This will no doubt draw some attacks.

Certainly some scholars with more information at hand are capable of more astute observations.  But I’m simply going to discuss common sense.  First, let’s lay out some facts…

Fact 1: Panama’s economy grew at an astonishing 11.2% in 2007.  This outpaced the rest of Latin America, which averaged 5% growth, according to the IMF.  The measly 5% growth in the region was STILL superior to the EU and North America.

Fact 2: The construction sector of Panama is in hyper-growth mode, with dozens of projects in various phases of construction and dozens more approved but not yet begun.

Fact 3: Inflation has begun.  Panama is seeing rising prices in everything from labor, materials to basic costs of living.

So here are my predictions for the economic and real estate outlook for Panama in 2008.

1. Inflation — this has already begun.  Prices for everyday goods are rising.  It will most likely worsen, although paying $.50 a beer in the countryside of Panama almost seemed criminal anyhow.

2. Steep Rental Prices – because there are so many latin immigrants (Venezuela, Colombia, Ecuador, Argentina) and north american expats here awaiting their promised pre-construction condos to be completed, combined with all the investors, visiting businessmen and canal expansion staffers flooding the rentors market in Panama City, monthly rent prices have risen by 2 to 2.5 times the asking prices of just 24 months ago.  A 2 bedroom, 1,500 square foot apartment in a trendy area will run from $2,000 to $3,000 per month.

3. Overbooked Hotels — for some reason, developers just aren’t building enough hotels.  I can’t name 3 solid, substantially sized hotels projects well underway ANYWHERE in Panama.  Two-star Panama City hotels that were empty at $59 per night 24 months ago are now packed at $99.

4. Flattening Or DECREASING Condo Prices – there are many who will argue that the skyrocketing prices of real estate in Panama MUST continue.  I think that could be the case for product not so easily built as boring, cookie-cutter, 80’s style condos.  These are a commodity that can be easily compared city to city, worldwide.  Sure, there are plenty of Panamanians, Latinos and foreign investors buying these, but until a few dozen are delivered this year and we see how many folks actually MOVE IN, I’m not convinced that the prices can even remain stable.  As far as more desirable ocean view and mountain real estate…who knows?

5. More Taxes — local lawmakers seem quite eager to snag these dollars while they are on the table.  I wouldn’t be surprised to see new taxes invented in 2008 to take advantage of the enormous influx of investment and wealth being generated.

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Filed under: News on February 29th, 2008