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Is there a Panama real estate bubble? If so what will the effects be? Costa Rica is experiencing a real estate price contraction tied to Americans pulling their money out of Central American real estate. Will the same need to bring money back home to pay the mortgage cause a Panama real estate bubble to burst?

The Potential Panama Real Estate Bubble and the Costa Rica Experience

The real estate problem in Costa Rica as described by Reuters is that nearly all foreign owned homes in Costa Rica were purchased with cash. Most individuals chose not to finance in Costa Rica but to take out a second mortgage on their US home during peak real estate prices there.

As real estate prices have plummeted in the USA and banks have tightened credit many US citizens have tried to sell their Costa Rican real estate to raise cash. This flood of sales has driven down prices and has produced a buyers market.

Will a Similar Situation Burst a Real Estate Bubble in Panama?

The real estate situation in Panama has been similar to that in Costa Rica in that foreigners with money or credit have purchased property and driven up prices. The same demographic group of foreigners has been hit by plummeting property values and tightening bank credit in their home countries.

However, Costa Rica has always been farther along in obtaining investors and selling real estate to foreigners than the other countries of Central America. In fact, the residency laws in Panama and other Central American countries are basically copied from those that Costa Rica has had for years. Costa Rican real estate has been more expensive than Panama may simply come down to Panama real estate prices.

From the viewpoint of foreign investment prices were driven higher and have farther to fall in Costa Rica than in Panama. But, there is another factor in Panama besides the foreign home buyer. Panama is in the midst of an economic boom unrelated to foreign home buyers and solidly tied to world trade. When the world economy is strong more trade moves through Panama. When fuel prices go up the Panama Canal is used more to save fuel from rounding Cape Horn. When trade shifts from Asia to the Americas Panama benefits. Forty percent of Latin American container shipping passes through the Panama Canal.

Panama has been pouring money into improving its infrastructure. With what is already described as a first world infrastructure Panama is laying the groundwork for years of prosperity.

Panama Commercial Property

Panama’s commercial real estate value is tied to commercial investment, Panama’s service industry, and Panama’s unique position as the site of the Panama Canal. If North Americans stop moving here trade will still prosper. If all the North Americans go back up North Latin Americans will still move here, do business here, trade here. That economic strength is likely not just to last but to grow.

Investment in commercial property in Panama has been a good investment for years and is less prone to a Panama real estate bubble than the high end housing purchased by North Americans.

It may well be that the Panama real estate housing market will correct if foreign home owners start selling their Panama property. However, that bursting of a Panama real estate bubble will only affect high end housing. What is certain is that Panama’s economic expansion, infrastructure improvements, and growth will continue for years. This underpinning will keep property values, especially Panama commercial property values, stable and growing for the foreseeable future.

If you have questions about when to buy and when to sell in Panama’s real estate market or how to prosper with a possible Panama real estate bubble contact us at ABPanama. We have over 23 years experience managing real estate portfolios and do business throughout Panama.