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%.
Businessmen are looking to districts such as Arraiján and La Chorrera, as the improved connectivity brought by the Fourth Bridge over the Canal and Metro Line 3 will bring a wide range of business opportunities.
These districts, in which considerable growth is expected in the next few years, currently remain among the main areas attracting investment in the construction sector, since according to figures from the Comptroller's Office, between January and July of this year, the costs of new works, additions and repairs reported in La Chorrera and Arraiján, totaled $79 million and $58 million, respectively.
President Cortizo announced the implementation of a plan that contemplates expanding the preferential interest rate for homes with prices of up to $180,000.
During his inauguration, Laurentino Cortizo announced that he will implement a plan to reactivate the construction industry, which includes the extension of the preferential interest in different ranges for housing up to $180,000, the presentation of a real estate leasing bill and exemption from transfer tax for the current inventory of housing, among other actions.
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 March this year the balance of the loan portfolio in the construction sector amounted to $4.692 billion, 25% more than in March 2014.
Of the total amount loaned by banks for construction activities, 32% was allocated to housing construction, with a balance of $1.526 million, followed by financing for stores, with 18% of the portfolio ($835 million), and other infrastructure, with 12% ($564 million).
The private sector has identified several government actions that are undermining the foundations and underpinnings of the Panamanian economic model which is based primarily on local and foreign private investment.
From a statement issued by the National Council of Private Enterprise (Conep):
The most dynamic sector of the Panamanian economy is hamstrung by bureaucrats: before starting the construction of a dwelling, 95 procedures must be carried out in 19 state institutions.
Industry representatives argue that the procedures for approval of plans and building permits are slow and cumbersome, because some state institutions still perform these processes manually without digital tools to streamline them.
Claims have been made that the time it takes to undertake the procedures needed to start up a business stated in the Doing Business report are much longer in reality.
With the aim of improving competitiveness, private sector representatives have asked the Panamanian government to cut the amount of red tape, as some of the processes can take up to a year. This discourages foreign investment and above all increases costs for industry.
In the first half of 2014 housing construction grew by 30% and 27% for apartment buildings, compared to the same period last year.
The balance between the demand for houses and apartments is very equal, depending on the geographical area; generally there are more apartments in the capital and more houses in the countryside.
Elisa Suarez Gomez, executive director of the National Board of Housing Promoters told Panamaamerica.com.pa that "...
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.
The balance of loans granted by the banking system to the construction sector increased from $2.598 billion in April 2012 to $3.830 billion in the same month this year.
Loans for infrastructure were the only ones which showed a reduction in the period in question, going from $593 million to $377 million. Loans for housing, businesses and other categories showed increases.
In 2013, homes priced over $120,000 accounted for 20% of all units, while in 2012 the figure was 12%.
The data were revealed by Elisa Suarez, Executive Director of the National Housing Developers Council (Convivienda).
The developers of these projects expect that by the end of 2013 they will have sold about 1,642 such homes, representing 20% of the market, up 8% from last year.
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.
Construction unions in Panama are looking for a way to avoid an excessive increase in the value of homes due to underground cabling.
"The guilds of Panama involved in building and selling homes, have joined forces with the aim of making underground cables in new residential projects (...) not having a significant impact on the price of homes ...", reported Panamaamerica.com.pa.