Construction shifts following demand
New starts up by more than than 45%
The vast majority of the condominium projects that dotted the Panama skyline for the last six years are finally being delivered, with reports showing that there are less than 2,500 condo units still in development between the waterfront areas of Punta Pacifica, Balboa Avenue, and San Francisco.
The numbers prove that the pipeline for new residential projects in the Panama metro area is down significantly as developers shift their resources towards non-housing projects, which are up sharply from last year. We’ve seen that most of the nearly 8,000 new condo units that entered the market over the last 24-36 months have had little effect on overall pricing, with condos being generally sold in the areas mentioned above at around 2007 pricing levels. There has also been strong absorption of the new inventory and according to an article in Capital Financiero, over 70% of the 2,500 units in the areas mentioned above and currently in construction are either “reserved or sold.”
AIn the first seven months of the year the value of approved construction projects amounted to $918 million, 45.3% more than in the same period last year. Of the total number of permits approved, $705 million worth was for projects to be developed in the capital, being mostly non-residential. Hotel, office, and mixed use commercial space continue to drive the construction market and have helped keep unemployment below 5%.
While privately financed projects in these sectors have kept Panamanian workers employed over the last six years, we believe that as these projects come to an end there will be more to follow. The city continues to grow to the east and to the west, and we’ve seen the focus shifting towards logistics centers near the airport, an expanded port and marina presence on the Pacific side, and more development in the country’s “interior.” Public works projects also continue at full steam, with the Panama Canal expansion project and the Panama Metro initative approaching full capacity.
This bodes well for the market in 2013, as the supply of brand new condos will be down sharply in the Panama metro area. Assuming demand will be as good or better in 2013 than it was in 2012, pricing gains are likely for select areas for this sector.
In other news, the Panama Canal ended their fiscal year last month and posted a $1 billion dollar profit, nearly $50 million more than what was projected. This money will go directly to the national treasury and be used to fund projects like roads, hospitals, and education.
2012 GDP is predicted to come out around 11%, leading Latin America and driven mostly by construction, financial services, and mining.