If You Build It, Will They Come?
Non-Stop Building In Panama City
The government of Panama is issuing building permits at a record pace. In the first six months of this year $829.8 million dollars worth of permits were issued, which is a 54% increase over the same period last year. The statistics appeared in today’s La Prensa newspaper.
The numbers were released by the country’s controller general. Most of the approved projects will be located in Panama City, however, Arraijan, a small town on the outskirts of Panama City came in second with $44 million worth of construction projects approved. That is a 161% increase from the first half of 2007.
Two things came to mind when reading this article. First, Panama City is running out of space if so many construction projects are being built in the suburbs. There are already many small housing developments underway in Arraijan, but those are mainly geared towards Panamanians. With such a hefty price tag on the building permits, it seems as though developers will now be touting Arraijan as the hot spot outside of Panama City.
The other thing that this article brought to mind is the fact that Panama really isn’t learning that they are overbuilding. There are many empty apartments in the city right now and there are more foreigners than I can count that want to sell their pre-construction condos. Are the developers not seeing this? I suppose they will only learn once they are left holding the bill for a project that no one is buying in. I know of a number of condos in the city that should be completed by now, yet construction hasn’t even started because not enough units have been sold.
The president of the Panamanian Construction Chamber is quoted in the article as saying he hopes the growth will continue through the second half of the year. Does he really think there are that many people who want to buy in the city? Real estate prices in the city are skyrocketing, shutting many potential buyers out. So the logical solution is to build more? Do the developers not understand that there are many, many people looking to buy houses and condos in Panama’s interior? Not everyone wants to live in a congested mega-city.
Do you think the government should limit the number of building permits they issue? Can Panama sustain such development?
| Written by Rebecca Tyre |  |
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Filed under: Living & Retirement, News, Real Estate on August 20th, 2008
The thing with Panamanians is that they never really analyze things. They just go with the flow. Panamanians see that one person is doing one thing successfully, and not just one, but everybody wants to get into the action. So now, everyone is a developer. They create these ideas in their heads that no matter what happens, they will also be as successful as that one person that did it first, b/c they are as righteous and deserving as he was. Hence, the oversupply of projects. But that doesn’t stop there, no. Their mentality is that if someone sold a condo (to a drugdealer) for 4 times the national average, then they all conclude that at that high price it can be sold to anyone, even to panamanians, who don’t make nearly enough. Finally Panamanians tend to think that Panama is a cocoon. That what ever happens to the rest of the world, does not affect them. Soon they will be knocking on my door, and I will buy a nice condo really, really cheap.
The developers will figure this out when every second condo is for sale in PC.
Prices are now dropping some as flippers have already been somewhat caught in the trap. After prices drop for a while, they’ll catch on.
I expect a 25-30% decrease in prices within 18-24 months.
Mark your calendar.
A close look at some condos along Avenida Balboa will reveal that they are taking on the appearance of hotels as property management companies are renting units out for many owners. In some buildings, 50 units or more are managed by these companies.
This is occurring because there is a lack of hotels and because the condo market is slowing down (fewer resale buyers). What happens when the supply of hotel rooms catches up with demand in a couple of years? Not only will you have a major glut of condo inventory but an oversupply of hotel rooms. I actually hope this happens as hotel prices in the City are ridiculous.