As I predicted in our 2024 Panama real estate market forecast in January, it’s been a pretty turbulent start to the year here for the property market in Panama. Prices have gone sideways and in some cases we are seeing some very motivated sellers, especially in the city and beach markets.
And while buyers for Panama real estate came down in a big way during the first 3 months of 2024, it wasn’t enough to drive any price appreciation.
Below is a summary, including statistics, of the Panama real estate market for the period running January 1st, 2024 – April 1st, 2024.
What We Are Seeing
With the Panamanian elections just a few weeks away, local buyers have almost completely dropped out of the market. That’s bad news for real estate developers catering to local buyers, particularly interest subsidized projects. Sales in new developments priced under $180,000 are off by 23% compared to this time last year.
Institutional buyers are also sitting on the sidelines awaiting election results.
According to the March 2024 report published by ACOBIR (the Panamanian equivalent to the National Association of Realtors), the average closing price for a published property for sale in Panama was 11.2% below the asking price.
According to the same report, the average days on market for a property published for sale on the Panama MLS was 203 days. This is a 6% improvement over the previous period.
The property rental market for the same period was showing less discounts (3% difference between asking and closing) and faster turns (63 days on market).
More Bad News For Panama?
Another major news item that will affect Panama’s real estate market is the investment rating downgrade Panama incurred in March. This downgrade was based on concerns over Panama’s new stance on mining, Panama’s debt solvency, and general concerns over the economy.
Quite frankly, I love the fact that we got the downgrade and think it could be exactly what the real estate market needs to force a slowdown on new property construction.
No doubt, this downgrade will hurt the Panamanian economy. It will make borrowing costs higher for businesses, it will likely push up rates for banks offering mortgages, and generally put a damper on economic growth.
Why am I so optimistic on the downgrade, at least when it comes to the sector of the market that we operate in?
Because the Panama real estate market has been plagued by oversupply for more than 10 years! Developers with easy access to construction financing because of banks salivating to issue mortgages to their buyers led to a bonanza of new inventory in a market that was getting oh so close to stabilization back in 2016.
Heads up! We are still living in the aftermath of that bonanza and are likely to see prices hold steady like they have for the last 10 years or even come down a bit before they start inching up, assuming demand will stay the same.
April 2024 Panama Real Estate Statistics
According to Galeria Inmobioliaria, Panama real estate inventory is down by more than 50% from it’s 2017 highs. Of the total 16,558 units for sale, 30% are in pre-sale.
This 30% is telling because here in Panama, the “pre-sale” is a way for developers to test the waters on the market and decide if they build or not. And while investors are protected and generally put down very little equity at this stage, historically over 50% of projects never get past the presale and therefore never hit the market.
So that could imply a 10-15% haircut in inventory that may or may not hit the market over the next 5 years.
Included in this figure are properties between $180,000 – $800,000 which represent just over 25% of the total inventory, and are spread out between 212 real estate projects in development.
The fastest selling segment of the market is once again the Panama luxury market. “Fast” may be a bit of an exaggeration, as this segment is still showing on average 23.5 months on the market. Yes, that’s right. MONTHS. Granted, the clock starts ticking in this case when the project goes into presales and first hits the market. And the average time to build in a new development in Panama is 4 years once construction actually starts. But hey, luxury real estate for the win.
What We Are Seeing In House
This quarter, we closed over $7,000,000 in property sales, spread out over the three real estate markets we cover: City, beach and mountain.
Our buyers were evenly split between North American and European buyers.
Most of the EU buyers were focused on second home purchases in Panama’s interior. Their purchase price averaged between $300,000 – $600,000.
Almost all of our US buyers were investors focused on retirement properties which they plan on moving over the next 5 years full time. In the meantime, several had opted to use our property management services and some chose not to lease while empty.
So far, we have had only 2 price reductions over the first quarter and 0 price increases.
It was a very busy first quarter for us.
What to Expect in Panama’s Real Estate Market
The fallout from the investment downgrade may not hit us in the short term. The long term implications however are significant and both positive and negative.
Short term, expect mortgage rates in Panama, which are all adjustable to increase proportionately to the increased cost of borrowing for the banks.
Long term is a bit murky, and I personally think that our rating will be back up to investor-grade by the time the new administration releases their 2025 budget. I also think mining will be back before the end of next year.
Mid term, we may see fewer businesses open up or expand in Panama. Infrastructure projects may be slapped with a longer timeline based on increased financing costs.
The implications of the investment downgrade for the Panama real estate market will be felt in the corporate rental sector, which has been enjoying a strong Q1. Strong enough in fact to fuel a slight increase in rental rates, particularly in areas like Costa del Este and Balboa Avenue.
We expect prices on properties for rent, particularly 3 bedroom furnished condos, in areas like Punta Pacifica, Costa del Este and Santa Maria to increase over the next 2 quarters and then level off as hiring and expansion potentially slows down.
Thanks for reading and as always, if you are looking to buy or sell real estate in Panama, we are Panama’s hardest working real estate agency!
Click here to watch the YouTube video where Kent Davis discusses these topics!
Astha Dixit
on said
Your post is simply superb!
Mirco
on said
Great job….
Marc Lacombe
on said
‘Most of the EU buyers were focused on second home purchases in Panama’s interior’
I would be curious to know the main reason and what type of property. Does it include land? (I mean a real piece of land, one to 100 acres range).
Most projects are on the side of the ocean, but when you live here like we do, we like to live close to the schools for the children, but always curious as to what is available. We went to see (very briefly) cerro azul but its still a good drive from here (Panama Pacifico). Something with land at a higher altitude would be great, ideally within a 30-45 minutes drive since week-ends are short….
Any ideas?
Cheers, always happy reading. Let’s see if the prediction for the mining comes true.
Guillaume Ruff
on said
Dear Sirs,
I am looking for a 4 bedroom apt (1 master 3 kids) with ensuite bathrooms and closets, fully equipped kitchen, dining room, lounge, on an elevated floor, in an oceanfront tower in Costa Del Este, with 5 parking lots (or more), a sunny social area with pool, gym etc
If you have something to offer, other than in the VITRI TOWER, please contact me.
Yours truly. GR
GR
Turnell Watts
on said
Thanks for the info & insight into the real estate market in Panama. greatly appreciated. A few year ago we also had our downgrades but when the new Prime Minister took over within a year those downgrades went back up and the our country was able to burrow loans at some good rates.
stacyrossetti
on said
Putting all of my creative and entrepreneurial energy into real estate investing has allowed me to open doors for my family and myself, and it has altered my life.
mirco
on said
great article.
Kent, you are the only one that report the real situation and tell things just like they are.
congratulations
Kent Davis
on said
Hey thanks!!