QUICK TAKES

Panama: Trends And Forecasts For
The Construction Industry

By Will Irvine

Post-economic crisis results are in. The dust has settled and Panama keeps growing. Not as strongly as before but it is still in an upwards swing. One of the industries that grew exponentially before the crisis but was expected to plummet this year is the construction industry however it still shows growth. At the close of the third quarter the construction industry showed a contraction from a 9% growth in 2008 to 2.5% this year yet it is still solid growth, verses many other countries.

In 2008 the 9% growth in the construction sector totaled a dollar investment of $1.8 billion while this year the total dollar investment in this sector is $1.2 billion. In numbers it is less volume of construction, however if you take a ride through the city many buildings are still going up. If you place these numbers in context the years 2007 and 2008 for construction were exceptional years, well above average due to the sudden international interest in Panama. After the beginning of this global financial crisis the Panama construction sector is still showing growth albeit not the same accelerated growth of the two previous years.

The sector most affected by the decrease in construction is the high end real estate which was very much directed at a foreign market wanting to buy a second home or a retirement home. This sector was hard hit by the economic slump as many people chose not to invest abroad. However showing marked flexibility builders, developers and promoters have switched markets and are now directing their interest to lower income housing.

Grupo Sucasa, a leading company in the low income housing sector indicates that they are showing positive growth this year and expect to close December 2009 with 13% growth or $55 million dollars versus last year which was a 12% growth with $48 million dollars and expect this trend to continue in 2010.

The government has also weighed in and through a special fund assigned by the Ministry of Housing called the "Fondo Solidario de Vivienda" is granting $5,000 to low income families who qualify to be used as a down payment on their mortgages to acquire their first homes. These families must have a family income no greater than $800.00 and apply for a house valued at $30,000.00 or less. Within this range the stipend of $5,000.00 issued by the Ministry of Housing represents a savings of 16% to 18% on the mortgage.

This initiative is part of the government's program to address the housing deficit in this sector estimated at 150 thousand units. In order to do this the government requires that the private sector invest more of its resources in developing lower income housing solutions. Since September there has been increased interest from construction companies and developers, in lower income housing and close to 40 developers have joined the program now that the government is putting up the down payment. For this year the budget for the program was $8.3 million and for next year it is $10 million.

Real estate in Panama is still alive! It has just changed its target market.

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