Panama Real Estate: One Big Hoax
The amount of speculation driving the real estate market in Panama City is breathtaking. Literally, I sometimes gag when I hear the kind of numbers floating around this place. The amount of money being spent is unfathomable, and for what? No one’s actually getting anything? These are all condos that won’t be built for months, sometimes even years! I can honestly say that I’ve never seen, maybe with exception of the Beanie Baby craze, so many people putting down money and reserving a product that doesn’t yet exist.
Someone interested in Panama real estate once asked me the following question—a question that represents this publicity and over-fantasizing hype to the tee: “Can I flip a beach condo without even purchasing it?” Are you on crack?
Being a business person, I can’t help but evaluate the situation in Panama City real estate to that of a young company: one that appears to be growing too fast for its own good:
1. Taking on projects that are too big: In the process of approving new high-rises around every corner, MIVI will inevitably lose meticulousness and standards for construction. With the Canal expansion too, in addition to the bay clean up and sanitary/road work, safety and environmental issues in Panama City real estate will take back seats, quality will be sacrificed, and mistakes will be made. One serious construction disaster could be all she wrote.
2. Running out of capital: The kind of growth we’re seeing in Panama City right now is devouring money the way giant island mice devour seabird chicks. As we have seen with some projects, cash has already run out. Developers are, as a result, looking to cut corners and for the most part it comes at the investors’ expense.
3. Construction supplies have become hot commodities: If you’ve noticed, there’s a crane on just about every block in Panama City. Each of these projects is eating up cement, steel, and workers to the point that it’s becoming hard to obtain them. As no surprise, you’re starting to see price gauging for materials and rental equipment.
4. Customer complaints: You can read about a handful of investors who have been screwed by developers, but those are just the ones who’ve written about it. As in a company, negative feedback needs to be addressed, however in the midst of this Panama City boom, there is such crazy demand that unhappy clients are indifferently kicked to the curb because there’s someone who’ll happily pay one spot behind them in line.
5. Losing touch with the world outside of Panama: It has already started: developers, sellers, buyers, and agents already getting so caught up in the hype, they forget that indeed, Panama is one of several other countries in this continent. It’s not a private bubble-like Wonderland independent of the functioning world outside. They’re not noticing that the real estate prices have risen here faster than any other country in the region and based on what? Renderings of new condos and intangible speculation?
6. No One Lives Here Anymore. It’s Too Crowded: There’s a serious problem when the majority of the investors in a culture-oriented market are there solely for the money. In order for Panama City real estate to thrive, there cannot be empty units all year long. You’ve got to have people living in those apartments: people who can help build a community! Relying too heavily on such tunnel-vision investors who are, in essence, pricing locals out of their neighborhoods, can backfire and instead of a core community of happy expats and locals, you’re left with blocks of dead-empty apartment buildings.
The founder of Starbucks, Howard Schultz says that to be successful, a company must “invest ahead of the growth curve.” Meaning, that in order to build a sustainable enterprise, one which can handle growth, you must first build a solid foundation: a foundation of the right mentality, the right infrastructure, the right vision…etc. When you apply this to Panama, the parallels are haunting and familiar. Can you build a skyline of 100-story towers without the right metaphorical foundation in place or will everything topple like an oversized set of dominoes?
There are plenty of theories that buying pre-construction in Panama City can still be extremely lucrative, which it probably can. And I do agree too that there will be a lot of baby-boomers who’ll bring a lot of money to this isthmus. But when people get greedy and baby-boomers turn into funeral-boomers what’ll be left behind?
A friend recently referred me to a quote he heard made by a large homebuilder from the USA. “Panama City may become known as the biggest real estate scam in modern history”. And he’s right. Panama City, if it continues at this extraordinary reckless and uncontrolled rate, could at some point implode, bringing down with it all the money, glitz and fame. But by that point, all the smart people will be long gone.
Matt Landau is a travel writer and Panama real estate skeptic living in Panama City, Panama. His website, http://www.thepanamareport.com, details what he considers to be the harsh reality that is investing in Panama. Check it out, then decide for yourself.
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Comments on Panama Real Estate: One Big Hoax
Great article. Do you have any more on Panama? My wife and I are thinking about considering investmetnt there, but need more good info like this…
Thanks for this insight into Panama. I am planning a trip to visit a few countries in Latin America this coming year. My goal is to locate a few good investments for a client. I may end up spending less time in that region than I had planned on initially if what you have said in your post is the case.
