Hi everybody. This is Kent here with Panama Equity Real Estate giving you guys a weekly update on all things, real estate in Panama. As you probably already know, I’m Kent the founder of Panama Equity. I’ve been doing real estate in Panama since 2008 and we cover the city, beaches and mountains areas up to about Penaome. We tend to cover mostly the Pacific side of Panama but we do a little bit of the Atlantic area, including Bocas Del Toro.
So here we go. The top news, I would say for the market is that rental prices have come up — finally! So as an example, we manage quite a few properties around the city, including quite a few on Avenida Balboa. And as you may or may not know, Avenida Balboa is our oceanfront iconic skyline that offers sweeping views. It’s a really great area. Everybody’s doing exercise out there, you can wake up and look out at the ocean and etc. So a 90-meter apartment in Bayfront, for example, is a building that’s around 15 years old and about a thousand square feet. This one bedroom furnished rental pre-pandemic (the beginning of the panic where people started dropping their prices because nobody knew what was gonna happen) would’ve gone for about $750-$800 a month. That was like the trough! Now you can’t find a single one-bedroom apartment on Avenida Balboa for rent for under $1000 — period! And that’s a good thing for those who are already in a place, however, this is your current reality if you’re still looking for a place.
It’s also very interesting for investors because obviously, you look at a property as an investment to either sell it for more later or to maintain a yield on it in the form of rent. If rents come up, then in theory more people are willing to pay a little bit more for investment properties. Now that has not affected property prices across the board yet. However, staying on the theme of pricing and Avenida Balboa, for example, we have seen a few cases, in the preconstruction market, where we had some clients who purchased multiple units about a year and a half ago in the Nuovo building. Nuovo is brand new, developed by a great developer that’s pretty much all completely sold out. Our clients paid about 2,500 and they’re reselling for about 3000 so that’s about a 20% increase. That’s not bad! And it’s also not bad when you take into account that you aren’t putting down the entire balance on preconstruction.
Transitioning into preconstruction, we do have a couple of new buildings getting delivered. We have HYDE – the first tower of HYDE is going to soon be delivered, in about a month or two, starting from the bottom up. So if you’re on one of the top floors, you probably won’t get your apartment until the middle of the year. I think the developer would love to tell you the second quarter, I would say probably the end of the second quarter/the beginning of the third quarter — but it’s coming and that’s an awesome building!
The interesting thing is when you buy pre-construction. On paper you’re like, oh yeah, I’m probably getting a better deal than what it might be in a couple of years. I mean, that’s a safe assumption, but it’s definitely not guaranteed because you never know what’s going to happen with the market. Right? The other thing is that it gets a little tricky to rent it out at the very beginning, because obviously if it’s in a building where most properties have been sold to investors, you got the challenge of competing against your neighbor. So rental prices tend to get a bit cannibalized in buildings that are primarily sold to investors. We saw that back in the day with Trump, and actually, we see that still what’s now called the JW Marriot. Those rental prices fluctuate because seasonally if you’ve got 50-100 empty apartments, everybody knows it and prices come down. Versus when you have high occupancy, you sort of have the liberty of asking for a bit more. This is true in every market, however, some buildings are a bit more exaggerated because there are not a lot of end-users.
However, versus a building like Allure also near Avenida Balboa, right off of Parque Urraca that’s mostly occupied by end-users. Here, you don’t have as much rental competition or cannibalization of pricing where you have to beat out your neighbor or drop your prices just to get it rented.
Ok so theme number one is rents have increased — but why? It’s due to a number of factors. One, employees are finally starting to come trickling back, international travel is starting to recover a little allowing more to come into Panama, and it’s been a good busy season already in terms of hotel occupancy. The big one though is that many expats are starting to come back to try Panama out again. They’ve been hearing a lot about Panama and maybe they came a year or two ago and are now ready to actually rent a place. That single-handedly has affected rental prices this year. And that’s a good thing! That could eventually translate into some purchases that it could also translate into some broken leases where people decide that they do not like Panama. We’ll do another Facebook live about why people don’t like Panama and what you need to ask yourself if you’re thinking about coming, but getting back to the market update and what’s going on.
Despite rental prices rising this does not necessarily move the sales prices up. It’s not like rent prices go up and sales prices automatically come up. Sales pricing has been flat for like a long time, like eight years. We haven’t seen much price appreciation. Why is that? Maybe oversupply, you know, builders got pretty crazy back in 2000 when they were like, oh my God, this is a sure-fire way to make money. Let’s build a building.
A couple of other news items, and then we’ll go back to the real estate updates! Tocumen International Airport was named one of the top 10 busiest hubs in the world. That’s a good thing, right? That brings jobs, that brings new eyes, that brings exposure and makes it easier to get in and out of Panama and to connect to other places. All of this makes it more attractive to live in an area or close to an airport that is truly an international airport where you don’t have to deal with multiple connections. It makes travelling to places like Europe, the USA easier. So from a lifestyle point of view, it’s nice having a great big airport with Copa based out of it and other international carriers.
Continuing with price updates and market trends. The beach is hot right now! We’ve actually got Matthew Marx, one of our beaches agents working on a flip, which doesn’t happen that often because prices haven’t really been coming up that much. At the beach, it’s the same story — prices have been flat for like eight years. However, there are still a few distressed properties out there at the beach that can be bought, remodeled and sold. Now, keep in mind, costs are expensive when you sell a property, nobody tells you how cheap it is to buy when you’re buying. If you’re thinking about buying to sell, don’t forget that you’re probably looking at about 11%. 5% – 6% on commissions and then another 5% on taxes like transferring capital gains tax. Then on top of that, you have lawyers, right? And that’s about 11%.
Let’s talk about the cons of buying preconstruction today too as I want to cover this today too. So we’ve got some buildings that are getting ready to get delivered. The first tower in HYDE and Nuovo are close to getting delivered. Nuovo is actually getting delivered as we speak. It’s good because maybe you can buy cheaper two years ago. Prices come up a little bit just from the developers pushing up prices, not because the market’s coming up because if you want the unit and if you want it then you are going to pay more for it. This will happen until they are gone and then they correct down to market price. And so there is an opportunity there to make a little bit of money, but you can’t bank on that.
The negative side of buying pre-construction is similar to what I alluded to earlier, which is when you put your apartments on the market for the first time, it’s a race because everybody else is trying to do it. If you’re in a building where it’s mostly investors prices come way down like below market. You’re getting what should normally be a $2,000 a month apartment and rent it quickly because you see 20 other apartments just like theirs on the market. So while the market price says this should be able to rent for about $2000, you as the tenant could get it for $1600 because the owner knows that competition is high. And it’s probably not unique to Panama, but it’s something I’ve learned along the way, which is to manage your expectations when you’re first getting an apartment because you might have to rent it out for a little bit less just to get through that initial oversupply of units in that building.
I think that’s all for today folks! If you are looking for real estate in Panama then make sure you get in touch as everybody that works for Panama Equity is available 24/7. Follow-up, follow-through, follow back is one of our mottos internally so you get taken care of. I appreciate you watching, have a great day!
Great info Kent! Thanks.