Actualizado: 26 de abr de 2020
The rental market in Panama City underwent a transformation in the last five years due to factors such as a government that did not generate foreign investment, a reduction in economic growth and an increase in the supply of square meters for rent. We are going to analyze the factors that encouraged the decrease in demand for rental apartments in the center of Panama City:
1. Decrease in foreign investment:
The profile of tenants for apartments in the city center were usually executives of foreign companies that established a headquarters in Panama and the company paid them for housing, but when the flow of foreign investment decreased, many companies left Panama or reduced their staff, so many apartments were left without their tenants. Consequently, the owners, having their apartment without generating an income, made the obvious decision, to lower the prices.
2. Reduction of economic growth:
The reduction in Panama's economic growth translated into business closings and lower wages. Tenants who had the financial means to pay above-average rents in the city center no longer had a sufficient source of income and the owners were forced into 2 scenarios; lower the rent amount or look for another tenant to pay its price, but those who decided on the second option most had to lower the prices since they had several months without renting their unit and many paying a mortgage on their property that did not generated income.
3. Increased availability of rental apartments:
An apartment building real estate project usually takes a range of 2 to 4 years from presale to unit delivery. Most of the projects that were delivered from 2018 to date started their presales at a time of economic confidence, in which an increase in rental prices was expected due to the boom that the country was reflecting, however, all These units that were sold entered the market and added to the square meters that were already available.
It is a pity that currently there are unit owners just covering their mortgage or in some cases neither the mortgage with the amount in which they rent their apartment, but what is a loss for one is a gain for others. Current prices have allowed tenants who previously could not access apartments in the city center, to enjoy the advantages of living in buildings with better amenities and locations. This behavior is normal in all real estate markets worldwide, there are those who say that we are experiencing a real estate crisis, but we are very far from a real estate crisis, it was only a reduction in prices.
A crisis was experienced by the United States in 2008 where prices fell dramatically. The real estate crisis in the United States was a "real estate bubble" that affected more than half of the states in the United States. Home prices peaked in early 2006, began to decline in 2006 and 2007, and reached new lows in 2012. On December 30, 2008, the Case-Shiller home price index reported the biggest drop in prices. in its history. The credit crisis caused by the bursting of the housing bubble is a major cause of the 2007-2009 recession in the United States. Increased foreclosure rates in 2006-2007 among homeowners in the US triggered a crisis in August 2008 for high-risk markets, Alt-A, secured debt (CDO), mortgages, loans, hedge funds, and foreign bank markets. In October 2007, the US Treasury Secretary He described the explosion of the housing bubble as "the most important risk for our economy."
All real estate markets go through good and bad times, you just have to act smart and pay attention to the economic indicators. I recommend that if you are in the process of locating an apartment to rent in the city center, take advantage of the window of opportunity, there are indicators of an economic recovery and prices will rise in certain areas.
There is an additional factor that I will only mention and that is material for another article, the Airbnb application has caused many owners who cannot generate returns in the traditional market to generate interesting income through this application. This system has comparative advantages when converting properties into hotel rooms and its global exposure, I know of units that would generate rents of USD $ 800.00 in the traditional market and are generating amounts in the application of the range of USD $ 1,100.00 in this application. With this, it has been possible to remove square meters from the traditional market and will gradually generate an increase in prices, this phenomenon has been seen in cities such as Barcelona and Berlin, according to the Airdna.com portal in Panama City, we have had an increase in the units listed Only in the center of 0 units in 2,016 to 2,000 units in 2,019 this will translate into an increase in prices at some point. Real estate is cyclical markets, there will always be times of ups and downs, but the best opportunities to invest are always in downs.
If you have the resources, take advantage of the current market moment. Do you need advice? Fill out the following form:
Until next time!