Well if you really want to know more regarding Panama; don’t go-by a comment. Do research on your-own, visit Panama and deside whether or not it’s the place for your new home or business. Go to thepanamareport website and there will be someone to help you. A neutral person;perhaps. I’ve visit Panama plenty of times and I think I can make something productive out of my investment. If you have some kind of skill that Panama lacks, well thats were the invester comes in.
It is the most stupid article I’ve ever read.Go and get some knowledge first before writing things you have no idea about.
Jonathon – thanks for the suggestion – good advice.
rino – Ummmm thanks
Matt actually lives in Panama city and is pretty plugged in to what is going on down there. See Spain for a preview of Panama:
Spanish Property Market collapse
A friend told me that Malta (the island in the Mediterranean) is a very beautiful place, and that ugly womens are an extinct species there. Having said this, I can tell Panama is not the most beautiful country in the world… and not the more organized either. Panama is a tough country, but I love it. It`s small but tasteful, and if you know where to go you will find heaven. Here like everywhere else, a little bit of courage, optimism, patience, humble and intelligence will bring to you your own kingdom.
For those who need some facts or comments about the country to see it it’s the real thing, here I paste a few:
Before the canal was built, Panama’s strategic location, at the wasp waist of the Americas, and the shortest landlink between the planet’s two largest oceans, made it one of the great crossroads of the world. Since the XV century the greatest empires in the western hemisphere, Spain and later the United States of America, had always interest in Panama due to it’s strategic location.
Panama has the biggest commercial area of the western hemisphere, The Colon Free Trade Zone located in the city of Colón on the Atlantic. It is second only to Hong Kong as the largest free trade zone in the world.
Panama is ranked as the 11th best place to “do business” out of the 31 countries in the hemisphere. Panama ranks first in the hemisphere in two areas – Getting Credit and Trading Across Borders (ease of importing and exporting goods).
Albania and Panama are the top two locations for long term property investment according to the latest research from international analysts.
Panama’s economic growth has been around 11% year on year and property values have been growing at a recorded and sustained 25% per year over the same period, the DSR research found. For 2008 the growth projection is about 8 to 9.5%.
Panama is currently growing into one of the world’s main financial and banking centres, with good communications and first class world amenities. Panama’s dollar based economy is sustained largely by the Colon Free Trade Zone and the Canal, as well as services from the operation of the two including flagship registry and canal tolls.
The canal expansion will add new impetus to Panama’s economic growth, which is likely to remain strong between now and its completion, making Panama excellent for long-term property investment, predicted international analysts.
Over half of the country is covered in dense, tropical rainforest. Panama’s forests contain more species than any other country in North and Central America. Panama serves as a migratory path for birds traversing the continents of North and South America. Although Panama is almost the size of Bavaria, it hosts more than 900 bird species – that’s more than all the bird species registered in the United States and Canada combined.
About three million years ago, the emergence of the Isthmus separated the marine life of the Atlantic and Pacific Ocean and formed a land bridge that allowed the previously distinct floras and faunas of North and South America to mix. This unique history offers opportunities for the study of evolutionary and ecological processes unequaled anywhere else in the world.
Panama is the youngest area of land in the Americas, having emerged from the oceans approximately 3 to 10 million years ago. In biological terms, the fact that Panama linked the landmasses of the two Americas helps explain its incredible biodiversity. Despite its small size (75,900 sq. km. to be exact) Panama is home to more than 10,000 varieties of plants and more than 1,000 species of birds. Panama City is the only major Latin American city with a rainforest that is only minutes from downtown.
A little bit more:
Examples of foreign entrepreneurs in Panama:
Attracted to Panama for its strategic location between North and South America, its proximity to the United States, good infrastructure and a favorable climate for working year round, ST Aerospace established the aerospace engineering firm, Panama Aerospace Engineering Inc., at Howard air base in the old Canal Zone, and this year began to provide maintenance, repair and reconditioning services for Copa’s fleet of Boeing 737s. The specialized company hopes to expand its client base to provide services to airlines that operate in North, South and Central America, and the Caribbean, and can offer maintenance to wide body aircraft from Airbus, Embraer and McDonnell Douglas
Balboa, located on the Pacific Ocean and operated by Panama Ports Company (PPC), a member of the Hong Kong based Hutchison Port Holdings, in June 2007 became the first port in Panama to receive a post-Panamax ship, the Maersk Seletar that is part of the fleet of Danish shipping giant Maersk. Now, PPC has a weekly post-Panamax service, and soon Maersk will launch a second weekly post-Panamax route from Asia, with a stopover in Balboa.
