In the News from Panama

In Wake of U.S. Home Buying Frenzy, Investors Turn to Panama

The U.S. real estate market is out of control, with prices soaring and buyers competing for any house that hits the market. Even savvy veterans of the property market have never seen action like this, with homes selling in hours for anywhere from 10 to 30 percent over the asking price.

One beneficiary of the frenzy: Panama real estate.

In recent weeks, Punta Pacifica Realty (PPR) has seen a dramatic uptick in interest from the States. In many cases, investors are looking to roll profits out of the overheated U.S. property and stock markets into real estate in a market with more opportunity for growth.

We’ve seen this cycle before. Investors and second home buyers are searching for alternative locations outside of the U.S. to avoid the inflated valuations. And Panama is a natural fit, with prices still depressed from the pandemic.

Panama is simply at a different place in the cycle. While markets in the United States are reaching astronomic new highs, we’re seeing Panama City bounce off recent lows, with healthy activity in recent months as investors seek out deals. Prices have jumped 5-7% for top units in the most sought-after resort-style buildings, such as The Ocean Club and Yoo Panama.

As we’ve reported in the past, a fear of missing out on these unprecedented deals is helping to drive the market. Buyers were already active in the waning months of 2020, snatching up bargain-basement deals. We put together several multi-unit purchases, as investors jumped on distressed units.

The Panama market remains a stark contrast to the U.S., where things have simply gone crazy. The median price for a single-family home in the U.S. jumped 16.2 percent in the first quarter compared to a year earlier, after rising 14.8 percent in the fourth quarter of 2020. The growth rate is the highest since 1989 and most property experts will confirm that these prices are unsustainable.

Can you say, “bubble?”

“The housing market is out of whack,” National Association of Realtors chief economist Lawrence Yun recently told a reporter. “There’s a lot of demand, but the supply is not coming along.”

The lack of supply is not going to change any time soon, which means prices will stay artificially high, with more risk to the downside than upside. The U.S. is simply not a great investment anymore if you’re looking for growth.

There is no mystery why Panama is attracting attention. For investors, it still checks all the boxes, in terms of security, a solid economy based on the U.S. dollar, and an opportunity for steady rental income. Recent reports confirm that Panama will likely recover much faster than other economies, in part due to its role as Hub of Americas, connecting trade and tourism throughout the region. The International Monetary Fund recently forecast a 12 percent jump in Panama’s GDP in 2021.

Conditions are perfect for Panama to reap the benefits of the bonkers U.S. and we’ve already seen its impact. In recent weeks, we’ve seen a shift in the market, as the word gets out and countries continue to reopen. Attitudes are changing and sellers are growing more wary. Top developers are announcing an end to pandemic promotions, as more and more vaccinated investors arrive to visit showrooms.

Depressed prices are becoming harder and harder to find. But there are still some great investment opportunities, including units that never even make it to market.  

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