Panama Real Estate Market Report April 2024

As I predicted in our 2024 Panama real estate market forecast in January, it’s been a pretty turbulent start to the year here for the property market in Panama. Prices have gone sideways and in some cases we are seeing some very motivated sellers, especially in the city and beach markets. 

And while buyers for Panama real estate came down in a big way during the first 3 months of 2024, it wasn’t enough to drive any price appreciation.

Below is a summary, including statistics, of the Panama real estate market for the period running January 1st, 2024 – April 1st, 2024.

What We Are Seeing

With the Panamanian elections just a few weeks away, local buyers have almost completely dropped out of the market. That’s bad news for real estate developers catering to local buyers, particularly interest subsidized projects. Sales in new developments priced under $180,000 are off by 23% compared to this time last year.

Institutional buyers are also sitting on the sidelines awaiting election results.

According to the March 2024 report published by ACOBIR (the Panamanian equivalent to the National Association of Realtors), the average closing price for a published property for sale in Panama was 11.2% below the asking price.

According to the same report, the average days on market for a property published for sale on the Panama MLS was 203 days. This is a 6% improvement over the previous period. 

The property rental market for the same period was showing less discounts (3% difference between asking and closing) and faster turns (63 days on market).

More Bad News For Panama?

Another major news item that will affect Panama’s real estate market is the investment rating downgrade Panama incurred in March. This downgrade was based on concerns over Panama’s new stance on mining, Panama’s debt solvency, and general concerns over the economy.

Quite frankly, I love the fact that we got the downgrade and think it could be exactly what the real estate market needs to force a slowdown on new property construction.

No doubt, this downgrade will hurt the Panamanian economy. It will make borrowing costs higher for businesses, it will likely push up rates for banks offering mortgages, and generally put a damper on economic growth.

Why am I so optimistic on the downgrade, at least when it comes to the sector of the market that we operate in?

Because the Panama real estate market  has been plagued by oversupply for more than 10 years! Developers with easy access to construction financing because of banks salivating to issue mortgages to their buyers led to a bonanza of new inventory in a market that was getting oh so close to stabilization back in 2016.

Heads up! We are still living in the aftermath of that bonanza and are likely to see prices hold steady like they have for the last 10 years or even come down a bit before they start inching up, assuming demand will stay the same.

April 2024 Panama Real Estate Statistics

According to Galeria Inmobioliaria, Panama real estate inventory is down by more than 50% from it’s 2017 highs. Of the total 16,558 units for sale, 30% are in pre-sale.

This 30% is telling because here in Panama, the “pre-sale” is a way for developers to test the waters on the market and decide if they build or not. And while investors are protected and generally put down very little equity at this stage, historically over 50% of projects never get past the presale and therefore never hit the market.

So that could imply a 10-15% haircut in inventory that may or may not hit the market over the next 5 years.

Included in this figure are properties between $180,000 – $800,000 which represent just over 25% of the total inventory, and are spread out between 212 real estate projects in development. 

The fastest selling segment of the market is once again the Panama luxury market. “Fast” may be a bit of an exaggeration, as this segment is still showing on average 23.5 months on the market. Yes, that’s right. MONTHS. Granted, the clock starts ticking in this case when the project goes into presales and first hits the market. And the average time to build in a new development in Panama is 4 years once construction actually starts. But hey, luxury real estate for the win.

What We Are Seeing In House

This quarter, we closed over $7,000,000 in property sales, spread out over the three real estate markets we cover: City, beach and mountain.

Our buyers were evenly split between North American and European buyers. 

Most of the EU buyers were focused on second home purchases in Panama’s interior. Their purchase price averaged  between $300,000 – $600,000. 

Almost all of our US buyers were investors focused on retirement properties which they plan on moving over the next 5 years full time. In the meantime, several had opted to use our property management services and some chose not to lease while empty. 

So far, we have had only 2 price reductions over the first quarter and 0 price increases. 

It was a very busy first quarter for us.

What to Expect in Panama’s Real Estate Market

The fallout from the investment downgrade may not hit us in the short term. The long term implications however are significant and both positive and negative.

Short term, expect mortgage rates in Panama, which are all adjustable to increase proportionately to the increased cost of borrowing for the banks.

Long term is a bit murky, and I personally think that our rating will be back up to investor-grade by the time the new administration releases their 2025 budget. I also think mining will be back before the end of next year.

Mid term, we may see fewer businesses open up or expand in Panama. Infrastructure projects may be slapped with a longer timeline based on increased financing costs.

The implications of the investment downgrade for the Panama real estate market will be felt in the corporate rental sector, which has been enjoying a strong Q1. Strong enough in fact to fuel a slight increase in rental rates, particularly in areas like Costa del Este and Balboa Avenue. 

We expect prices on properties for rent, particularly 3 bedroom furnished condos, in areas like Punta Pacifica, Costa del Este and Santa Maria to increase over the next 2 quarters and then level off as hiring and expansion potentially slows down.

Thanks for reading and as always, if you are looking to buy or sell real estate in Panama, we are Panama’s hardest working real estate agency!

Click here to watch the YouTube video where Kent Davis discusses these topics!