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am testing the comment field here

I think you ignore the reality of "replacement costs" for high-rise condos. Construction costs never go down and that's 60-70% of the cost. Everyone thought there would be a fire-sale in Miami with huge price cuts - there wasn't. Instead a few groups put together billion dollar buyout funds and bought hundreds of units at their "replacement cost," or the lowest someone else could create new units for.

While I don't know enough about the market conditions there - I agree that the majority of the units are just too expensive. We are seeing incredible demand in US cities for units priced under $300 PSF or $3,000 M2. The only way to achieve this is with a reduction in construction costs, which is very difficult.

The Panama City condo market has has been running on fumes for a while now. This is not news to anyone but the most uninformed and naieve. Every building boom has it's bust. However, opportunities can still be found, they're just not obvious to a herd mentality. They don't come with glossy brochures and polished sales staff. Investors may need to take a longer time horizon rather than expecting to flip a contract for a non-existing highrise. For example, Santiago is admittedly is not Panama City, but it has lot's of room to grow. Smaller cities offer slower, more relaxed atmosphere that attract the retiree crowd and nature lovers. The surrounding rural areas offer breathtaking natural beauty, at prices from another era. Perhaps Panama is trending away from the urban condo toward the rural ranchito. Time will tell.

There are other areas to consider when investing in Panama. We live in the mountains about 60 minutes from Panama City and it is as close to paradise as you can get. Our area is called Altos del Maria. Take a look at our website and links: www.PanamaHouse.Info

Your numbers are way off regarding pricing and new construction. Average ppsm is more like 2500. You're just looking at the high end of Punta Pacifica or Costa del Este. San fran, where I would say 30%-40% of the new construction is, is about 1600psm. Ave Balboa and Punta Pacifica are more like $3000-3500 tops, but they don’t comprise more than 20% of the total that’s available

Investors are putting down 30% real money, as opposed to the market in the US where buyers were getting as much as 105% financing so to compare the two is a bit silly.

TO imply that the US is fueling this boom is naïve. What about Russia, Canada, and south America ( with Venezuela in particular )?

Do you realize how many people are actually moving to panama and the mega projects that are under way? Do you realize the lack of new housing that exists, or at least failed to exist before two years ago.

Although much of your assessment is somewhat accurate one must realize that it is important to compare apples to apples and not New York or Los Angeles to Panama City. You can not purchase a unit in either city which would even slightly resemble anything you may be able to buy in Panama. In 99% of US purchases tax abatements are nowhere near 20 years although some do approach 15 years especially in NY, you will, however, pay $639K for a 900 sq. ft. 2 bedrooms 1 ½ baths primitive condo (and that’s in Brooklyn). It is not accurate to compare Miami to Panama City, many will tell you ‘why’, I will not even go into that. You are correct about an overwhelming number of speculators, but they are necessary for any type of healthy RE Market place. I also will not go into issues such as desired profit margin by a developer in Panama (100%) or lack of professional brokers or banking issues, because I believe it is a learning curve.
I do not believe that future of Panamanian real estate market is up to the American Buyer but rather someone from so many different places who is looking for an opportunity in a more or less stable society. Personally, I think it is an incredible country with tremendous future growth potential in many different sectors, certainly including real estate. Infrastructure issues do need to be solved and I do believe they will be sooner or later, hopefully sooner.
I do respect your point of view, we in Panama need that.
(I have been a real estate developer, investor, consultant, broker and property manager for number of major companies, including my own, all over the US, including 17 years in New York City, for the last 26 years of my life)

I enjoyed reading the article and agree with the author on the major points. As the global economy starts to slow down you will get less international buyers for the condo market in Panama. On top of that Panama has to compete with many other countries that have a lower cost of living. Panamanians are not buying-up the higher end condos (with very few exceptions). I have been out of Panama for many years but if their is a tight financial market in Panama as in the US and as is starting to happen in Europe, this will make it more difficult to sell the existing (and under construction) supply of apartments. I agree that the replacement cost for the apartments have gone up given the higher level of prices (inflation). I also believe that their will be a market correction, speculators will not be able to meet their dues and serious buyers can afford to wait.

Having spent the last year looking at Panama city condos I have to agree with your most of your remarks. One thing that will excaserbate the problem is the lack of a MLS type listing service. There is no easy way to list and market used condos in Panama city. Once the resellers and speculators start to stampede people are going to get run over heading for the exits. This will happen. Panama city does not live in a vacumn from the rest of the deflating world.

Finally, an excellent analysis of the Panama City high-rise house of cards. This market is downtown Miami 2005. When taxi drivers and strippers start pimping condos, you know the end is near. The local brokers are always the first to know, and Quesada says the Panama brokers are already aware this market is crumbling fast. I worked for one of these foreign developers who is building arguably the most garish high-rise in the Western Hemisphere. There was absolutely no interest from U.S. buyers for $400,000, 700-square-foot, 1 bedroom high-rise condos with no balconies (brilliant!) in a city 6-8 hours from most major U.S. metropolitan areas. The only buyers were gullible Europeans taking advantage of the exchange rate and thinking they would have guaranteed rental income for the foreseeable future and a shoebox unit they could flip for 30-50% upside upon delivery in two years. Dream on. The developers are sticking to mandatory price increases, so potential buyers will have some forced motivation to pull the trigger. But what good are mandatory price increases when buyers start to walk away from their deposits, foreclosures spike and the resale market is flooded with 20,000 unsold units? Not sure? Come on up to Miami and find out for yourself. Bookmark this article. The Panama high-rise market will implode by mid to late 2009. Those who think otherwise, just keep drinking the Kool-Aid and telling yourself Panama is somehow immune to the same cyclical factors that torched the real estate markets in California, Florida, Arizona, Nevada, Spain, Ireland, Estonia, Latvia, etc.

I think what everyone can agree on here (or maybe not) is that discussion about this topic is better than everyone holding their breath. There are obviously two arguments here: the developers/agents who stand by this boom and the skeptics/investors who are doubting it. Either way, I think everyone is better educated by hearing both sides of the gun.

I have been wondering for a while, how does one make money if one knows the price of condos is going to go down?

With stocks it's easy, you just short them or buy put options. What does one do with condos?

Excellent post. Given the events of the last two weeks, any overbuilt market will be in decline sooner rather than later.

There is likely no worse investment in this market than high rise condominiums. While the US credit markets have been slowly coming to a complete freeze for the last year, European credit markets are going through the same process in a matter of weeks. Emerging markets will follow suit, especially an overbuilt, highly speculative one that is relying entirely on U.S. and European investors.

Is there any reliable indication of what these units will rent for? Is there any demand for these units as rental properties at all? Offhand, i can't think of any other way to determine a price floor at this point, especially if an investor will have to hold onto them for a few years while demand recovers.

Matt is eagerly awaiting for you in Panama when are you returning, is there any reason you dont go back to Panama

Peter

Don't say all that! there will be no burst! market will continue growing!
LOL
I'm being sarcastic obviously.

itsallcompletelyknackered.

I like Panama. What is everyone's problem on here! So, it is not developed. Big deal. What do you expect? If you don't like then go back to whence you came. Stop posting nonsense and start talking sense.

Thank you.