Condo market moving to rental properties

There are strong signals that the number of investors will decline in the future, because of the shrinking availability of money.

For the first half of the year the country managed to attract over a billion dollars in direct foreign investment which is 33 percent higher than for the same period in 2007. Most of that money was funnelled towards banking and real estate.

Until a few weeks back it was said that Panama was “safe” from the world financial crisis, but now analysts in the public and private sectors have become cautious. They are unwilling to quantify the extent of the possible damage to the country’s economy, because they believe it is premature.

One thing is certain, two of the sectors that would be most affected the most would be the Colon Free Zone and the Panama Canal.

Multibank general manager, Rafael Sánchez Garros said that he estimates that the traffic through the canal could experience a 25 percent reduction and that the real estate sector could also suffer, if foreigners are unable to face the commitments they have acquired in the different construction projects.

Although there is a lot of uncertainty about the economy, between April and May 2008, the number of loan mortgages saw an increase of 9 percent, but that was before the current world financial crisis.

Ivan Carlucci, former president of the Real Estate Agents Association ACOBIR (Asociación de Corredores de Bienes Raíces) is optimistic about the real estate sector and said that the market is readjusting itself to the cost of the construction materials increase and land prices.

“There has been a decrease in the sale of properties, but the Panamanian market is coming back with an answers changing the real estate products. We are optimistic that it will continue to grow. What we need to do is to capture buyers from other places who want to retire in Panama. The one sector that is growing fast is the rental market, mainly because of foreign executives that are coming into the country to work in different projects,” said Carlucci.

Jesse Levin, from Archer Group Investments, said that the real estate market in the capital city is slowing down. Currently there are 80,000 apartments and the prices are very high, fuelled by speculators. However in the countryside in places like Chiriqui, Azuero and Pedasi the prices are still reasonable.

“Real estate depends a lot on cash flow. Venezuelans tend to buy in Panama City, however they are a little concerned about the country’s pending presidential elections, fearing that if Balbina Herrera wins it could be bad for them due to her ties with Hugo Chavez.

“The Americans are worried about the financial crisis. The rental sector is benefiting from this, as well as the logistic and commercial real estate, because more companies are moving to Panama to take advantage of the tax incentives,” concluded Levin.