International investors continue to see the real estate of Panama (and Avenida Balboa, in particular) as a good asset class for parking equity due to the low costs of portfolio relative political stability and an economy that has shown significant progress and strong prospects growth for the foreseeable future. Based on several years of data collected at home, we believe the overall upward trend in house prices in the downtown corridor will continue, and that the Avenida Balboa, in particular, continue to see gains in the next 12-24 months.
Avenida Balboa – Gogetit Highlights
- Large regional connectivity (especially with Colombia and Venezuela) and the fact that Panama is a dollarized economy is generating interest from European investors looking to take advantage of the disparity between rental rates and property prices to along waterfront district of Panama.
- A strong demand and a sharp reduction in supply, could raise prices again at existing prices in 2009.
- Banks such as Scotia Bank have increased their rates of loans to investors by almost 15% (from 6.25% to 7.25%), which can keep shoppers in search of financing outside the market.
With just a high-rise residential building along Avenida Balboa in Panama, the new deal for the next two years will be flat condominiums for sale. The plots for development are scarce and show no signs of construction starts, which means that with the exception of that ongoing project, there should be no new residential inventory for the next three to four years along Avenue Balboa. This, compared to the period from 2007-2010 when stock almost doubled and fixed in 25% prices due to a number of factors, one of which was an oversupply.
While prices remain peaks of 2009, we believe that strong demand and a sharp reduction in supply could raise prices again at 2009 prices over the next 12 months. Interest is growing with buyers from the primary markets such as the US and Canada, many of whom had deferred the decision to buy real estate in Panama and the will or have already entered the market.
Major regional connectivity (especially with Colombia and Venezuela) and the fact that Panama is a dollarized economy are also generating interest from European investors looking to take advantage of the disparity between rental rates and property prices throughout port district of Panama.
A strong case can be made for price gains in 2015 based on a survey of our office has been performing for the past four years and the moderate appreciation in the range of 5-10% is realistic.
On the other hand, banks and Scotia Bank have increased their rates of loans to investors by almost 15% (from 6.25% to 7.25%), which can keep shoppers in search of funding from the market .
Rental rates softened in 2014 and may continue to decline as more investors buy rental properties. The decreases observed in rental rates in 2014 could be compensated for renewed efforts to court Panama multinational companies whose employees tend to gravitate to areas like Avenida Balboa and finally fill the gap and potentially increasing rental prices once again but it remains to be seen. Another attenuation rental rates could keep investors out of the market in 2015.
Fire-sale of apartments purchased by “pre-boom” buyers who could not meet its obligations to the developer are a thing of the past, although several large developers are still sitting on substantial inventory and could look to liquidate the inventory in 2015.
Conditions favorable financing development (and the consequent lack of bank pressure) and an average 3-4 unit sales per month in projects like Yoo Tower located in the heart of Avenida Balboa, can, however, keep these developers fall in prices below the mark of U.S.$ 3000/m.
A favorable economic outlook, steady increase in demand for foreign and local buyers, along with continued investment in the Varela administration improvements that better quality of life in the city center are important drivers that we believe will drive the growth in 2015 along Avenida Balboa as well as the real estate market of the capital city in general.