It is predicted that in Panama due to the health and economic crisis the inventory of available properties will increase, a situation that will put downward pressure on property prices and rents, affecting mainly the office and commercial space segment.
Directors of the Panamanian Association of Real Estate Brokers and Developers (Acobir) estimate that in the context of the health crisis resulting from the covid-19 outbreak, sales or rental prices in the local market could contract between 20% and 25%.
In Panama construction and real estate companies have resumed discussions with the government to update the regulations on the Horizontal Property Law that has been in place since 2010.
From a statement issued by the Ministry of Housing:
Authorities at the Ministry of Housing and Territorial Ordering (Miviot) and the construction guilds are analyzing proposals submitted for the regulation of the Horizontal Property Law.
Between 60 and 90 procedures in 19 institutions must be undertaken by developers in order to obtain the necessary permits to build a real estate project.
Companies in the sector are complaining that the procedures which used to be completed within a maximum period of two years, are now taking up to four years. Residential projects, whether apartment towers or horizontal developments, are those which suffer the most from bureaucracy, they must undergo several steps in various institutions, ranging from the Ministry of Housing and Land Management to the Fire Department, passing through the corresponding mayoral office, to name a few.
In Panama entrepreneurs are anticipating increases of between 6% and 12% in home prices in the coming months.
The increase in the prices of materials such as concrete, gray cement, sand and stone, among others, is one of the factors that is pushing up the prices of homes, both those for social interest as those aimed at the middle and upper classes.
20 years ago for every apartment for sale in a high rise building there were 9 houses on offer, whereas today the ratio is 50-50.
The construction of residential buildings in the city has been driven by the increased purchasing power of immigrants and the integration of the underground transport system.
Nowadays people prefer to buy a home that is close to the areas where they are underground stations.
In recent years the percentage of taxes paid by promoters compared to the final cost of a home rose from 1.3% to 2.7%.
The price of building materials, labor and land values are not the only factors that influence the cost of housing, taxes collected for construction also affect the end buyers.
It is for this reason that the construction industry has shown its opposition to the tax increase that has been implemented on residential projects, since developers are the ones who bear the costs of infrastructure for sanitation and roads even when the work has been completely finished.
The lack of government planning for the water supply is affecting the development of real estate projects.
According to Guillermo E. Quijano Jr, president of Grupo Unesa, real estate development in the country depends on whether there are water services in the area where you want to build. "To be able to say that development will move towards the east or west or north sector of the city ...
The increase of more than 5% in the cost of construction and the revaluation of land in the capital, has made the social housing segment unprofitable for builders.
"In its projections for 2013, the National Housing Council (Convivienda) a guild that brings together the leading companies involved in the construction of family units will build 8,206 dwellings (houses and apartments) with a total investment of approximately $800 million.
The Panamanian group of companies, Convivienda projects sales in 2012 amounting to $665 million with the delivery of 7,429 homes.
The director of the national council of housing developers, explained that the with the Preferred Interest Act raising the ceiling on the value of homes which can benefit to $120,000 will help... "the middle class above all, because there are more chances to get a house for a longer period", reported Panamaamerica.com.pa
The crisis in Europe, North America and Venezuela is dampening the dynamism in the real estate sector whose sales depend heavily on these markets.
In the first six months of 2011, of the total amount of real estate transactions only 2% related to the sale of luxury real estate projects.
The executive director of the National Housing Promoters (Convivienda), Elisa Suarez Gomez, said that building of luxury residences has been reduced in the first half of the year. "... In luxury segments, those costing upwards of $350,000, sales depend heavily on the foreign market, so the crisis in European countries, Canada and Venezuela, has made for significant changes in the sales process", said the director to Panamaamerica.com.pa
The region west of Panama City has become a focus for new residential and commercial investment projects.
The area used to attract social-interest housing projects but now it is difficult to find developments costing less than $30,000 and many units' price tags are more than $100,000 with some as much as $200,000.
Melissa Novoa, writing for Martesfinanciero.com, comments that, "real estate developers agree that a series of infrastructure improvements including a four-lane highway, a new route into the capital and no toll fees have been significant factors in their decision to invest in the area".