Greetings from the Sheraton Hotel and Convention Center in Panama City. I'm writing this post from my hotel room, which is directly across the street from a construction zone. I awoke this morning at 6am to the sound of jackhammers and trucks rumbling outside my window.
Everywhere you look in Panama City, you see cranes, construction, and new development. But who will buy the thousands of new condominiums, apartments and houses that will come on the market in the next few years?
it won't be Panamanians…the average Panamanian earns less than $5,000 annually, according to the World Bank. That means the vast majority of the new construction must be sold to expatriate investors…Americans, Chinese, European, and the other nationalities now flooding Panama with their investments.
In the past five years, Panamanian real estate prices have climbed more than 200%. When I first visited Panama in 2000, you could purchase a nice two-bedroom condo with a view of the ocean for $60,000. Today, you can't touch a simiar unit for much under $200,000, and often much more.
Can the boom be sustained? I'm skeptical, but I'll be spending a day this week with a well-connected local real estate agent to look at some developments both inside Panama City and in the nearby suburbs.
One thing is for sure. If the flow of expats into Panama slows down, the thousands of new housing units coming on line in the next few years simply won't be sold at current levels. That means Panama could potentially experience the kind of real estate slowdown now being experienced in the United States.
Time will tell…
Copyright© 2008 by Mark Nestmann
(An earlier version of this post was published by The Sovereign Society.)
