Panama City Skyline [Photo credits to Young in Panama on Flickr]
Earlier this month Fortune Magazine featured an article on â€˜Panamaniaâ€™, the explosive growth of Panamaâ€™s capital city in the last few years.
Panamaâ€™s economy is booming with 8.1% growth in 2006 and Panama City is the focus for a lot of this growth. The article quoted Adolfo Olloqui of Grupo Olloqui saying that Panama was inheriting the mantle of Miami (1500 km to the north) now that visa requirements are making entry to the US more difficult for many people from Central and South America (but see below). Grupo Olloqui itself was pitching to stamp its mark on the city with its Palacio de la Bahia (Palace of the Bay) which when finished in July 2009 would have been 350 metres tall, will have 97 floors, a hotel, 333 apartments, offices and commercial centres and will have cost $200m. In competition with the Palacio was the 104 storey Ice Tower residential and hotel block being developed by F & F Properties of Panama and due for completion in 2010. Since March there have been reports on the cancellation of both of these projects and in the case of the â€˜Palaceâ€™ it is alleged to be a sorry tale of poor planning, lack of proper liaison with the city authorities and cost disagreements between the developer and the architect.
The Economist Intelligence Unit Viewswire also makes the comparison with Miami but questions the countryâ€™s capability to manage a property boom whilst simultaneously focusing on the updating of the canal at a cost of $5bn. Symptomatic of the challenges facing the country (and overseas investors) is the prohibition against swimming in the bay because of pollution. This city of over one million inhabitants will not have sewage treatment works until 2009.
In 2006 it was estimated by Prima Panama that about 11,000 apartments were under construction in Panama City representing an investment by developers of $3.17bn. Puzzlingly, Fortune Magazine quotes Paul McBride, Prima Panama CEO, as stating that 30,000 apartments have come on to the market in the last 12 months worth an astonishing $5.7bn. If true, this would suggest the construction boom has already peaked. Prima Panamaâ€™s report questions whether the volume of immigration into Panama merits the amount of speculation in new residential developments and poses the question of what will happen when many of the current developments come on to the market in the next 18 months. Another key question that they bring to the attention of investors is the merit of living in Panama city relative to other parts of the country. As EIU Viewswire makes clear there are a number of beach resort developments occurring in other parts of the country. One of Panamaâ€™s chief attractions is the accessibility of its tropical rain forest areas â€“ rain forest protection plays a key role in ensuring the supply of water to the canal â€“ and the country is a Mecca for ornithologists.
Incidentally, Prima Panama have also been the lynchpin of a campaign to persuade the government to reverse their decision to shorten tourist visas from 90 days to 30.
The conclusion to draw seems to be that speculative investments in Panama City real estate are definitely risky and that an owning to occupy approach is wiser. However, even purchasers of second homes would probably do well to make comparisons in terms of attractions and costs between Panama and other Central American locations such as Costa Rica and Nicaragua. On a practical note, Tocumen, Panama Cityâ€™s international airport, has plenty of services to all parts of the Americas but the only