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| The Undercover Investor: Emerging Real Estate Markets in Panama |
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| Written by Matt Landau | |||||
| Tuesday, July 01 2008 | |||||
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Roughly ten years ago, an investor I know came to Panama and liked what he saw. He liked it so much that he purchased a piece of beachfront real estate in a little town called Gorgona for $25,000, roughly the size of a football field. He just recently sold the property to a hungry developer for just over $400,000.
Another investor I know picked up a building in the historic district of Casco Viejo, five years ago, for $200,00 and just recently sold it for over $1,000,000. OK, so you can't turn back the clock and buy real estate in Panama in years past, but today's most lucrative investors are doing the next best thing and going undercover. Just two years ago, the majority of investors flocking to Panama's shores were drawn to two places: Panama City, for it's relatively inexpensive high-rise condominiums and Boquete, for it's cool climate and comparatively lower cost of living. The two hotspots turned up in business magazines, real estate fairs, and TV shows as new, attractive, and exciting alternatives to investment or retirement abroad. But while many of today's visitors to Panama still feel as if they're in on a secret the rest of the investment world has yet to discover, recent statistics have revealed that soaring real estate prices and potential oversupply in such hotspots (as well as others like Bocas del Toro, Cocle, and Colon provinces) could be threatening the very premise that drew buyers there in the first place. So what's the savvy investor to do? Try searching the farther corners of Panama, to the most remote spots imaginable, and reaping the same rewards that characterized the lucrative times of Panama real estate's yesteryears. Some of the new emerging investment targets drawing attention are naturally endowed, such as the rural region between Penonome and La Pintada, a bundle of communities less than two hours from Panama City. The cool climate is not the only thing bringing investors, as the arrival of Petaquilla Copper Ltd. and their estimated $3.5 billion mining project started to raise eyebrows upon announcement. Similarly, the little-known coastal community of Puerto Armuelles in Chiriqui Province is currently undergoing a pipeline project linking crude oil between Bocas del Toro's Caribbean waters and its counter coast to the south: an obvious impetus for real estate price increases, where ocean views, surrounded by teeming forest is not too much to ask. But natural resources and valuable positioning aren't the only frontier characteristics forward-thinking investors are considering. Take the long-forgotten region of Boca Chica on Chiriqui's Pacific Coast, now being made more accessible by roadways and a nearby international airport. Or perhaps the communities within earshot of Santiago, Panama's center-most capital, like Santa Fe and Puerto Mutis: becoming clear targets in the crosshairs of confident investors for their ease of access and low-impact living. Another, perhaps more famous, frontier market in Panama's emerging niche real estate scene is the Los Santos town of Pedasi, home to Playa Venado surf beach as well as a number of unknown, albeit headline-worthy tourist attractions such as sport fishing, rainforests, and artisans. Unlike the widely-hyped markets of Panama City and Boquete, emerging markets in Panama pose radically higher returns on investment to buyers; however with this change in scenery also comes noteworthy risk. Rural markets like Pedasi, for example, require significantly more inside information and local connections to score big on an investment, not to mention extra due diligence effort seeing as though the real estate market is so new. Because certain real estate and tourism infrastructure is not yet established, buyers must take into account politics, accessibility, local wages and labor: not necessarily concerns in more developed areas. Investors in Panama's frontier markets are careful too not to set strict timetables for success in, seeing as though much of the traditional ebb and flow factors of real estate (banks, commercial stores, real estate agencies, incoming flights...etc) as well as second-tier buyers don't necessarily yet exist. While current investors are experiencing generous returns, newcomers are often surprised at the patience required. One other significant factor that limits the players in frontier markets in Panama is the high transaction costs that are associated with getting in at ground level. In most of the aforementioned regions, most of what's available to buy is large chunks of land - not exactly what everyone wants to purchase and retire on. So this process, from acquisition to flip (or lotification) is limited in its willing participants. In Panama, smart investors know these risk profiles well and are more than happy to cope because they (many of whom have come from Costa Rica) have faith and confidence in Panama's long term stability and growth. Hunting for returns upward of 10% has become difficult in Panama's known destinations, a fact that's led investors into the depths of Panama's interior and along its jagged coasts, in search of the next boom town.
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| Last Updated ( Sunday, August 24 2008 ) | |||||
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