Rent Prices Falling in Panama City, Panama
rent prices in Panama City, Panama are falling
When I first came to Panama in 2004, I was impressed by the affordable the cost of living for such a cosmopolitan town. I rented a spacious, fairly new, furnished, ocean-glimpse apartment in El Cangrejo with for $600 per month. In 2004, a beer at the neighborhood bar was $1.25 and dining out ran around $9 for an entree. Back then, there were plenty of pre-construction apartments for under $100,000. Sure I loved Panama, but I loved the those condo prices even more, and so snatched up one myself without thinking too much.
Since then, prices skyrocketed. We can debate the reasons why: the U.S. real estate boom, news of the Canal Expansion, the success of neighboring Costa Rica or a glut of foreigners with fat pocketbooks, and a lot of hype. Regardless of the potential causes, since somewhere around 2006 prices for beach land, entertainment, hotel rooms, and apartment rentals all went through the roof.
After selling my condo in late 2007 (at what I hope will be remembered as peak prices) I’ve been renting in Panama City. While anxiously awaiting Panama’s inevitable real estate collapse, I’ve been both unwilling and unable to pay what I believe are crazy prices for city condos. Thus, I’ve been forced to continue renting. For the last year and a half, that’s unfortunately meant that I’ve paid grotesquely high rent to remain in the now-somehow-fashionable El Cangrejo area. I’ve been reluctant to wander too far from the region, as I do my best to avoid a nasty commute to my nearby office in El Carmen. As an Irish-American cheapskate, it’s been extra painful to pay Manhattan-type rent to live in a so-so apartment in an average neighborhood.
FINALLY, while searching for apartments nearby this month, I have observed a trend that’s both astonishing and heart warming: RENT PRICES ARE PLUMMETING! To any casual observer of financial news, this trend probably seems as surprising as the laws of gravity. However, I am thrilled, because after 2 years of listening to all the Panama real estate “yay-saysers” reapeat like robots that Sir Isaac Newton’s laws do not apply here, I was starting to believe them. But alas, the rules of the universe, as well as Adam Smith’s invisible and, do indeed reach to lands so remote as Panama.
To give you an idea of what I’m seeing, go to any of these sites and take a look around:
www.encuentra24.com
www.compreoalquile.com
panama.en.craigslist.org/apa
What you’ll see if you do:
- There are a ton of units for rent in newly delivered buildings in San Francisco, El Cangrejo and El Carmen.
- 2BR units that may have rented for $1,700 to $2,000 a year ago are now asking for as little as $1,000 per month.
- Units that were posted as far as 90 days back are still listed and have been recently reduced.
- There are a LOT of units for rent from $1,500 to $2,500 per month.
I’m hoping that the following events occur next:
- A bunch of apartments do not rent at the desired asking prices
- Rent prices continue to decrease
- Many units simply do not rent at all, forcing owners to sell
- Selling prices fall to near-original purchase prices
- Would-be buyers, turned off by previous pie-in-the-sky prices, return to Panama and snatch up the good deals they were seeking in the first place
I’m hoping that this is the first of several much-needed reality checks for Panama’s real estate sector. It’s time to get serious about the real value that Panama offers in today’s challenging market. I hope that the local business owners and politicians are prepared to work hard to deliver greater value in order to attract investors. It would also be great if Martinelli’s administration offers investors more benefits and tax breaks to encourage the absorption of this condo glut. I am not encouraged by the move to banish “illegal hotels”, aka: short-term apartment rentals. Do potential buyers need any more reasons to NOT buy? Panama needs to do something very bold, very soon in order to avoid a Miami-type condo crisis. To those who say, “but we’re not in a crisis YET!” I can only respond with my favorite Robert Redford line in the movie Spy Game: “When did Noah build the Ark? BEFORE the flood.”
By the way, who are these nut jobs posting rentals asking $8k per month? Who would pay that in PANAMA?! I can only hope that anybody with that type of salary would be smart enough to make a down payment and BUY a place.
