Prices are starting to trend upwards on homes and finished condos in the Costa del Este, Panama real estate market.
This is welcome news for homeowners in this upscale suburb of Panama City, considering the past 7 years of flat to declining prices.
Fueling that price increase are a number of factors from both inside and outside of Panama. These include a changing buyer demographic, stronger than expected absorption, and some inflation in building material prices that are starting to be passed on to the consumer. New buyers are also beginning to come back to the market after a noticeable absence in 2020.
And while Costa del Este still enjoys a very favorable reputation with both expats and locals, new inventory in Santa Maria and several other factors may hold back further appreciation in real estate values.
How Business is Affecting Prices
Businesses such as restaurants, shops, and hotels in Costa del Este have depended heavily on the strong corporate presence of companies like Copa, Adidas, Proctor, and Gamble as well as newer additions such as Samsung and Liberty.
At the start of the pandemic, many Panama-based expats returned to their home countries. Some were laid off, others were furloughed while still others were allowed to work from outside of Panama.
Many of those employees have not returned to Panama.
While Samsung is back to 100% capacity (and reportedly bringing on an additional 50 employees over the next 6 months), Proctor and Gamble is just under 25% of their pre-covid office occupancy. In fact, companies in Costa del Este are still significantly below pre-covid numbers in terms of the physical presence of employees. This slow return to work is putting a drag on neighboring businesses such as Athenesiu which, pre-covid, was a hub for executives.
However, if Town Center Mall, the hallmark development located in the center of Costa del Este, can be seen as a barometer, activity is starting to pick up. On the weekends, restaurants are full, the outdoor area has been well transited, and retailers such as Do It Center and Stevens are reporting 12-month highs in terms of sales.
This returning consumer confidence is a welcome sign for businesses and property owners in Costa del Este. It’s also evidence that international expats, as well as local families who moved outside of the city, are starting to return.
Another factor causing buyers to return to the Panama real estate market is a depreciating US Dollar. The Dollar, which is coming off an 8-year high, is bringing back a number of buyers earning in Euro, Canadian Dollar, Brazilian Real as well as Colombian Peso eager to get into US Dollar-based, non-US assets.
Who is Buying in Costa del Este?
Political instability in the region is once again pushing expats to Panama and family-friendly neighborhoods such as Costa del Este.
Tightly contested elections in Peru are causing an abnormally large number of Peruvian visas and investment-related movements in Panama.
Colombian buyers are also active in Costa del Este, due to political instability, rising crime, and their government’s unsuccessful approach to the current health pandemic.
South Africans continue to migrate to Panama in large numbers due to high crime and economic instability, and many are finding Costa del Este.
Canadians and Europeans are also slowly making their way back to Panama, and some of them are landing in Costa del Este. Travel restrictions, however, have made travel difficult and the majority of sales to Canadians and Europeans have been sight unseen.
And finally, Americans are once again starting to purchase property in Costa del Este. Investors and retirees are moving gains from a hot stock market and an active US real estate market into Panama, which is still seen as an opportunistic property market.
What is Selling in Costa del Este?
Investors have been very active in Costa del Este over the last 12 months, but they are finding fewer distressed sales as rental prices start to stabilize and the market of local, expat, and corporate buyers return to Panama.
One and two-bedroom apartments in buildings such as Top Tower, Riverside, and Castellamare have seen sale prices impacted by declining rents and long periods of vacancy.
This double whammy caused prices to dip to as low as $1,700/m2 back in March 2020. However, real estate prices for investor geared condos ranging from 80m – 110m have started to see gains of around 5% over a 3 month period. This implies that most of the condos priced for quick sale have disappeared.
Homes for sale in Costa del Este during this same period saw an increase in average price per square meter listing prices. According to Encuentra24, in February the average sales price was $1831 per m2. In May that number rose by nearly 15% to $2104 per m2. This is partially due to migration from condos to homes as a result of the global health pandemic.
Another reason for this increase is the fact that very few new homes for sale have been built in Costa del Este over the last 5 years. This is in sharp contrast to what is still a very active pre-construction market for condos for sale.
