Panama Real Estate Predictions 2022

Hi everybody, Kent Davis here, Managing Director of Panama Equity Real Estate. I’ve been doing this for the last fourteen years and it’s always interesting and fun to share some Panama real estate predictions for 2022 — and that’s the plan for today. So, obviously, nobody’s got a crystal ball but there are some factors that anyone can watch to help predict the direction in a real estate market.

The Panama Economy

We can start with the economy and Panama. Here’s what’s good about the economy in Panama, especially compared to other countries around the world. Panama has not had all of the employment-related subsidies — for example, the incentives to not work. Panama has not had that at all. There are some social programmes that give a bit of relief for people, but not to the extent of incentivizing them to not work. So for that reason, people are still looking for work and the economy has definitely contracted because of COVID, so our unemployment is still in the double digits. That said, people are actively getting back to work. There have been new job creation over the last couple of months, and I think that next year if the trend continues, we should be back on track to see, 2% – 3% GDP growth based on both local job creation, and companies scaling up again on hiring and of course, that all leads to people moving out from their parent’s house, or upgrading or buying versus renting. So I think that is a positive.

One positive thing for Panama, especially compared to the rest of the world, which at least in the US, folks are seeing massive shortages on the labour side, which could lead to shortages on the product side. The Panama Canal, by the way, just released their 12-month figures and they had their best year in the last 10 years go figure. So World Trade is back. Global commerce is definitely cranking and that obviously benefits Panama to the extent of Panama toll revenues, which creates more money for infrastructure projects, more money for school and hospital projects, more money for business incentives. So all that is a good thing.

I think this is a good time to mention guys that Panama is an economy affected by the world. Obviously, all economies are a part of a world economy but Panama is more so. A because we import a lot, B because we have a lot of expats moving here, we have a lot of multinational businesses located here, disproportionately compared to other countries in the world. I mean, hey, Panama population is about 4 million and when you’ve got a high percentage of foreigners that means that folks are looking at Panama as an alternative. And we’re talking about high net worth people all the way down to politically persecuted like Venezuelans, people that are fleeing Nicaragua, and all levels of socioeconomic status. The point being guys is global factors affect the real estate market.

Back to some predictions! Unemployment is making its way down, which is good. Global commerce is starting to pick up again, which is good. So that’s two scores for Panama, in terms of the potential of the real estate market being affected.

Opening of Global Travel

I think another factor is topped out markets in the States and I don’t follow markets in Europe, however, the Dow is up 20% this year and housing is up almost in all markets in the US but not up in Panama. That’s interesting because investors generally don’t like to get in at the top of the market, of any market, if you can help it. Panama still represents a, I wouldn’t say depressed market, but I would say a recovering market. There are still some sellers who have not been able to sell. I think some of those will be gradually churned out of the market by a function of more people coming to Panama. With the return of global travel, we’re seeing indications that this coming busy season which is generally from January to April is going to be gangbusters. Like all of the Airbnb, we manage outside of the city are fully booked from now until April.

I’m seeing reports from a great company called Panama Relocation Tours that their tours are booked for six months in advance. Obviously, that’s an indicator and those people generally tend to take about 12 months to buy and we’ll probably see those results the following year. Why? I mean some people buy as soon as they come down, but more so it’s folks that come down once to see Panama, they come down again to look at real estate, and maybe they’ll come down a third time to purchase. And then the purchase process could take two to three months. So that generally means about one year lag time on first-timers coming to Panama who might ultimately buy.

There’s gonna be more first-timers this year than there has been in many years. Why? Well, a couple of reasons. I think low population density is a big one. You know you go out to the beaches in Panama, you can still be the only guy walking the beach on a Tuesday morning in Coronado, which is like our most popular sort of Panama City Beach destination. It’s amazing. Granted, on the weekends, it gets a bit busier. However, that low population density I think is going to be a trend. You know, Panama is definitely not like Hong Kong, or Singapore, where there’s high population density. Panama is spread out and people are looking for that. This might be due to the health pandemic but also just quality of life.

Inflation of Prices

Inflation is an issue in the States. They’re seeing higher food prices and I think that it’s probably an issue in Europe. We’re starting to see that a bit in Panama but the fact that we are still somewhat economically not recovered, means that major costs such as labour and real estate have not increased to the tune that they have in the states in Europe. This means that we’re not going to see nearly as much inflation as we will, in other parts of the world. That’s good for Panama, obviously, because it will become cheap again. I moved to Panama in 2007 when you could get a beer at a restaurant for $1 and you could get a pretty solid lunch at a restaurant that you’re now paying $12 for a good meal, I was probably paying eight back then. Right? As inflation picks up in the rest of the world, Panama will benefit because Panama will be comparatively cheaper as Panama will not have as many inflationary factors, namely wages and real estate.