I’ll let you know how my apartment hunt turns out soon…
Anybody else out there moved recently?
| Written by Casey Halloran |  |
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Filed under: Business, Real Estate on August 31st, 2009
I’m considering taking a semi-long holiday (3-5 weeks) in Panama this winter, and thinking renting a place short term seems a better idea than paying through my nose for a hotel room.
Any idea where (websites) to look and what to look and look out for?
Thanks for an excellent blog as well by the way, it’s been a great resource for me!
On top of the real estate debacle the newly introduced resolution that makes it illegal to rent out your condo for less than 90 days will crate an even bigger supply that paired with the diminishing demand will drive prices even lower and will create a whole other black market, under-the-table type economy.
Ahhhh, what a great place and time to be a renter (if you can live with the rest of Panama City’s frustrating issues that is).
What worries me in all these prediction is this.
Wasnt it the Real Estate collapse in the USA that killed the economy in the US?
Surely it would then follow that if the Real Estate market in Panama was to collapse then the economy in Panama would also collapse?
I am not an ecominist but i do see that if the Real Estate market fails in a country then the country fails.
What would be left in Panama should that happen?
Please dont say the canal as that has been there since the begining of time in Panama, it has only been the incresaed interest in Real Estate that has made Panama what it is today.
So everyone would have cheap rent but no jobs, err, i dont see a benifit!
In response to Geoff:
Geoff, making comparisons to the US is like comparing apples to pears. Panama real estate does not have the same characteristics. Owning a house in the US is (in most cases) a matter of livelihood. In Panama is a matter of investment, profit and retirement (or second home). Also, do not confuse Panama City real estate (which is the case in this post) with Panama real estate. there is a number of markets in Panama’s interior that although slow are poised to regain their position. Lastly, I disagree with you on the Canal. It was always there but for America’s benefit. It is a great stabilizing factor for any economy, let alone Panama’s recuperating one especially now with the expansion in full swing. Despite the Panama City debacle, Panama has one of the most promising economies in Latin America. It is just a matter (as Casey, myself and others pointed out on a different blog) of improving some business, immigration and cultural elements to get to the next level.
Geoff…FYI
Panama canal from 2000-2007 revenued for the panamanian economy the same amount that it had revenued the 83 years prior to 2000.
Canal, Zona libre, now tourism, and of course real estate as investment properties will continue to offer income.
As a Panamanian…(and im not sure anyone who posted here is one). I can tell you that Panama was subvalued for a very long time, and what you found was people taking advantage of a desperate economy and people living under a dictatorship/social structure.
I do agree prices were extremely high and ridiculuous. What has happend now is that the cost of construction and cost of sale/rent is being backed by a price per mt/2 which is being backed by the banks. REAL EQUITY!!!
Hopefully the damage done wont be too hard on the economy. But Panama as a whole is growing tremendously and little by little those apartments will get end users in them, and prices will level off entirely.
need a good deal call me!! We have always been against the inflation!! http://www.skylinepanama.com, and fight against speculation!! check us out.
Casey careful who you call nut jobs my friend
their are nice apartments that in any other countries would rent for those prices. Obviously they need to merit the price.
I am actually comparing Panama with the the rest of the world. i.e. Spain, Dubai, the UK and even Bulgaria.
Are you really trying to tell me that Panama is so completly different from the rest of the world?
What i am trying to say is be careful what you wish for?
If thinking cheap rents are the answer to Panama’s problems then we have a huge problem.
Geoff,
If from my writing you deduced that my position is that “cheap rents are the answer to Panama’s problems” then you need reading comprehension lessons.
From your post: “Wasnt it the Real Estate collapse in the USA that killed the economy in the US?” How is that refering to “Spain, Dubai, the UK and even Bulgaria”?. Which by the way have hurting real estate markets but their economies are holding on pretty good considering the order of things.
The point I am trying to make is that your theory that “if the Real Estate market fails in a country then the country fails” does not hold water.
Despite what a lot of Cassandras are saying, Panama is not just condo and beachfront land sales. People had jobs before the boom and will have jobs long after this whole real estate craze is gone. There is the canal, there is the Colon free zone and there is huge tourism potential(to name a few) IF the government start making the necessary changes to get to the next level.
