June 9, 2010
Panama City, Panama
Panamanians are generally a carefree lot… but there are a few things that they curiously take very, very seriously. Mother’s Day is one example– it’s held in December, and the entire country shuts down for the day, including banks and government offices.
Voting is another example– it’s actually compulsory in Panama to go to the polls, and the government ensures that you don’t have any excuses by wrapping the event into yet another holiday.
The 10-year census is another… the government requires locals to stay home and wait for the census teams to show up. These teams go house to house interviewing residents in a single day, and afterward provide a small receipt indicating that the individual has already completed the census.
If a local is caught in the streets without this card on Census day, s/he can be taken to jail. While this requirement doesn’t apply to foreigners, the seriousness of this whole charade seems rather silly.
A few weeks ago, the government executed its latest census, and the results were quite interesting.
The preliminary data show that, since 2000, Panama’s population has grown by 17%, while the number of dwellings in the country has increased by 33%. In gross figures, there are now 3.3 million Panamanians living in 1.05 million homes.
Over the last 10-years, there has clearly been a dizzying housing boom in this country and an explosion of new housing units, particularly in Panama City. These numbers illustrate a few interesting points about the market.
First, as the population of full time residents has grown half as much the number of homes, it stands to reason that a substantial portion of the dwellings has been sold to nonresident foreigners.
You can see this on the ground quite easily by surveying the cityscape in the evening. Most of the freshly minted condo tower units, in fact, are sitting empty. The lights are off, and nobody’s home.
Given the straits that many people are finding themselves in these days, the oversupply of condos could be a great opportunity for the right entrepreneur. Each one of these units needs services, such as caretaking, bill pay, and short-term rental management. Most owners would jump at the chance to generate some revenue with rental income.
Problem is, there are few professional property management firms in Panama. I could name one, maybe two, and they are maxed out in their capacity. The other property managers in the city are one-man bands who work part time from their mobile phones.
I think someone who could provide well-marketed, comprehensive professional services would do quite well here.
The other key opportunity that I glean from the census data is the strong potential in ‘social housing’ projects. The government has an active commitment to increasing home ownership in Panama among the poor, yet the figures still show significant housing shortages in the key commuter towns outside of Panama City.
One of these commuter towns is called La Chorrera, roughly 20 minutes from the city. Its population has grown from 20,000 just a few years ago to over 100,000 today, and more people are moving there every day to take advantage of the strong job market in Panama City.
The people who move there often come from the interior of the country where they lived in dirt floor shanties with 7 other family members. The government provides incentives for banks and developers to build housing communities specifically for this market of first time buyers who have never had four solid walls and a ceiling.
As you could imagine, the homes are cheap to build and the demand is incredibly strong. Government data show the current housing shortage north of 50,000 units in this market, indicating that while the gringo segment has been vastly overbuilt, the local segment has a lot of opportunity.
Fortunately, most of the local Panamanian developers have largely ignored the opportunity. They couldn’t possibly sully their brands by building homes for commoners, which is why the housing shortage has been growing each year. This leaves huge opportunity for foreigners who can provide quality, cost effective units.
A few months ago I conducted an interview with a real estate professional here in Panama who I have known for several years. He’s German, and aside from running one of the top brokerages in the country with his partner, he also develops social housing projects.
In the interview, he explains the very compelling economics behind these projects, and you can listen to that interview here.
It’s not sexy or glamorous, but I think Panamanian social housing may be one of the strongest real estate opportunities in the western hemisphere at the moment. I would also put certain locations of raw land in Ecuador and Paraguay, as well as high yield Colombian properties in this category.