Rent Prices Falling in Panama City, Panama

August 31st, 2009
Written by Casey Halloran

When I first came to Panama in 2004, I was impressed by the affordable the cost of living for such a cosmopolitan town. I rented a spacious, fairly new, furnished, ocean-glimpse apartment in El Cangrejo with for $600 per month. In 2004, a beer at the neighborhood bar was $1.25 and dining out ran around $9 for an entree. Back then, there were plenty of pre-construction apartments for under $100,000. Sure I loved Panama, but I loved the those condo prices even more, and so snatched up one myself without thinking too much.

Since then, prices skyrocketed. We can debate the reasons why: the U.S. real estate boom, news of the Canal Expansion, the success of neighboring Costa Rica or a glut of foreigners with fat pocketbooks, and a lot of hype. Regardless of the potential causes, since somewhere around 2006 prices for beach land, entertainment, hotel rooms, and apartment rentals all went through the roof.
After selling my condo in late 2007 (at what I hope will be remembered as peak prices) I’ve been renting in Panama City. While anxiously awaiting Panama’s inevitable real estate collapse, I’ve been both unwilling and unable to pay what I believe are crazy prices for city condos. Thus, I’ve been forced to continue renting. For the last year and a half, that’s unfortunately meant that I’ve paid grotesquely high rent to remain in the now-somehow-fashionable El Cangrejo area. I’ve been reluctant to wander too far from the region, as I do my best to avoid a nasty commute to my nearby office in El Carmen. As an Irish-American cheapskate, it’s been extra painful to pay Manhattan-type rent to live in a so-so apartment in an average neighborhood.

FINALLY, while searching for apartments nearby this month, I have observed a trend that’s both astonishing and heart warming: RENT PRICES ARE PLUMMETING! To any casual observer of financial news, this trend probably seems as surprising as the laws of gravity. However, I am thrilled, because after 2 years of listening to all the Panama real estate “yay-saysers” reapeat like robots that Sir Isaac Newton’s laws do not apply here, I was starting to believe them. But alas, the rules of the universe, as well as Adam Smith’s invisible and, do indeed reach to lands so remote as Panama.

To give you an idea of what I’m seeing, go to any of these sites and take a look around:

www.encuentra24.com
www.compreoalquile.com
panama.en.craigslist.org/apa
www.Boquete411.com

What you’ll see if you do:

* There are a ton of units for rent in newly delivered buildings in San Francisco, El Cangrejo and El Carmen.
* 2BR units that may have rented for $1,700 to $2,000 a year ago are now asking for as little as $1,000 per month.
* Units that were posted as far as 90 days back are still listed and have been recently reduced.
* There are a LOT of units for rent from $1,500 to $2,500 per month.

I’m hoping that the following events occur next:

1. A bunch of apartments do not rent at the desired asking prices
2. Rent prices continue to decrease
3. Many units simply do not rent at all, forcing owners to sell
4. Selling prices fall to near-original purchase prices
5. Would-be buyers, turned off by previous pie-in-the-sky prices, return to Panama and snatch up the good deals they were seeking in the first place

I’m hoping that this is the first of several much-needed reality checks for Panama’s real estate sector. It’s time to get serious about the real value that Panama offers in today’s challenging market. I hope that the local business owners and politicians are prepared to work hard to deliver greater value in order to attract investors. It would also be great if Martinelli’s administration offers investors more benefits and tax breaks to encourage the absorption of this condo glut. I am not encouraged by the move to banish “illegal hotels”, aka: short-term apartment rentals. Do potential buyers need any more reasons to NOT buy? Panama needs to do something very bold, very soon in order to avoid a Miami-type condo crisis. To those who say, “but we’re not in a crisis YET!” I can only respond with my favorite Robert Redford line in the movie Spy Game: “When did Noah build the Ark? BEFORE the flood.”

By the way, who are these nut jobs posting rentals asking $8k per month? Who would pay that in PANAMA?! I can only hope that anybody with that type of salary would be smart enough to make a down payment and BUY a place.

I’ll let you know how my apartment hunt turns out soon…

Anybody else out there moved recently?