And just like that, 2018 is behind us. This new year is likely to come with new trends when it comes to Panama’s economy and real estate market. One of the tricky things about predicting trends in the real estate market is that so many aspects of Panama’s economy affect real estate. Everything from tourism and infrastructure to taxes and technology play a role in which way the real estate winds will blow.
So while nothing is certain, there are plenty of indicators about upcoming trends that you should be paying close attention to. Read on for a few key movements we’re expecting to see in the year to come.
Tourism Affecting Real Estate Property
With the near completion of many city-wide projects, Panama is cementing its reputation as an affordable destination with something for everyone. This, accompanied with the chance to host events of international importance and the potential wave of visitors this could bring to the country can only be positive for Panamanian real estate.
Here are some upcoming events that may impact Panamanian tourism in the coming years:
- Panama is kicking off the year by hosting World Youth Day in January. Organized by the Catholic Church, this annual event typically draws crowds in the millions.
- Many of the remodeling and construction initiatives taking place across the city including for the convention center will wrap up this year.
- The fourth bridge over the canal on the Caribbean side will be completed.
- The cruise ship terminal is projected to be done in early 2020 or even late 2019.
As Panama continues to invest in infrastructure making the city more appealing for tourists, we can expect tourism rates to grow.
How does tourism affect real estate? There are plenty of ways. One example is people who come to Panama as tourists, come back again, and some of them end up deciding to buy. This has become an increasingly common trend with Chinese tourists visiting countries like Malaysia, Vietnam and Canada and everyone is waiting to see how that trend could play out for Panama.
Another important factor to consider is that as tourism increases, hotels get filled up. Consequently, hotels can afford to raise their prices. When hotel prices rise, big corporations house their employees in hotels because they’re cheaper than apartments will then start to look at apartments again. They will either buy or more likely rent properties for their employees, meaning excess rental supply may get absorbed as a result.
In general, when tourism picks up the property market has a tendency to see a boost about twelve months later. Given that tourism has seen and will likely continue to see steady growth, we can expect that this will have continued positive effects on real estate as well.
Tourism isn’t the only trend to watch in terms of what’s happening in the Panama real estate world of 2019. Rental inventory is another area that we’re keeping an eye on. In some places, the number of new apartments and condos has grown at a breakneck pace as new developments have popped up all over the city. As a result, there are many instances where the supply of rental properties exceeds the demand.
While it isn’t the case everywhere, some developers are responding to this excess in supply by selling bulk inventory to investors. Those units in turn usually get placed on the rental market, creating a vicious cycle that ends once enough of the for-sale inventory either gets absorbed by buyers or fully tenanted.
It’s hard to say how this trend will play out in the long run, but it’s definitely something worth noting. Although more properties on the rental market could mean lower rent prices, it could also provide opportunities for those looking to invest in real estate to get a great deal.
Starting on January 1, 2019, Panama’s new property tax laws will go into effect. Through this reform, tax rates levied on properties will be modified. Previously, primary residences valued at $30,000 or less were exempt from taxes. Under the new law, this threshold will be raised to $120,000. These thresholds have been raised all the way up the scale, which means all homeowners will be eligible for property tax savings. This new law also applies to non-citizens who own property in Panama.
It’s very likely that as these tax modifications go into effect, we’ll see a revaluation of older property because the holding costs will be cut by more than 50%
Panama is holding a presidential election in May of 2019 and while you might be tempted to think that the outcome of the election could affect real estate, you’d only be half right.
Truth be told, the mere fact that Panama will be having an election at all can have an impact on real estate long before Panamanians head to the ballot box. Presidential election years tend to create an environment of uncertainty and in moments of uncertainty, people are more likely to hold onto a sure thing and avoid risks. This social trend is likely to affect how people behave in the real estate market as well.
When it comes to the prospective candidates, all three front runners are fairly politically conservative. All three also plan to stick with the existing pro-growth economic policies that have served Panama well in recent decades. Though none of the three have any groundbreaking plans that would severely affect the real estate industry, their stances on subsidiary industries are worth paying attention to. Potential changes to interest rates, taxes, and banking could all have effects on the real estate market.
One thing’s for sure, Panama didn’t get where it is today by living in the past. In every industry and market, entrepreneurs, developers, and investors are looking to what’s new. And in the real estate world, we wouldn’t be surprised to see new technologies making their way onto the market.
One technology that we’re expecting to see more of in new developments is keyless entry. Keyless entry technology has been growing overseas, particularly in China, and we’re expecting to see some of that technology making its way here. Whether with a fob, a fingerprint, or a smartphone, the most state of the art new developments in Panama are likely to think outside the box when it comes to keys.
Another area where there’s room to grow is in home automation. As smart appliances and integrated technologies become more popular, we’re expecting to see these used both at the unit and the building level. Online concierge services are likely to become more popular in new developments as our industry matures a bit. Through such services, tenants and owners in a building will be able to do everything from checking if they have mail, to placing a maintenance request, to paying building fees all with a few clicks of their smartphone.
Panama’s rental market is likely to stay soft until we see a resurgence in new companies moving to Panama. There are many factors, though, that indicate such a resurgence might be on the horizon. As relationships between Panama and China continue to strengthen, there’s some talk about if and when some large Chinese companies might open a Latin American hub in Panama.
Whether in mining, logistics, or transportation, there are many potential industries where economists believe new multinationals are likely to extend operations to Panama. If this were the case, it could mean an influx of thousands of employees to Panama. And while a thousand new families moving to New York or London might be a drop in the bucket, in Panama this could have a substantial impact on the rental market.
As these changes can happen very quickly, it’s important to stay up on the news if you’re looking to make a move in the real estate market. If you’re keeping track of big business deals and foreign investment plans, you’ll be ready to pull the trigger at the inflection point because as the old real estate adage says, you make your money on the buy-side, not necessarily on the sell-side!