economy

Matt Landau's The Panama Report website has published a special report that shows something very unusual in the Panamanian real estate business --- prices declining due to low demand. The sampling upon which he relies, however, may exaggerate a trend that only applies to part of the market. Still, it's something of a landmark in local business journalism.

Landau looked primarily at upscale residential properties, including the 10 most expensive projects in Panama City, plus properties in the beach communities in Coronado and San Carlos, the mountain communities in the Boqueteand El Volcan area, and the Bocas del Toro archipelago. Data collected between June and September of 2008, and in April and May of this year, were compared. The study focuses on "foreigner-interest real estate" and doesn't get into resales.

The steepest price declines were found in Bocas. Prices in Panama City's upscale towers were still going up, a phenomenon that Landau described as "backwardness." In the Chiriqui highlands, lot prices were up but home and condo prices were down. In Coronado and San Carlos, home, condo and lot prices were down and some of the developers were converting condo projects already underway to have more and smaller units within the price range that such buyers as there are will pay.

There is a tradition among Panamanians with real estate holdings to maintain the prices they want through market downturns, sometimes for years, until they can find a buyer at their stated price. And then there is one sector of foreign investors, the money launderers, who notoriously don't much care if their property gets sold.

According to sources in the real estate and allied industries, there have been hardly any sales in Panama's upscale residential towers, either newly finished or under construction, since last fall. The speculation in such circles is how many condo flippers are going to walk away from their deposits due to the slow market.

Much of the decline in demand is driven by Americans who would like to move down here but can't sell their homes in the USA for what they believe they should get. There are still Canadian, European and South American buyers looking for upscale properties, however. The problem for some speculators, however, is that these people just don't tend to believe that an apartment in chaotic Panama City should cost more than an equivalent unit in Miami.