According to MLS and Encuentra 24, the average time it takes for a property to list and sell is ranging from 300 to as long as 600 days. The main issue is that Panama remains a very opaque market in terms of statistics, making it harder for sellers to understand correct market pricing. This results in overpriced listings and as evidenced above, longer than necessary days on market.
That said, property is still selling in Costa del Este and there are indications that absorption may be picking up.
Front line condos are now listing for between $1,800 – $2,600 per square meter. This range is based on the building (age, amenities, location), condo floor, as well as improvements to the property.
The lowest-priced condos for sale on the front line of Costa del Este are currently in Altamar, Murano, and Zeus. The buildings listed for the highest price per square meter are Acqua II ($2,200), Matisse ($2,500), & Parkside ($2,800)
Second and third line resale (existing) condos for sale are coming on the market at between $1,500 – $2,000 per square meter.
In the case of new and pre-construction, prices in Costa del Este range from $3,000 per square meter – to as high as $3,500 per square meter.
During the first half of 2021, closing prices have been discounted from 8% to as high as 20% off of the list price.
A few examples of recent sales include a 420m2 property for 800k in Ten Tower, 125m2 for 325k in Parkside, 287m2 for $565K in Ocean One, 264m2 for $485k in Altamar as well as a 3-story penthouse unit in Titanium selling for $1,650/m2.
The above is based on Panama MLS reporting as well as information gathered from the private market.
How Santa Maria is Affecting Real Estate Prices in Costa del Este?
Santa Maria is built around a Jack Nicklaus designed golf course, so it tends to be perceived as more green and eco-friendly. It’s also a gated community with two controlled entrances, so it’s generally considered safer than neighboring Costa del Este. And finally, inventory is newer and built for a more high-end buyer compared to any other part of Panama City, Panama.
For that reason, real estate prices in Santa Maria are still generally 10-20% higher than comparable properties for sale in Costa del Este.
When Santa Maria inventory became available in 2014, prices were as high as $3,800 per meter. Wealthy Panamanians, fresh off a real estate boom, eagerly snatched up pre-construction properties with the idea that they would sell their existing homes once their new property was delivered.
When that inventory started to get delivered in 2018, there was a sell-off in Costa del Este, Punta Pacifica, and Paitilla as Santa Maria buyers sought to liquidate in order to take possession of their new properties. This spike in inventory pushed prices down. And in some cases, buyers had to walk away from their deposits, putting additional pressure on properties for sale in Santa Maria.
The combination of price competition, supply returning to developers, and immigration law changes brought the prices of properties in Santa Maria to where they are today. That said, one surprising market correction we are starting to see is that brand new construction that did not qualify for the 20-year tax exoneration is losing some of its perceived value compared to older buildings that still enjoy a 10-year tax break. This trend is likely to wane as property tax exoneration runs its course.
How Prices May Perform in Costa del Este
Costa del Este is likely to fair well over the long term, especially when compared to its more glitzy neighbor, Santa Maria.
Residents in Costa del Este decide to live in this area for a number of reasons, most of which revolve around convenience and ultimately, price.
Services such as daycare and after-school activities as well as shops and restaurants are all generally within walking distance in Costa del Este. Town Center, Atrio Mall, or the shops along Avenida Centenario are generally never more than a 10-minute walk or two-minute drive. This is in comparison to Santa Maria, where there are no businesses within walking distance and generally no nightlife.
Commute times between the two areas are similar for those working downtown. However, being within walking distance to the office is another big draw for Costa del Este when compared to Santa Maria. This is particularly relevant for investment properties geared towards corporate rentals.
Additionally, there are still many properties for sale in Costa del Este that still benefit from the 20-year tax exoneration. This is still a relevant factor for investors looking at holding costs long-term.
No doubt, Costa del Este prices have been impacted by the overbuilding that has characterized the Panama real estate market over the last 10 years. However, the vacancy rate of new construction in Santa Maria is notably higher and will take longer to get absorbed. This implies that Santa Maria is likely to continue to face downward pressure.
Costa del Este on the other hand is already starting to show some resilience in the form of price stabilization and in some cases some slight appreciation.
It’s still too early to tell if the recent price increases are the sign of a new trend or simply a small market correction that has already run its course.
One thing for sure is that it’s still a very competitive real estate market in Costa del Este favoring cash buyers.