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Inflation is ready for deflation in Panama, but not for a few months. Lower oil costs have resulted in lower gasoline prices and will shortly result in lower electricity costs in Panama. However, retail prices including food will take a few months to come down. Food as well as retail items now for sale were produced during high fuel costs. Experts expect it to take five months to see prices at stores in Panama come down.

La Prensa, Panama, November 11, 2008 quotes José Ramón Varela, the president of the Panama Chamber of Commerce, Industry, and Agriculture as predicting a drop in prices of as much as six percent in about five months. Mr. Ramón notes that food and retail goods now for sale still cost more because of the high price of fuel involved in their production. He expects it to take about five months for goods being produced now, including crops being grown now, to come to stores.

Assuming continued low oil prices Mr. Ramón expects to see prices in the later half of 2009 to go lower still but not to return to the “pre inflation” prices seen in Panama.

Panama Real Estate Investment and Reduced Inflation

North American second home buyers and retirees “found” Panama about ten years ago. They were attracted by Panama’s low cost of living, first world services, natural beauty, and easy residency requirements. Those North Americans came in a flood making Panama one of the world’s premier retirement destinations.

The large number of North Americans buying real estate in Panama helped drive up prices but real estate stayed cheaper than in North America, Europe, or the Caribbean.

Then in the last year or so inflation hit Panama. Panama was not exempt from rising fuel costs and rising food prices. Much of this did not bother North American retirees but did threaten to erase the strides Panama has made over the last nearly two decades in reducing poverty.

Now a credit crisis has enveloped the USA, Europe, and Asia. The fallout has affected countries throughout the world including Latin America. However, an island in this sea of credit trouble seems to be Panama. Panama’s conservative banking and continuing high rate of foreign investment looks to be weathering the storm well. Panama City’s many construction projects are still going full tilt and the stores are full.

Now that inflation is taking a breather with lower oil costs Panama’s middle and lower class will be breathing a big sigh of relief.

Real estate investment in Panama will likely get a boost from the world troubles. As an island of economic sanity the Panama real estate boom will likely continue but at a slower pace. Commercial real estate in Panama will still be a great investment, both for rental returns and for appreciation of real estate value.

Come to talk to us at ABPanama. We can help you find a good deal at current prices of residential real estate. With over 23 years managing real estate portfolios we can find you a commercial real estate investment that will pay excellent returns for years to come.