Because of the Covid virus Panama’s real estate market took a nose dive. Real estate offices have been closed.. some may never open again. Most notary offices have been closed so you can’t go to a closing. Many contacts were cancelled too. Rentals sat vacant because Panama’s borders were closed and the quarantine prevented anyone from being away from their house for more than 2 hours to buy groceries. So, what’s the future of Panama’s real estate once Panama opens their borders again?
The basic principal of supply and demand indicate that Panama will have much more supply than demand for the next 3-5 years. To make matters worse, in 2020 there has been a big increase in properties and businesses for sale which will add to the already overloaded supply.
For this report about the future of real estate in Panama, I consulted with trusted real estate agents, the biggest developers in Panama and researched what the Panama’s association of real estate agents have to say. I’m also drawing on my 30 years of experience as a real estate investor who monitors real estate trends in Panama and in the United States.
Let me state up front that we at Panama Relocation Tours encourages you to rent for at least 6-12 months before you consider buying any property in Panama. Twelve months will give you time to make sure you like living in Panama. Twelve months will give you time to experience both the rainy and the dry season which can be dramatically different in some areas. Twelve months will give you more time to understand the “right” price for houses versus overpaying. In twelve months, you’ll know if you’ve picked the right area or if you need to keep looking at other locations or elevations in Panama.
It is easy to buy in Panama but it could take many years to sell. So, you should not rush to buy something regardless of how good you’ve been told the price might be.
WHY DOES IT TAKE SO LONG TO SELL A HOUSE IN PANAMA?
There are a lot of reasons that it takes many years, sometimes 5+ years, to sell a property in Panama. Most people selling real estate, including real estate agents, in Panama have no previous experience in real estate so they don’t know how to do marketing. We do not have a widely used MLS (multiple listing service) in Panama so it is very hard to determine the right price to list a house at and most sellers/agents start at a price that is WAY too high. Beware that some foreigners selling or renting real estate do not have a work permit so they are working illegally in Panama. Always ask to see their work permit.
Another obstacle is financing. Financing is available at banks but they will require 20-30% down and it could take months for the financing to be approved. Banks will require that you get a life insurance policy naming them as beneficiary just in case you die before paying off the loan. And banks loans must be paid off when you turn 70 which prevents many retirees from getting financing. You will probably not be able to get fixed rate financing.
Some developers offer short term, less than 5 year, financing for new construction.
The other reason it takes a long time to sell is because there is a mismatch between the price point that most buyers are looking for and the price of the inventory that is available for sale. Ninety-seven percent of the people who come on a Panama Relocation Tour are looking for homes under $200,000. But much of the inventory of homes for sale are prices at $250,000 or more. There are not enough buyers in the higher price points so it takes much longer for those properties to sell. Properties in good condition priced under $200,000 tend to sell quickly if they are in a good location.
GROWING INVENTORY = LOWER PRICES
During the 2008/2009 real estate crash, Panama saw far less drop in prices than other countries. But the Covid-19 impact is different. The borders of Panama have been closed so no foreigner buyers could come in. Even people already living in Panama cannot buy houses yet because real estate offices have been closed since mid-March and the notary offices, where you would go for a closing, have mostly been closed too. According to the Panama’s Association of Real Estate, sales are down 90% in Panama at least.
Construction projects were stopped during the quarantine too.
The president of the Association of Real Estate (Acobir), Frank Morrice Arias, stressed that, “in addition to this (covid-19), previously, they had already been facing a market hit due to the decrease in prices in the last four to five years.”
Prices in many areas in Panama were going down before the Covid-19 virus. And now, with even more inventory, we anticipate that prices will need to go down more if a seller really wants to sell.
Morris announced that, “in the residential sector, it will take about three to four years to absorb all the inventory they have and it will be necessary to carry out strategies to mitigate the situation; In the case of an office commercial, where for several years they had excess inventory, it will take five to seven years to recover.”
