Panama Real Estate Investment

News about the real estate boom in Panama City seems to be in never ending supply (making this my third Panama City update this month, read here and here).  This week the honors came from the LA Times, in an article they ran entitled “Panama City: A Boomtown With Growing Pains.”  The title alone seems to sum up the situation in Panama City well.  Yes, Panama City is booming, but will it be a completely painless process?  Probably not.  The article goes on to discuss the overall positive economic situation of the city, such as the major canal improvements currently being undertaken, which should bring short-term construction jobs to the city as well as bolster Panamas reputation as an international crossroads of goods and services.  Multinational corporations such as 3M and Hewlett-Packard are also flocking to set up shop in Panama City to take advantage of the “location and friendly atmosphere” (which is apparently corporate jargon for ‘tax-haven’).

Yet, as the “growing pains” portion of the title from the LA Times article suggests, the arguments for economic prosperity in Panama City are not without caveats.  One of the biggest problems facing the growing city is that the growth seems to be outpacing infrastructure development.  Traffic congestion is horrendous, the electrical grid is extremely strained, and 6% of the Panama population is without running water.  This is not to mention the fact that Panama is still trying to separate itself from its historical reputation as a hangout for corrupt despots, drug lords, and sleazy businessmen.

So what does this mean for real estate investment in Panama City?  As a short term investment the city is looking increasingly risky.  The speculative nature of the condo market and lagging infrastructure development in the city are worrisome.  The canal project isn’t scheduled for completion until 2024, and while the influx of workers should keep segments of the real estate market booming, will these workers be in the market for the multitude of luxury high-rise condominiums currently slated for construction?

Fortunately, as a long term investment the situation in Panama City is looking positive.  As multinational corporations continue to move to the city, and the canal project goes ahead as planned, Panama City should be on track to becoming a world class city, and a major regional hub for cargo and telecommunications.  Yet given this, you still aren’t interested in weathering the fallout of a potential condo bubble in Panama City?  Investing in hotel and hospitality industry is always an interesting possibility… according to the same article a shortage of rooms has caused rates to double in the past year.

Source:

Panama City: Boomtown with growing pains (Latimes.com)