Panama’s Construction Boom Continues: Construction and real estate update March 2014

Construction spending increased over 32% in 2013, compared to the year prior according to the comptroller of Panama.  Non-residential construction led the way with just under $1 billion dollars in money spent on construction, additions, and repairs, led mostly by construction in the hotel and office sectors.  Spending in the residential sector increased 21% compared to the previous year.

We’re starting to see a slowdown in new construction starts due in part to the election in May, and one big factor to watch is the increasing cost of labor, a key driver of construction cost.

The national construction workers union has requested a 50% salary increase and while the full demand is not likely to be met, skilled workers are in short supply and will definitely see some of that wage increase realized.  The price of building materials also continues to climb, and that, combined with the increasing wage environment means it will cost a lot more to build in today’s market than it did just a few years ago.  This inflationary environment tends to have a direct affect on real estate prices as developers pass these higher costs on to buyers and new inventory costs more than existing.

A few other key figures of note, released in the last two weeks:

The current rate of inflation in Panama is 3.4% as of January 2014.

Foreign direct Investment in the Isthmus, up nearly 61% this year to a total of $1.7 billion dollars indicates another wave of confidence in Panama’s future.