Elisa Suarez, executive director of the National Council of Housing Developers (Convivienda), explained that “… We are going to face a market where the demand will be quite contracted and where the supply will definitely have to be restructured. This leaves me to think that there is definitely a tendency for prices to fall in order to leave the inventory that we have so far.“
Throughout the entire quarantine in Panama, I have seen many more houses and businesses come on the market to add to the already growing inventory.
From CentralAmericanData, the directors of the Panamanian Association of Real Estate Brokers and Developers (Acobir) estimate that in the context of the health crisis resulting from the Covid-19 outbreak, sales or rental prices in the local market could contract between 20% and 25%.
Of course real estate is local. What happens with prices in Coronado may not be the same scenario that happens in Volcan. Each real estate market in Panama is unique. Some markets have more inventory that others. Some markets have a higher demand than others. Those with the highest inventory could experience the biggest decline in prices. There will be bargains throughout Panama.
Luis Pimentel, president of Acobir, told Panamaamerica.com.pa that “… No one expected the pandemic, so the developers who finished their construction and were about to deliver have that inventory available right now’. Currently, the inventory in the residential segment of goods available for occupancy and pre-sales is more than 25 thousand units.“
I talked to several real estate agents who have been selling and renting houses in Panama for many years. They all agree that the primary buyer will be people who already live in Panama who are looking for discounted opportunities.
WILL THERE BE DISCOUNTS?
Many properties have been for sale, and way over-priced, for a long time. The fact that a seller finally reduces their prices to a more realistic number does not mean it is a good deal in an uncertain real estate market. There will be some true bargains but unless you have lived in Panama a long time and followed real estate prices in the area you are interested in, you won’t know if it is really a good deal or if the agent is just telling you it is a good deal. Buyer beware!
Alfredo Aleman of Grupo Los Pueblos who engages in design, architecture, construction, marketing and real estate for sale including residences, apartments, shopping malls, offices and other projects, stated that “In such a downturn, there will always be sellers in distress, mostly in the secondary market Project a under development with issues, have week capitalized banks behind them. For developments under construction, can’t see significant adjustments since prices were under important pressure for the last 5 years.”
In the past Panama’s strong economy has attracted investors and buyers from all over the world. Some buyers will see Panama’s real estate prices as a bargain and will come in to swoop up some of that excess inventory.
I’ve already seen significant discounts in some rentals. A furnished three bedroom two bath house in a gated community in Boquete that previously rented for $1500 is now advertised for $950 including utilities. And an Ocean view three bedroom furnished condo facing in Coronado previously rented for $2200 is now advertised for $1650 but the price may need to come down more to find a tenant quickly.
In March, just before things shut down in Panama, a friend got a great deal on an ocean front single family house in San Carlos. Furnished two bedroom two bath house for $85,000 with a pool.
It’s a great time to move to Panama because there are some tremendous deals for rentals and for house for sale. You really can live BETTER for less in Panama. Now you’ll be able to find even better prices. Everything is negotiable too!
Covid-19 has changed the world and it will definitely have an affect on real estate prices in Panama.
Starting about June 1st, real estate agents and overseas living gurus started really pushing investing in Panama. They have fancy sales letters and make insane claims that they can guarantee a 6-9% ROI. They are promoting condos, apartments, pre-construction projects, agriculture projects, retirement living projects, beach projects, etc etc.
Don’t believe them! Most of these projects are way over prices and there is no way they can guarantee an ROI especially in the current economic climate. Until you have lived in Panama for awhile, and followed real estate price trends, you don’t know what a good price is.
COVID AFFECTS RENTALS PRICES TOO!
Rental prices will come down too! Because of Covid-19 there could be fewer people moving to Panama so rental inventory will increase and that will cause rental prices to go down in many areas.
Because the borders have been closed no new potential tenants could come in to Panama.
Panama has had a strict quarantine. No one could not travel outside of the province where they live. Plus, we were only allowed to leave our house three times a week for two hours to buy groceries. Since March there have been very few people moving or renting in Panama.
Some people left Panama on humanitarian flights which left even more rentals vacant.
AirBnb and VRBO properties cater to tourist coming to Panama for a week or two. But no tourists could come to Panama, so their properties have been sitting vacant too.
