Tower 300 of Luxor is one of our favorite developments in Panama City, and clearly other people seem to agree, as the 40-story tower now has less than 8 units left for sale.
The Allure, a high-rise just off of Balboa Avenue we’ve been promoting since it started construction has four units remaining and less than 10 on the resale market at any given moment.
Casco View, one of our favorite developments in the Old Town, has more than 70% presold before the start of construction (planned for August 2014).
Rewind to 2009: Panama City was dotted with cranes and everyone was making references to another Dubai, a potentially overdeveloped market where supply had to exceed demand. “There has to be a bubble in this market, this city is overbuilt” were the comments from most visitors, no doubt referencing the bubble in their own markets back home. And as we reported in our series of reports on new condos on Balboa Avenue, supply did in fact nearly double over a 24-month period from 2009-2011.
But a funny thing happened in Panama. Or more importantly, a funny thing DID NOT happen in Panama.
Prices never came down, and developers kept building. Actually, prices did come down about 10-20% during the financial crisis, but that’s a far cry from markets like Miami, Las Vegas, or Valencia Spain and more a function of the fact that Panama’s always been a market driven by foreign drivers. So in effect, while we did experience a correction, it was more a function of demand slackening versus excess supply.
Undeniably, there are a few buildings that still have plenty of apartments for sale, but they are concentrated into a few (that I wont name in this article but would be HAPPY to tell you in an email) poorly built properties that only a few agencies are willing to sell. And most of the new projects are commercial developments, which is a cycle seen in many healthy real estate markets: commercial following residential. Now the cranes in the city are to finish off hotels, office buildings, and new shopping centers versus four years ago when they were finishing the newly built towers you now see dotting our city skyline.
What we are seeing in 2014 is that pre-construction is once again hot and on the heels of a new president coming in and several other factors, we may be ready to go through another real estate cycle.
There are, of course, risks in buying pre-construction with the two main issues being if the market comes down below the strike price and if the development fails to be delivered. But precon is also the best way to hedge your bet by limiting equity instead of plunking down for the full price. And if you know your developer and understand the risks, then the reward can be lucrative and a $40,000 deposit can double over the time that it takes to deliver the project.
If you are interested in exploring the market for properties in construction, both on the beach or in the city, I’m always available at Kent@panamaequity.com. We know the developers, we know the prices, and we are always available to help.