PANAMA ECONOMY INSIGHT MONITOR

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Sunday, January 31, 2010

Real estate in Panama looks weak


Panama real estate sales fell by 50% in 2009. Panama real estate has been strong impacted by the U.S. real estate collapse. Real estate sales are fallen since Lehman Brothers bankruptcy and the collapse of the U.S. house prices. The U.S. Baby boomers (the main buyers of houses and condos in Panama) cannot sell your house and moved to second home in Panama. The supply/sales ratio is increasing since Lehman Brothers bankruptcy. Despite oversupply of house and condos, prices is not ease.

General Comptroller published in its web site that the premixed concrete production and construction permits value fell by 9.9% and 6.2% from January to November year on year respectively. In 2009 the premixed concrete production contracted eight month straights. In June of 2009, construction permits soared in 265% year on year. This atypical situation occurred because in June the real estate tax exemption ended. After June, it is another adverse factor for the construction sector, because the new projects have not this incentive.

Value added of real estate (market production) contracted by 4.4% from January to September of 2009 year on year, according to data published by General Comptroller. However, construction value added grew 6.6% from January to September of 2009 year on year. In the first quarter of 2009, construction was in boom, despite real estate market sales were contracting. This construction boom in the first quarter was the result of the boom of condominiums construction and infrastructure projects such as the Coast Tape, the Highway Panama-Colón and the Northern Corridor among others.

Panama Economy Insight estimates that construction GDP contracted by 0.8% in 2009 and forecasts another contraction in 2010 by only 5.1%, due to the impact of the Canal expansion in second half of 2010 and construction of a subway in Panama City in fourth quarter 2010. Canal expansion will have major impact on construction investment, cement production and premixed concrete industries, as well as on sand extraction and quarries sectors, but not on employment. Canal expansion will compensate losses of jobs in residential construction, but not at all, because Canal expansion is not labor intensive. The problem is that the construction sector employs 138,000 people, while Canal expansion will employ approximately 7,000 people in the project peak because this is little labor intensive. Panama Economy Insight expects to decrease the employment of construction and real estate by 8,931 and 1,858 respectively in 2010, due to the adjustment of Panama real estate supply. Panama Economy Insight expects to grow the real estate sales in the first half of 2011. Panama Economy Insight forecasts that GDP will grow only 2.3% in 2010 due to this real estate supply adjustment, spite Panama Canal expansion.
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