How The Great Recession Changed Panama Real Estate
The best way I can demonstrate how the Great Recession, the global massive economic decline from 2007-2008, effected Panama’s real estate market is by telling my personal story.
June 2006, Discovering Panama.
While chilling out in a hammock at a beachside cafe in Costa Del Sur, Nicaragua, I was flipping through a rare current issue of “The Economist” when an article about Panama caught my attention. The article described Panama as the next property investment location and highlighted massive real estate projects like the Trump Tower as evidence. I was stoked because I soon would be traveling to Panama. I threw on my sandy flip flops and strolled to the nearest internet cafe to email my international investment buddy, Jesse Choquette. Two days after reading sales pitch via email, Jesse is booked to meet me in Panama. Initially both of us were more probably more drawn to the novelty of international property investments than the promise of its returns, nonetheless we were anxious to explore Panama’s opportunities.
August 2006, Can it be that easy?
Completing an unimpressive real estate tour of Panama City, Jesse and I head to a new mega nightclub named “Guru”. Over our decided favorite national beer, Balboa, we discussed the real estate agent’s sales pitch. His advice was to buy a pre-construction condo in Panama City and flip it to a Western retiree or relocated Venezuelan before it is completed which would likely double our investment. We simply could not make the numbers add up, so we decided not to pull the trigger but still had an ear to the ground. Then while rubbing elbows with the whose-who of Panama City, we overheard a conversation between a real estate agent and a potential client. The regurgitated “flip it” sales pitch from the Panamanian real estate agent seemed to excite the Western property investor. Jesse and I were amazed to witness two complete strangers seemly cementing a real estate transaction at a nightclub.
I thought to myself, ”Could it be that easy? Is real estate so hot in Panama that you can sell it at bars to complete strangers?” That night I made up my mind, when my year traveling Latin America was complete, I had to come back to Panama.
June 2007, Making Money.
I had been working in Panama City for 4 months and business was booming. Real estate investors and vacation home buyers from around the world were flocking to Panama. Real estate investors from the U.S. were beginning to see the crack in the sub prime mortgages. They were quickly liquidating real estate assets there and moving them to Panama. Canadians were enjoying increased purchasing power because the Loonie was at all time high. Russians rich from the commodity boom were off-shoring their money in droves. And masses of wealthy Venezuelans to avoid Hugh Chavez were relocating to the close affordable Miami-style Panama City. Yes, real estate business in Panama was good, and I was making money.
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September 15th 2008, Lehman Brother Collapses.
I remember going through my traditional morning rituals of having coffee while reading the New York Times online before digging into emails. The lead story was the collapse of Lehman Brothers. At the office, my silenced colleagues and I spent the entire day listening to streaming YouTube videos with the sinking feeling that it was the beginning of the next Great Depression. We continued to watch as the Dow Jones plummeted and world markets unraveled. All of us wondered how the disaster would affect Panama.
January 2009, Were They Drunk or Stupid?
The phones had been silent for 3 months. It didn’t matter if you were in property management, real estate, or tourism, Panama’s busiest season was SLOW. Yet even with the downturn in business, some people in these industries were optimistically telling me that business booming and that sales were strong. They insisted — ”The recession didn’t effect Panama”. Were they drunk or stupid? Everyone I knew was feeling the economic hardship because the number of people coming to Panama was way down. In spite of this fact, those in denial were still acting as if it was business as usual.
May 2009, A Glimmer of Hope.
The phones had started ringing again and leads were slowly coming back. A total global economic melt down seems to have been adverted. Client volume for me continued to be still be drastically down but a few deals closed and I knew that survival mode was the name of the game. The economy was not fully recovered. Not only was my volume down but other real estate types began leaving the industry and even the country — often the very people who had insisted that the recession did not effect Panama. In spite of this, many real estate prices were not reduced. Property owners who had a lack of transparent market information to accurately price their properties were delusional stubbornly refused to lower asking prices.
July 2009, Frustration Sets In.
