Distressed in Panama

I’m speaking at International Living’s Live and Invest in Panama Conference. One of my presentations is an overview of the real estate market in Panama. It’s not a pretty picture…

From 2004-2007 (Panama’s property boom years) around half the buyers of prime waterfront condos came from the U.S. In late 2004 and early 2005, they were paying as little as $1,000 a square meter. Then property prices rose sharply, with developers asking $3,500 a square meter for similar units in 2007.

At those prices, investor buyers started to look elsewhere. And second-home buyers were hit by a tightening of lending policies by banks in Panama, changes in visa laws, and the economic slowdown in the U.S. The stream of U.S. buyers dried up.

But developers kept building…and “official” property prices carried on rising. Today we have a shortage of buyers…and a glut of condos. And we have buyers who bought a pre-construction unit three or four years ago, and who need to find 70% of the purchase price to close, but who no longer have access to those funds. It all leads to one thing: fire sales.

So, my message to conference attendees is: Don’t buy in Panama for short-term appreciation. Don’t buy expecting double-digit net rental yields. Don’t buy pre-construction whatever you do…there’s always a risk with pre-construction, even in a rising market. In a stagnant market, pre-construction is not a risk worth taking.

But Panama still makes sense as a place to live. If you plan on relocating or spending a chunk of the year here long-term, and you want a home base, then look for a fire sale.

I found one through a broker we work with. This condo is less than four years old. It has 16 years of property tax exemption left. It’s on Avenida Balboa, one of the best waterfront locations in the city. It’s an ocean-view unit of 104 square meters.

It’s a one-bed, one and a half bath condo, with an open-plan kitchen and living space. It’s close to shopping, restaurants, cafes, nightclubs, and the financial district. It’s fully furnished, complete with appliances…and listed at $195,000.

Pre-construction buyers paid around $155,000 for these condos back in early 2005 (and they didn’t come furnished, or with air conditioners, water heaters, lighting fixtures, or appliances). At the peak, they were selling for up to $280,000. This unit is the lowest-priced condo of its size I’ve seen in this building.

If Panama is in your sights as a retirement or relocation destination…or perhaps you simply want a bolt hole to escape the cold winters back home…then take your time when you buy here. Don’t rush in. Wait for the right property, at the right price, to come along. The savings will make the wait worthwhile.

Editor’s note: Everyone knows the world is in crisis. But there are people who know how to turn this to their advantage…people like Margaret Summerfield (of Pathfinder—IL’s preferred real estate advertiser). There’s rarely been a better time to find good deals and the opportunities to get in on them at below-market value. This June in Toronto, Canada, Margaret and a hand-picked panel of the world’s foremost real estate experts are convening for the International Real Estate Investment Forum 2011, where they’ll reveal some of the world’s most potentially lucrative deals to a select group of attendees. Check out the schedule.