Analysis of Panama Real Estate and market behavior

We have taken all the market data from the last years and until the end of 2016 to understand the behavior of Panama real estate market. We always listen to opinions and information that is based on particular or partial sales figures, or the available supply, but rarely we find an in-depth and detailed analysis of the sales behavior versus the available supply.

In this first quarter of 2017, we are feeling the effect of a 2016 with a lot of construction and also with more sales than 2015.

We are talking about the general real estate market in Panama. Sometimes, as brokers or as developers, we don’t feel that it has been sold more unities. In fact, the feeling is that it sells less, but this is only depending on the niche and price range of certain projects and areas. In general terms, projects that are sold in medium and low price ranges have increased significantly.

Below, we present a very complete analysis to understand how the real estate market is moving and if it is possible to reorient the commercial strategy towards projects and properties of high demand.

The total of projects with available supply remains at the highest levels of the last 5 years, showing a growing trend since the end of 2013. The number of projects of less than US$120.000 was reduced by 1% and those projects over US$120.000, have increased 16%.

In fact, in the last three years, the minimum number of homes sold has been 586 homes (February 2014) and the maximum amount is 1,688 (September 2016).

Analysis of Panama Real Estate in 2016 – Sales behavior during the year

Average sales, in the period from January to November, have increased by 7% over 2015. Not all is good news, nor is it a month-to-month constant. For example, only in November, sales were down 10% compared to the same month of the previous year (2015) but this is seeing the behavior of the month in an isolated way.

Zone price targeting

Of the segments valued above US$120.000, those with better levels of sales, are situated between US$120.000 and US$180.000, with 206 units sold monthly.

On the other hand, in the ranges inferior to US$120.000, the best sales are registered by the segment between US$40.000 thousand dollars and US$80.000, with 441 average monthly sales.

These numbers tell us about the housing deficit that still exists in the country in these segments.

The area with the highest concentration of available units is Panama Oeste, with a 33% share of the city’s total supply, Beach sector and Bella Vista, have a 10% each one, Panama Este has a 12% and San Francisco participates with 8%.

What is currently happening in the real estate market?

If we want to do an analysis of Panama real estate on this last year, it is important to note that there are more sales and more construction than in previous years. However, for the large number of real estate developments that are on the market, there have been more sales in some sectors than in others.

The projects located to the outskirts of the city, have shown an increase in sales compared to projects of the luxury market in Panama. Likewise, the projects known as “preferential”, with prices around 40 thousand dollars, are those that arouse more interest in the buyers in general.

Real Estate Market Expectations

The increase in properties in the last five years has been more than 30%, which is an attraction for investors. In this way, different companies that make life in the real estate market, have been in charge of maintaining the growth in the sector and studying the future of the business in the medium and long term, offering them by the web sites.

When doing the real estate analysis in Panama for 2016, what is expected is that the number of units that are offered be sold and sold in full, despite the high prices they may have.

It is important to note that there is movement of sales of real estate projects. The problem is in the great supply that exists, which is greater than demand. There is more project construction than sales, and then one tends to think that the real estate market is in recession, when really the opposite happens. In simple terms and not proportionately correct: A unit is sold, but two are built.

Competition

New projects are being launched every day, new properties are being built and competition is growing among developers. This allows us to talk about the “before” and the “now”.

In the past, due to the small number of existing projects in the real estate market in Panama, a project managed to sell all or almost all of its units in the short term. That is, if you had 20 units for sale, you sold those 20 units in a time only missed today.

Nowadays, we can see how the same project that previously sold all of its units, is short in quantity of sales in the time in which they plan to sell them (time adjusted to the expectations of the past), because there are a lot of projects that offer similar products, in the same area, for a competitive price and sometimes, even more accessible.

There will always be competition, and especially in Panama real estate market, this will increase while there are buyers. Everybody wants to get the most out of the market. But the market (demand) is not infinite.

The marketing strategies

How are these projects publicized? What strategies do they use? What are they based on to attract customers and closing sales?

Many people don’t know what a comprehensive sales strategy is. And this is a serious mistake, because knowing a sales strategy and executing it properly, is what really makes a project sell according to business plans.

Previously, we needed the billboards, television commercials and advertisements in newspapers or magazines to publicize the project we wanted to sell.

Nowadays, although this is still done and has its effectiveness, there is a very powerful tool that is gaining strength: Digital marketing.

You might be interested in: Real estate projects in Panama sell better on the internet.

Zones with highest construction

There are some areas in particular with more density of new constructions than others, but not necessarily they are selling better than others.

It is one thing to talk about “selling momentum”, where we refer to which sector (or zone) is the one that is having a better performance in sales of real estate projects.

Similarly, there is the so-called “construction momentum”. These areas can be located in Panama City or in the suburbs.

The most sought-after areas for investing in real estate (areas experiencing a “momentum of sales”) are located in the district of Panama Oeste, specifically Arraiján and La Chorrera. In these areas, property prices start at US$ 30,000.

Santa Maria and Costa del Este have a rebound in quantity of constructions. A lot of projects are being built in these areas and there is a lot of price competition.

On the other hand, the beach area is offering more projects to invest. Such is the case of sectors such as Coronado, Farallón, Río Hato, among others.

In these areas, there is a high competition. Some projects are sold more than others, all depending on the prices they offer, since the offer is fairly standardized: Beach properties, with two and three bedrooms, easy access to the sea and many amenities.

In Figures

• Pre-sale projects: 17,195 (representing 65%)

• Projects Under Construction: 7,062 (Representing 27%)

• Completed Projects: 2,095 (Representing 8%)

We hope that, with all this data, if you are a broker or a real estate company, you can reevaluate your commercial and marketing strategy according to niche markets with greater demand. And in this way, have a positive impact on your return on investment and additionally, reduce the times of concretion of sales.

To show the behavior of how 2017 is going, we will make a next report with other types of data to complement the analysis.