Property prices were still over-inflated and the market remained nearly frozen. While there were some buyers in the market, many sellers clung to unrealistic asking prices. At that time, Jesse Choquette had published an article, An Open Letter to Panama’s Real Estate Market , that was widely distributed. The article bluntly described the over pricing of the Panama real estate market. He and I were seeing potential end-use buyers, the type of buyer a healthy real estate market requires, leave the country because frankly, there were much better deals in other developed parts of the world. As the world market adjusted prices, Panama’s potential buyers were being priced out.
October 2009, Back to Basics.
Reality has finally come to Panama. With some properties on the market for six months or more without an offers, property owners are a bit nervous. Both rental and resale markets are lowering prices. It is not just me who has noticed property prices coming down, a savvy Panama investor Casey Halloran wrote an article concurring my point in Rent Prices falling in Panama City, Panama.
Savvy property owners are less delusional and eager to negotiate. Indeed, parts of the market are continuing to drop prices and some of the most knowledgeable people in the real estate industry both in Panama and elsewhere are predicting that prices will continue to come down until they are closer to 2004 levels.
My story is not unique. Many of my colleagues and friends have similar tales. The real estate market continues to be uncertain and as well as the impact of the Great Recession on the world economy in general.
Yet, the Great Recession potentially saved Panama. People and businesses in Panama are going back to basics. Back to core business models, and creating growth from the ground up instead of the top down. For example, real estate agents are focusing on niche markets, and property management companies are condensing down the number of units they manage. By focusing on what works, instead of speculating, Panama may achieve its amazing potential.
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Thomas Dawson on Mon, 5th Oct 2009 10:57 am
has to be the most rationale, down to earth assessment of the state of affairs in panama i’ve read – thanks
what is your prognosis for the next year or two with thousands of condo units being delivered
t
Joshua Haarbrink on Mon, 5th Oct 2009 8:34 pm
That’s a solid perspective Evan. Panama would certainly benefit from going “back to the basics” and the opportunity really rests in the hands of those willing to focus their efforts on creating what they want to experience. Whether international man of mystery, social diva, savvy investor, techno wizard, or any other adventurous soul, Panama effectively offers the international community a patio seat at the crossroads of global commerce and the boundless opportunity that comes with living in that neighborhood.
As for condo units going up, as long as the players in the market understand that business needs to be done in a new manner, there is potential for stability and steady growth. We shall see what we shall see…
David Smith on Fri, 9th Oct 2009 1:47 pm
I have seen some prices drop by 25% in some area…even El Cangrejo….the big adjustment will start in Jan 10 when sellers finally wake up and smell the screaming deal coffee that the rest of the world is drinking!!!! That will be the new Panama business model!!
John connor on Fri, 16th Oct 2009 12:39 am
I don’t know what you guys are still doing in panama, the lingerers of a fallen real estate boom. There Is no way you can be making money, even to survive, you must have good trust funds fom mommy and daddy. There are no investors left in panama, at least sane ones. They have all returned to the states there they can get great deals on bank owned, short sale and auction homes. Prices in panama are insane, even now. You guys speak of a Miami like city, why not buy in Miami. They are basicly giving properties away there it is so cheap. You cam get into a nicer condo in Miami for a lower price than Panama. People go to a Latin American country to escape these crazy prices. You all think that these apartments are so nice and are worth the price, but just take a
look at the shoty constuction done. I am getting tired and going to bed. I plan on adding some mote rants later on why it is stupid to invest in Panama. You guys also act like you are smooth operators with the
woman but come on I have never seeen you with any except some homely panaminian chicks. You guys like to bash on Colombian girls but they are the only thing that brings any true beauty to that ugly female poularion.
David Smith on Sat, 17th Oct 2009 7:31 am
Hey John,
Well, at least you get it!!! The women here?? The worst I have seen in Central America, except maybe Salvador..
RK on Fri, 23rd Oct 2009 8:22 am
Oh come on, John, there is industry in Panama beyond being a real estate broker.
David on Thu, 5th Nov 2009 9:23 am
Hey RK……and what might that be? Panama does not produce anything…..that I am aware of. The condo pricing bloodbath is about to begin starting Jan 2010
RK on Sat, 7th Nov 2009 9:18 am
Resources: limestone, clay, salt; deposits of coal, copper, and molybdenum have been discovered. Haven’t you seen the press about the new gold mine in production?