Alfredo Aleman of Grupo Perlas said, “ short term rentals are a great alternative to hotels with a lot of value and a differentiated service. I believe they will remain an important factor for real estate development in the mid and long term.”
But the question still remains, are there more AirBnb properties than there is the demand for? Only time will tell if the inventory can be absorbed post-Covid.
Once again, Directors of the Panamanian Association of Real Estate Brokers and Developers (Acobir) estimate that in the context of the health crisis resulting from the Covid-19 outbreak, sales or rental prices in the local market could contract between 20% and 25%.
Snowbirds from Canada typically spend December through April in Panama. Because of Covid, property managers along the Gold Coast (Coronado area ) are anticipating fewer people will come. There could be some good deals for vacation rentals this year. There is a strong draw to the year round warm weather along Panama coasts.
It’s a great time to come to Panama! You’ll find a good selection of great rentals at fantastic prices.
Panama Relocation Tours gets daily emails asking about rentals and real estate. There seems to be a growing trend to get a property that has some land for “social distancing” and to grow a garden. By the way, we don’t sell real estate or rent properties in Panama.
Some people from our Tours who were living in a condo or apartment in Panama have opted to relocate to a single family house so they have a yard and maybe a pool.
Hopefully the Covid-19 virus slows down. If you don’t like being quarantined where you live now, it’s time to start looking for the kind of place where you would not mind living if there is another lockdown.
There seems to be a trend to get away from living in a high density area to a place with more “elbow room”.
A lot more people are working from home instead of going in to an office so there have been requests for properties that have a home office.
Because of the violent protests in the United States some are ready to move to Panama as soon as the borders are open in Panama. They will have plenty of rentals to select from and at good prices! Our Online Panama Relocation Guide provides all the information needed to relocate to Panama as soon as possible. Plus we offer ongoing support for those who purchase the Online Panama Relocation Guide or who come on a Panama Relocation Tour.
THERE IS HOPE
Panama has a very diversified economy with income from many different courses. Panama’s economy will bounce back much faster than other countries. The Panama Canal and other industries have has continued to operate throughout this pandemic.
Panama will continue to attract retirees, entrepreneurs and those looking for business opportunities.
As Jose Manuel Bern, a leading developer and highly respected businessman, recently said, ” As Panama is the only country with only four and a half million people, but it’s really a gateway to over 600 million inhabitants in the Latin American subcontinent. So when you think about it, if you want to have a distribution spot for goods going to Latin America or for services, Panama is a very good location and that has been proven by the installation of several multinational companies in the last years. Here in Panama, companies like Proctor and Gamble who are oriented towards personal hygiene goods. I think there’s going to continue to do very well. Companies like Nestle that are food oriented companies are also going to do very well.said in a recent webinar, Panama is the only country with only four and a half million people, but it’s really a gateway to over 600 million inhabitants in the Latin American subcontinent. So when you think about it, if you want to have a distribution spot for goods going to Latin America or for services, Panama is a very good location and that has been proven by the installation of several multinational companies in the last years. Here in Panama, companies like Proctor and Gamble who are oriented towards personal hygiene goods. I think there’s going to continue to do very well. Companies like Nestle that are food oriented companies are also going to do very well.”
The President of the Republic, Laurentino Cortizo, acknowledged that 2020 will be “complicated and difficult” for the country’s economy and was optimistic for what is coming next year.
“We are hopeful – not only because of the projections of international organizations, but because of the information handled by the Ministry of Economy and Finance – that by 2021 we will have a more robust economy,” said President Cortizo.
LEARN MORE ABOUT MOVING TO PANAMA
If you’re ready to relocate to Panama, check out our Online Panama Relocation Guide. It contains all the information you need to move to Panama the EASY way plus our rolodex of reliable and honest contacts for immigration lawyers, real estate agents, where to buy health insurance, how to get your pets to Panama and much more.
The Online Panama Relocation Guide is updated monthly. Plus you’ll get all the support you need when you’re ready to relocate to Panama.