The expansion of the Panama Canal (top) and the arrival of more multinationals is helping boost Panama's commercial real estate sector, while projects in areas like Bocas del Toro (above) are helping residential demand. (Photos: Panama Canal Authority and IPAT).
Commercial - rather than residential - may be the main growth driver for Panama's real estate sector, experts say.
BY CHRONICLE STAFF
Panama's residential real estate market - until recently seen as one of the hottest in Latin America - is starting to cool down, thanks to oversupply, rising prices, a new and controversial visa law and the U.S. sub prime crisis, experts say.
However, the commercial real estate sector is likely to see solid growth, thanks to the $5.2 billion expansion of the Panama Canal and the growing number of multinationals that are setting up offices or manufacturing facilities there.
"There's a lot of residential product that needs to be sold," says Shannon Robertson, managing director of the Latin America operations for Jones Lang LaSalle. "We expect prices to correct or developers to hold on to their products. There's no question that from a residential market view, Panama City got overbuilt very quickly. It became the flavor of the day."
Paul McBride, CEO of real estate consulting firm Prima Panama, agrees. "Oversupply in Panama City will begin to become a problem in the next 12 to 18 months," he predicts. "Increasing prices in the residential retail sector along with a tightening international credit market will likely slow demand."
While most of the oversupply is affecting Panama City, even areas with larger potential along the coasts could be affected by the U.S. sub prime crisis, McBride warns. "We’re very concerned about the sub-prime mortgage crisis and...
Full story Keywords: Bocas del Toro, Panama City, Procter & Gamble, Re/Max Central, Tourism, Visa Law
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From: Scott, USA It will be interesting to see how softening demand in the Panama City condo market affects the commercial sector. It will be even more interesting to see how a correction in the residential market affects the banking sector. If City condo owners(many of them speculators) can not flip their units as planned and start to default on payments, will the banks be left with thousands of foreclosures? Could these banks liquidate this severely over-valued/saturated inventory while developers are building hundreds more of these skyscrapers? Would these banks survive if they are forced to sell at a fraction of the mortgage?
From: US Citizen, Panama City Softening demand in the residental sector will not dampen the demand for commercial product in the near term. If the residential sector corrects severely then you could see some dislocation of the support businesses for the residental sales, construction, engineering and other participating businesses. The residental construction business (mid to higher end) employs a substantial number of people in Panama so any correction will be felt Panama but espectially in Panama City. Don't worry about the Panamanian banks as they (all) are bullet proof. They are conserative, hard-asset lenders (unlike their USA counterparts) and well-prepared for a downturn.
From: Tomas, USA the impact of transferred capital from venezuela is also a factor in panama's longer term real estate and economic stability. much of the relocated capital is not seeking rapid returns as much as a stable political climate that will not result in reduced values. like miami, many of the high rise units in panama will be owned and occupied by resident/investors with multiple homes who are less concerned about appreciation and more concerned about not losing valuation over time
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