Industries: food processing, petroleum refining and petroleum products, chemicals, paper and paper products, beverages, textiles and clothing, plastic products, light assembly, tourism
Exports: melon and watermelon, bananas, shrimps and lobsters, sugar, clothing, coffee.
Services include operating the Panama Canal, banking, the Colon Free Zone, insurance, container ports, flagship registry, and tourism.
Time to come out of the cave, David.
David on Tue, 10th Nov 2009 1:30 pm
RK thanks for the update….very interesting but I must ask….with all this industry in Panama, who actually does the work other then the white collar jobs? Must be guest workers right? Lol just kidding….we all know that the people here work very hard…..jejejeje
no really but the tourism thing is a real joke
COTE on Mon, 16th Nov 2009 2:54 pm
David, you keep repeating about a real estate bloodbath in January 2010, why exactly January?
M'Bosa Itchi on Wed, 16th Dec 2009 3:19 pm
RK email says it all. It is the future I tell ye, the future. All those resources are there! All these industries can be here!
None of it exists. It is a haven for everything. Quiet backwater. The end of the road.
bruce gallo on Mon, 1st Feb 2010 4:40 pm
gravity is a bitch watch what it does to an overbuilt condo market. Why should panama be any different from miami and its over building?
wa1den on Mon, 15th Feb 2010 4:53 am
Gee… sounds like there might be some bargains to be had in the near future… any likelihood that those Colombian gals can be coaxed over to Panama? (or maybe there will be bargains in Colombia too???) Sounds good to me! But then, I’m not into real estate – except maybe as a place to live in (rent?). If the prices come down, it may make it more affordable for a guy on social security retirement income – any opinions?
Doble A. on Wed, 2nd Jun 2010 6:03 pm
…despierten! wake up!!
…en Panamá siempre ha existido EL GRINGO PRICE $ y esa forma de “vender” se ha usado desde que Panama es Panama!
Empiecen la negociación con la idea en la mente bien firme que acá la gente ES-deshonesta! y que buscan la forma de ENGAÑARLOS, Gente DE Panamá con dinero NUNCA pagan esos gringo prices de miles de USD el Mt2, solo uds. los extrangeros! :(
…no se dejen engañar! pidan REBAJA y hablen con gente de Panamá! pidan a sus amistades NACIDAS acá que les den una recomendación antes de caer en malas manos!
Dr. Dias on Wed, 2nd Jun 2010 6:04 pm
This can not be for real!!!
With over three thousand condo/Apartments coming online and at an average of $1200.00 a square meter!
Who can afford such over Priced shoddy buildings!
With No fire safety, No real security, No parking, overly insane monthly building maintenance fees, and now new taxes over and above the HP taxes already on the books! Yes, they are a real bargain! Better get here quick and snap up these over priced dogs before the prices really tumble and you can loose your entire investment to these greedy Developers and Politicians!
pat on Fri, 4th Jun 2010 5:12 pm
We sold our land in Panama in 2009 (was to be our retirement home) and bought in the USA instead….where the cost was about the same, but the quality was better with obviously a lot more conveniences. Panama is no longer a bargain, but the USA markets have killer bargains.
Cedric on Tue, 8th Jun 2010 2:12 pm
Doble A is right about the “gringo price”. Americans buying anything in Panama will always pay more than the locals. My wife (who is Panamanian) and I are moving to Panama later this year and will be looking to buy a house. Reality is that she will have to do all the house hunting and negotiating by herself because we know that as soon as a Panamanian seller sees my white a$$ walking through the door, the price will go up by at least $100,000!
Esther on Sat, 18th Dec 2010 6:44 am
We bought a Condo in Bella Vista Panama with an oceanview.
In less than a year a 30 story tower was built right in front
completly covering the view and ventilation. It is not nice to live there anymore. But worst, the condo is unsellable
now, so our investment went to hell. In Panama they can build
just about anything close to your property, so your investment
is not protected. Also there are no secure parks for relaxation
or secure sidewalks, they are mostly broken, with holes and
dirty with dogshit. We want to get out of here but are stuck
with the condo.