So I respectfully disagree with your position.
Bottomline: It is a renter’s market in Panama with all the good and the bad that comes with it.
Saludos Cordiales
How is the UK market holding out OK. You been to the UK lately?
Spain was reported as having some of the highest unemployment figures in Europe.
This all happened because the Real Estate markets in these countries collapsed.
My statement is based on fact and i think there is more than enough evidence to support my comments
Panama needs a stable Real Estate market to thrive. If the country is based on rentals then there is and will be no stability.
Panama stated to thrive when the Real Estate market increased as there was more money coming into the country which also meant more jobs for the local population. This also then incresaed wages as more members of a familiy would be able to find work.
Take away that industry and you are back to ground zero again.
With less global trade around the world do you really think that the Colon Free trade Zone will increase in capacity. Even the canal transits are down due to the global recession.
Geoff,
It is true that Spain has the highest unemployment rate in Europe but to say that it is due to the real estate collapse there is bogus. As far as the UK is concerned, with an unemployment rate of 7.7% it is well beyond the EU
(here is the link: http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-01092009-AP/EN/3-01092009-AP-EN.PDF)average of 9,8%, as far as the other countries you mentioned Bulgaria has one of the lowest unemployment rates in Europe, as far as Dubai goes the the reasons for its real estate collapse are well known and documented.
To say that “Take away that industry and you are back to ground zero again.” is ridiculous. Only 22% of Panama’s workforce is employed (directly or indirectly) to real estate.
Again, nobody is proposing a “country based on rentals”. What I argue, however, is that now more than ever is the time that Panama revised its small business, immigration and work culture in order to be able to move to ‘the next level”.
For your information,wages in Panama have not changed since the last resolution in 2002, which is another of the new administration’s challenges.
As far as The Colon Zone and the Canal go, yes they may be suffering the consequences of a low trade activity, but if managed well and positioned even better, there will be a time (in the near future) that they will be able to contribute what they ought to Panama.
Hi Dimitri I dont need to read any stats on the UK to see how the economy is my family live there. Since tha collapse of the banks due mainly to the collapse of the real estate market the UK is in the Sh*tter.
Spains natural resource was and is tourism. The beach areas are more like parts on the UK with the amount of Brits that live there.
I would love to see how employment figures for Bulgaria have been established???
In the last 5 – 10 years what has been the main growth for Panama? Real Estate.
If that was to dimish that would therefore follow that 22% of the population would be unemployed. Not Good.
What trade could possibly replace the loss of so many job in Panama? Please dont say tourism, there is just not enough to do here in Panama to fill that void.
Now with the hotels trying to stop private property rentals that new industry will be squeezed for jobs.
Panama needs to focus on the high end market not the low end. What is the point of filling Panama up with a bunch of back packers that bring little or no money to an area?
The government does need to improve standards but they will not be able to do that without an increase in revenue and taxes. Real Estate is a great way of generating revenue and taxes and also employment which creates more taxes.
Geoff, first things first: lets not confuse (as is often the case) Panama real estate with Panana City real estate. There are a number of viable projects in the interior that will keep the ball rolling so to speak.
In a purely hypothetical scenario that Panama real estate is wiped out IN ITS ENTIRETY (and that is science fiction in my view) there are are other areas where these jobs could be channeled. Their majority is construction related and could be used to say… improved roads and infrastructure, supply the growing Multinational Companies that choose to make Panama their headquarters, fill in gaps in the service industry, improve agricultural productivity and work force that is currently in bad need of bodies etc. There are a lot of ways to absorb enough of that 22% to avoid a total collapse.
Now, I am not an economist (merely a lonely engineer) but these seem like logical and fairly viable solutions.
I agree with you on the taxes issue but again there are a lot more tax holes to be plugged other than the real estate.
