Luxury home sales plummet

PANAMA. Middle class and lower income Panamanians could be the benefactors of a rapid slowdown in the high end real estate market.

All the signs show that the construction boom is coming to an end, especially in the luxury property end of the market, and many projects have been scaled down and in some cases abandoned altogether due to lack of purchasers.

Last month the construction industry registered a decrease of 38 percent and the situation looks grim for many speculators who bought expensive apartments with the idea of flipping them and making a hefty profit.

The Housing Minister, Gabriel Diez confirmed that that was the case, when he said that, “constructions projects with high economic value, such as luxurious condominiums have been hit hard by the current economic global crisis, because the majority of their prospective buyers were foreigners.”

However, the minister remains optimistic and says that eventually buyers will return.

Diez said that “property developers have two options: some have decided to scale down their projects, while others preferred to put them on stand by until the situation improves. The ones that are already being constructed have to deal with the Panamanian banks, that are asking for pre-sales of up to 70 percent of the project, before they will advance any money, and they have been negatively affected.”

The minister said that although that end of the construction sector is depressed, the local market can assimilate those loses if the property developers begin to build low cost housing instead of luxury buildings.

Diez pointed out that many property developers are slowing down the progress of the projects, to allow them to raise more money and find buyers. That is more noticeable in the apartment blocks in Balboa Avenue, Punta Pacifica and San Francisco.

The Panamanian Construction Chamber (CAPAC in Spanish) president, Jaime Jované agreed with Diez statement that the luxury projects are the ones that are going to be most affected by the global financial crisis, mainly because foreigners buyers are unwilling to invest in countries like Panama.

Jovane is proposing that property developers re-orient their sights and start building low cost homes directed to local buyers. The government should, at the same time, strengthen the infrastructure to be able to face the urbanization of the country.

Minister Diez said that the current government still has six months in power and during that time it is determined to finish the construction of roads, aqueducts and sewers, to help the economy and avoid unemployment in the construction sector.