Hi everybody, it’s Kent Davis with Panama Equity Real Estate here to give you a bit of an update about what’s been going on in Panama. And what we’re watching as a company to keep our finger on the pulse in terms of 2021 Panama real estate trends and opportunities.
Rental Prices Decreasing
So, first of all, as everybody knows, 2020 was a bit of a rough ride for everybody. In Panama, particularly in the city, we saw rents coming down between 20% and 30%. And this was pretty much across the board, across almost all price points. You know we manage apartment rentals as low as $400 a month in the few entire buildings we manage, of course, we also handle luxury properties up to around $5,000 to $6,000 a month. So we have a pretty good sense of rents and we saw them come down last year.
The good news is that roundabout October is when a lot of the quarantine got officially released or at least everybody was allowed back into restaurants. So October is about when I think rent hit bottom.
We didn’t see a whole lot of rent reductions after that, as far as people putting in aggressive offers, getting accepted, and just published listings. So the interesting thing in Panama, for whatever reason, we didn’t see a corresponding decrease in price proportional. So, you know, where rents came down between 20% and 30%, we didn’t see a corresponding 30% drop in prices. Now we did see prices drop but those have also stabilized and I’ll tell you why later in this article.
Here’s what we’re seeing right now. We’re busy and I know we’re not the only agency that’s busy. We are currently in quarantine in Panama that said that’s going to all letup tomorrow. It’s going to be a staged reopening and similar to what we had back in the second quarter of last year, we’ve got certain industries that are opening again tomorrow, including construction way. We like that as it includes the pre-construction projects that we’re promoting and that’s probably a good time to talk about what’s going on with pre-con.
Pre Construction Prices
So here in the industry, of course, we call pre-construction what one might call just development sales. Pre-construction is anything up to the point of completion as far as a residential tower. Whether it is in the planning stages, and it’s still a beautiful green patch of earth, or it’s already got construction and workers pounding and clinking and clanking. So what’s going on with that market?
Well, there are still a few deals to be had with a few developers who are sitting on more inventors than they want to be. Some other developers have started to say, you know what, no, we are busy enough where we are not giving insane deals. Now we know who to talk to. We’ve got sort of inside track with these guys. When we come to the table, they know we represent 10, 15, 20 transactions plus for them a year. So we’ve got some negotiating power.
The point being is that pre-construction is starting to harden up a little bit. The prices aren’t as soft there, which is interesting. I wasn’t expecting it. I thought that developers were going to be having problems selling for a long time. However, there are a couple of interesting things that are happening in Panama and are really starting to play out.
A Weak Dollar
One of the things that’s going to be really interesting for Panama macroeconomically is a weak dollar. So the USD has been trending lower against currencies, like the Euro, against the Brazilian real and the Canadian dollar. All of those guys have kind of come back into the market and they weren’t really terribly interested in Panama for like the last eight years. And we love that. The US dollar was really expensive for Canadians, Europeans, Brazilians, Colombians, and anybody that is not on the dollar. This essentially means that real estate gets a lot cheaper for these people.
We’re seeing European family offices contacting us about multifamily options. We have European individuals looking at investment properties just to buy and hold. You know cap rates i.e. yield on rental properties was squeezed a little bit, you know, we’ve been fortunate for the first time in a while that our rental inventory across all the properties that we manage we have 98% occupancy.
Red Carpet Visa
The other trend that’s driving both pre-construction and to an extent resales, although there are some good deals on secondhand properties right now, i.e resales existing property. We’ve got some on our website, we’re aware of some others that prefer not to list. This trend is the whole red carpet visa, and that is a product.
I did an interview with Ricardo, about a month ago, talking about that. And it is a big deal. Ricardo is also a big deal and he’s with DenFab — a really good law firm. So we had Ricardo on the show and Ricardo talked to me about this new red carpet visa, which is huge.
The reason it’s so interesting is that while not a whole lot has changed financially, as far as the initial investment, I believe it’s 300,000, but what’s really interesting is you can do it overseas. You don’t have to come to Panama. A lot of people are taking advantage of that. We’ve seen a lot of inquiries from, you know, countries like the EU, Russia, China really all over the board. And they’re all looking for pre-con because it’s easier to buy on paper, you know, versus an existing property. You gotta see touch and feel. We’re still doing remote transactions as well but this is what’s driving the front end on pre-construction.
However, as they say, a rising tide lifts all ships, and rents have stabilized, pre-Construction is firming up as far as price sort of flexibility and existing properties are moving. We’re watching days on market and they’re coming down. So obviously we’re not the only ones who are busy.
Remote Working Increasing Interior Demand
So another thing I wanted to talk about is what’s going on in the interior. That’s basically everywhere outside of Panama City. So that’s Coronado, Altos Del Maria, El Valle, and Pedasi. And those places are busy because a lot of people have said, “you know what, goodbye city life I’m working from home”. A lot of our Proctor and Gamble clients are all working remotely and they are all talking about whether they should sell their place in the city because it looks like this remote model is here to stay. That’s been really good for the beach’s business. That’s been really good for the mountain’s business.
If you’re looking into that market give us a call — It’s been dynamic, to say the least!
Life in Panama
A couple of other general Panama life updates, just from the street here. Private hospital capacity is still there, but we’re kind of bursting at the seams a little bit. So while Panama is taking steps to address COVID and the corresponding stress that it puts on hospitals we are still, you know dealing with the effects of COVID. The vaccine has come, but it hasn’t gotten deployed.
People are pretty relaxed on the streets. There are no social uprisings, no big protests, nothing like that. So, it’s good news. It’s good news because the Panama market has always been an alternative for people. It’s always been a place where the grass is greener down here. And it really is — especially with summertime coming in and the temperature is lovely. You’ve got sunny skies for the next three months.
My point here guys is what’s going on macroeconomically in Panama is still good. Big projects are still getting funded. Tourism is still getting funded. Deals are very much happening and if you’re looking at something in the city, the beach, or the mountains, we got you. We’ve been doing this since 2007 and we’re here to serve!
Thanks for joining and have a great day.