international company headquarters to Panama under the benefits of law 41. CB Richard Ellis estimates that approximately 357,310 meters of Class A offices are under construction for delivery between 2011 to 2014.

Residential properties on the other hand have decreased in price as stated above, thus the target market has changed. In the past few years you would find property with prices from $1350 to $1500 per square meter. Today properties can be found for $1,050 to $1,200 per meter square. The emphasis is on buildings not in the downtown area but in the suburbs where developers can acquire plots of land for $80 to $150 per meter square and they are building 10 to 12 stories with new building technologies that allow them to bring construction costs down 20% or 30%. Builders are now using prefabricated materials, hollow walls, among other methods to achieve this reduction in construction costs. Architects are also designing smaller apartments but with better distribution to maximize the space. Today you will find apartments that are 70 to 80 meters square in Rio Abajo, Parque Lefevre, Juan Diaz, Carrasquilla and other similar areas targeting the Panamanian middle class.

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Copyright© 2011, Pan Am Publishing S.A., Republic of Panama