So let’s talk about other good things and then I will talk about some concerning things about Panama that could make my rosy outlook not so rosy. As tourism picks up, obviously that is good for the real estate market both in short term rentals ie 45 days in the city or one day outside of the city. We do have some rental restrictions here still in the city for Airbnb, but again, back to what I said earlier, more tourists, more eyes on properties, more properties purchased. People going back to work, more money available to purchase and/or rent. So we are seeing the cruise ship terminal that’s going to be ready in the next couple of months. We’re seeing a successful come to get vaccinated in Panama neighbours, you know, Peru, Colombia, Brazil. You don’t want to deal with getting vaccinated in your home country. Come on, come on over here. It’s a super random tourism initiative that I love. And it’s working!

Panama is also admired by its neighbours right now. You know, we have some friends from Honduras. Also some friends from El Salvador, and even to an extent Costa Rica — although there’s a bit of a rivalry between Panama and Costa Rica forever. Panama is very much in vogue in Central America and to an extent South America in terms of still being perceived in a very positive light, from a safety standpoint, from a political stability standpoint, for the ease of getting in and out and ease of doing business. And that’s always been the case but as people start to get back to being in a position to consider moving, we’re going to be seeing a big push. We are already seeing it from Peru, we’ve been seeing it from South Africa so we’re going to see that market come back. And that market has been dead for the last two years, which is basically expats relocating on mass from countries not in North America or not in Europe. So everybody else South America, Central America, Asia, we were kind of flirting with China, they’ve established a couple of big banks here. I think that relationship is still just getting started.

Crypto in Panama

Another fun one to watch is crypto, which is becoming a lot more mainstream. Panama has always attracted alternate investors. As more people make money in crypto, those same crypto buyers have the same kind of people to look at Panama. I don’t know what the correlation will be at the end of the day. But, you know, we’ve done talks. Aldo Antinori is a genius on crypto, and we’ve got a lot of very smart people following crypto, and building a crypto community. I think that the rise in crypto acceptance and the overall growth in people that are holding, using and investing in cryptocurrencies will benefit Panama. Developers are accepting crypto now and sellers are open to crypto now so would those people have bought a couple of years ago? There’s definitely newfound wealth being created in crypto and those guys didn’t have a million dollars a couple of years ago. And now they do and so Panama will benefit from that. We have the mechanisms and have done deals in Bitcoin already. And we’re definitely not the only ones to do it. As soon as Amazon starts taking Bitcoin, you know, the sky’s the limit.

Not So Rosy Predictions

What about some issues that we always are watching in Panama that are sort of hard to measure? Of course, corruption sucks, it makes things more expensive, because you’re ending up paying more for a road because the politician is getting his kickback. That’s always a damper and that doesn’t feel like it’s going away anytime soon. So that’s a challenge that doesn’t necessarily affect the real estate market but equally does because it’s a macro.

So what else negative could happen? That would damper the party in Panama? You know, as the US dollar declines, that’s generally positive for dollar-based assets, because it’s cheaper for people to purchase. I think if the US has some major political issues, on the one hand, it’ll be good for Panama because there’ll be more people wanting to get out.

US stock market crashes and US housing market crashes, for whatever reason, probably won’t be good for Panama. Obviously, a lot of wealth will be lost and a lot of disposable income that might have been used to purchase your beach house in Panama or diversify your real estate portfolio in Panama. People might not do it if that wealth disappears.

I can’t predict that market, I can’t even predict the real estate market in Panama! I’m just saying what to watch. So obviously watch hotel vacancies in Panama, watch unemployment in Panama, job creation in Panama, global travel restrictions or easing of global travel restrictions. There’s been a lot of pent up demand. We have so many people coming in December. Will that be enough to push up the real estate prices? Probably not at least for another six months if we have a crazy busy season.

Recent changes to the friendly nations visa programme. Ah, we’re not super excited about those. The politicians got with the developers and told them, hey, let’s make it so that you have to buy a $300,000 property to get your visa now. And the developers like, yeah, we’ll support that. And the politicians are like, yeah, the real estate market will blow up. What they didn’t realise is that there are a lot of people that rent before they buy. There are a lot of people that would rather spend $200,000 than #300,000. The good news is that Panama is kind of wishy-washy, and the laws change with the wind and the seasons. Now the good news is you can still stay in Panama on a 190-day tourist visa, go home for three days and come back. It’s inconvenient and let me tell you, I did my visa runs when I first moved to Panama. The friendly nations visa did bring a very nice wave of people from all over the world from those 30 odd countries on the list. So I think it will have a negative short term impact until they realise what happens.

Thank you for your listening folks and we always respond to questions. You guys are in great hands with anybody you work with from Panama Equity so thanks for tuning in. The next episode will absolutely be why not to move or invest in Panama. I think it’s an important topic that will save everybody a lot of headaches but it’s still a magical place. And I think 2022 is going to be awesome in Panama. That’s my takeaway, just from what we’re seeing on the street. So anyway, guys, have a great Tuesday morning. Thanks for tuning in and happy Fiestas Patrias we’re still celebrating down here!