Throughout its history, The Ocean Club has been the benchmark for apartment pricing in Panama City, spotlighting the highs and lows of the international market.
For investors, it has been a story about spotting the opportunities in the downturns, which typically have little to do with the fundamentals of the Panama real estate market. At the moment, prices are near historic lows due to the pandemic, the type of opening in the TOC market Panama analysts have seen before.
Even before the building was completed, The Ocean Club–originally the Trump Ocean Club–was a phenomenon. When sales launched in 2006, the prices were double any other new or existing building in Panama, at more than $3,000 per square meter. A 98-square-meter 1 bedroom sold for about $330,000, which was unprecedented for the city.
With two years, things went crazy. Prices continued to rise and by 2009, some apartments had seen their value more than double to more than $6,000 a square meter. By then, a 68-square-meter bayloft studios, one of the smallest units in the tower, were selling for $415,000.
When the global market collapsed in 2010, The Trump Ocean Club was entering its critical phase. Prices fell to $4,000 per square meter as the developer offered deals to close out sales. During this period, 153-square-meter two-bedroom apartments that sold for $700,000 at the peak were selling for closer to $600,000.
But a terrible cycle had started, fueled by the collapse of markets around the country. Sales ground to a halt just as the closing process was moving into the final stages in 2011 and 2012. With prices bottoming out, close to 50 percent of the buyers walked away from their pre-construction purchases and sacrificed their deposits rather than close their deals on apartments valued at less than what they would owe. For example, on a 1-bedroom purchased in 2009 for $520,000, the buyer would have an outstanding balance of about $364,000 on a unit that was valued at closer to $345,000 in 2012.
After 2012, there was a large supply of units for sale, while the developer continued to lower prices to try to sell the inventory. For investors looking for bargains, it was the time to move, as prices continued to be depressed until 2017 when the developer sold out the remaining units.
After the sell out, The Ocean Club became one of Panama City’s most stable markets. The market has ebbed and flowed, but prices have remained relatively steady, as the building–and Panama City–developed into a more mature market, governed by fundamentals and supply and demand. Better units attracted better prices, which typically range from about $3,100 per square meters for typical apartments to $5,000 per square meter for customized penthouses.
By the beginning of 2020, we were seeing a strong surge in activity in the TOC, as Panama’s economy continued to grow. January and February were two of Punta Pacifica Realty’s biggest months for sales, as well as rentals. And then the pandemic hit and everything shut down.
Most investors were hesitant to make moves. But we were still able to complete transactions, using virtual tours and digital contract technology, with some buyers sensing “blood in the water,” looking for desperate sellers. But there weren’t that many sellers—The Ocean Club is a different market than the early days. Owners don’t need to sell; many have steady renters in place.
By August, we saw buyers that were sitting on the fence were ready to pull the trigger, recognizing there were only a few real steals and they were likely to disappear soon. We saw a flurry of activity, including a few at amazingly low prices even below $2,900 per m2 which had previously been unheard of in the tower.
In September, we saw another distinct shift in the market, as a handful of TOC owners with financial hardship or personal situations decided to put their units on the market. This is another one of those moments in the history of The Ocean Club when rare opportunities emerge. We now have access to a few deals far below construction replacement costs and, in some cases, lower than the original preconstruction launch prices from 2006.
Several owners, faced with a sense of urgency, have come to terms with the reality of the current pricing and after more than 10 years are willing to sell at more than $100,000 less than their original purchase prices. It’s a moment in history solely due to the pandemic. Historically low prices can be found, such as a 1-bedroom in the high $200,000s and 2-bedrooms in the low $400,000s.
There are only a handful of deals like this available and we don’t expect them to last. It’s simply another blip in The Ocean Club’s history. We already have a long list of investors finally arriving now that the Tocumen International Airport has opened again. Many are looking to move money out of the U.S. and the stock market, another phenomenon we’ve seen with the TOC.
We expect a quick rebound as foreign investors resume travel to Panama in the coming weeks. And we are already seeing much of that attention turn to the TOC, which is still the city’s benchmark. The Ocean Club remains the only large scale, hotel-serviced residences in Panama. It is in a class to itself. Price increases are expected to follow as soon as the few low-hanging-fruit units get gobbled up by savvy investors.
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Jeff Barton is Managing Director of Punta Pacifica Realty, the largest sales, rental, and property management firm in Panama City.