As far as backpackers go, believe it or not that tourist segment plays a very important role in any developing tourism: they create hype and allure amongst the traveling populous that acts as a great podium to advertise a county’s Touristic “Goods”. So yes, directly they do not spend money but they end up making it up in other ways. I also happen to believe that one of the best business ideas for Panama is to open a low-budget boutique hotel (or hostel). A lot of money to made there. If you don’t believe me ask all those happy hostel owners in Colombia that are making money hands-over-fist right now as we post these messages.
Wille. Panamacasa.com is a place to look.
No doubt I agree with the *be careful what you wish for*. A good chunk of Panamas economy runs off the Canal fees, however developing tourism will broaden the base alot. Tourism in Panama has been primative for the years I’ve known Panama and hasn’t improved much except there is now a few more places to stay in beaches, etc. ATP proposal from Aug 13/09 isn’t going to help tourism much either. For some reason Panama gov’t has everything backwareds.
Love to know what these viable projects are in the Interior?
I am lost how you can divide Panama into 2 seperate sections.
Seeing the majority of the people live in the city isnt Panama based around the city?
Luis, good to hear from you man! If you can find me a 2br for $1k near El Cangrejo, I’m all ears!
I appreciate your feedback, although after a quick scan of apartments in London, New York, Paris and Panama’s oft-compared nothern sister, Miami on Craigslist, I couldn’t find many that were asking $6k+ for rent…and I don’t think Panama can claim to be on par with those locales. Whether “nut jobs” or just daydreamers, I believe that folks who paid $600k+ for PTY condos who were hoping to make their mortgage payments (which, depending on their interest rates, I’d estimate pencil out at around $4k+ per month) via income from renters are going to wind up very disappointed. I just don’t foresee that many renters for such a price, but maybe Panama really is that “different” as I’m hearing constantly. For my part, I’d like to think that anybody with the means to pay $4k in rent might also have enough saved and/or the financial savvy to make the down payment on their own unit. It’s going to be very interesting to see how this all plays out over the next 6-9 months. I really believe a HUGE correction is in order very soon.
Panama’s developers were about 3 years late to the already fading “ultra-luxury” trend. Now that the financial system is out o’ money, it seems most real estate buyers are returning to the reality of “not everybody needs to wash their face over a travertine sink.” The sub-$200k apartments may find buyers or renters, but there just way too much high end stuff in a period where nobody is feeling that bullish anymore.
Luis,
I have no clue what this means
“I do agree prices were extremely high and ridiculuous. What has happend now is that the cost of construction and cost of sale/rent is being backed by a price per mt/2 which is being backed by the banks. REAL EQUITY!!!”
I thought we are in a decreasing state of equity with some high end properties that were sold just at the peek being in a negative equity situaution. even prior to completion.
How are bank’s backing property when they are decreasing the limits they will lend at?
Does it matter which country a person comes from who contributes on this blog? I would have thought the more the merry.
BTW my comments on the Panama Canal where not negative, but to increase growth in Panama the countries needs more income from other sources or its economy will just remain constant.
Backpackers are actually a very important part of tourism. The majority of tourism in Colombia at the moment would be comprised of backpackers, they often lead the way into a country where more conventional tourists fear to tread. They also spend more money than you may think, and they spread it throughout a country.
They`re not your rich tourist staying at the Veneto and eating at 5 star restaurants who only leaves the city to do expensive tours or stay in resorts. Those tourists may spend a lot of money in one week, but where does it go? Basically to the same rich operators who just get richer.
Backpackers will spend the same amount of money, but over a longer period. They also spread that money through the country. They`ll go to the smaller towns in the interior and spend their money on the local buses, eat in the local restaurants, sleep in the local hotels and drink in the local bars, use the local tiendas. Rather than have a concentration of money in the same hands, their money is actually put directly into the hands of the people who need it most.
Australia did a study a few years ago that said it was more beneficial to have backpackers than it was to have highend tourists. In Australia it`s not unusual to stay for a year, and spend much more money in that time than a tourist on a 2 week holiday. Panama is different, but it`s not uncommon for backpackers to spend a month or more in Panama. As more areas open up in Panama i think that will increase.
All that said, don`t think you can get rich off a hostel!!!
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