The Panamanian ports moved 2.6 millions of TEU (20 foot long container unit) between January and December of 2006, a 6.1% more than during the same period in 2005. The major growth was reported for the ports of Cristobal (39.9%) in the Atlantic and Balboa (94.2%) in the Pacific. For the case of Balboa, the expansion is due to the fact that Maersk and the APL/MOL Alliance, increased their transfer cargo and railway substantially last year.
Call centers are proliferating, taking advantage of Panama’s infrastructure, which includes five fiber optic networks. Computer giant Dell and heavy equipment manufacturer Caterpillar have set up call centers in recent years. Dell has 2,000 employees at the Howard air base, who provide technical support and sales in English and Spanish. The call center industry continues to grow in Panama, providing employment to more than 15,000 people.
Panama has the potential to develop its strategic location, like Singapore has done, and create a world class logistical and transshipment center that offers the most sophisticated communications services, petroleum products production and biotechnology industries. The expansion of the canal will attract the eye of the international business community. With this, the country will have the opportunity to give new zeal to its service economy, creating a new cluster of services that will earn value with the location offered by the Canal.
My last post:
Panama also has strong influences from other global locations; Spain, Africa, the Caribbean, China, East India, and Europe. Panama City is the only Central American city that actually has a skyline, and is incredibly cosmopolitan and outward looking.
The increase in services and the current proliferation of new businesses in Panama reflects the new vision that is taking root among investors. The most important resource is not the Canal, but rather Panama’s strategic position.
Panama is expanding its services as a platform for distribution and transportation, which includes expanding its port and railroad installations. This expansion will materialize between now and 2014, in order to provide services to ships with a huge cargo capacity
Panama has the biggest commercial area of the western hemisphere, The Colon Free Trade Zone located in the city of Colón on the Atlantic. It is second only to Hong Kong as the largest free trade zone in the world.
The Manzanillo International Terminal in Colón, on the Atlantic, is the largest container transshipment terminal in Latin America, and was expanded to handle the larger container ships.
Complementing the Canal, and with the intention of competing with the US intermodal route, the Panama Canal Railway Company has expanded its capacity since the privatization of the railroad in 1998. Panama offers a unique opportunity to transport goods by rail between the two oceans in less than four hours. The trans-isthmus railroad handles some 500,000 container operations each year, and its continual expansion will allow it to reach 750,000 and up to 32 daily railroad routes within a few years.
And I didn’t even mention the word “realstate”… because you know what? I don’t care about it. Realstate is a by-product of the above!
If you need some advice to where and how invest in Panama, send me a mail: ianmartinez@grupomg.net
or visit my website: http://www.grupomg.net
Gladly I will help you without any compromise. I do it just for Panama.
I have condos avaialble for resale some are preconstruction, other are presently available, if you deal with resale of such product pleae cointact me for further details
Thanks
Panama is what you make of it! The Banking system is above all the world,yes they are USA friendly and may disclose your banking issues down the line(not likely since it is in the constitution) but if you have nothing to hide ..What is the issue? yet as a proud,Democratic country…with its faults..(God knows the USA has no Gov. corruption!!!) One can feel secure with the freedom of the country something! We have lost here! If you whant to be a Madoff..victim this may be the place for you..all the Gringo players are here..don’t deal with them.. deal with a reputable Panamanian builder..one with a proud latin reputation to up keep..there are no Angels! I been there..still there..plan on staying there…do the homework people..stop putting down a land of oppotunity..a place like the USA use to be!!
The hype about Panama created by non-Panamanians is the hoax. Matt Landau has not lived in Panama 40 years, and old timers will tell you that land in downtown Via Espana was sold at $0.25 a square meter 70 years ago. Panama is a hoax for house-flippers who now deal with well deserved losses. Interest from Cuban exiles in the 60s, Central Americans and Venezuelans in the 70s, US citizens in the 90s and Europeans in early XXI century, will maintain the Panama real estate market active.
.-= MyPanamalawyer´s last blog ..Singapore aerospace companies reach Americas through Panama =-.
Ian is like so obviously a panamanian….for example, it’s “women” not “womens”… the way you mention Malta just to sound foreign is pitiful.