Property and construction are in a period of transition in Panama. TBY talks to key players in the local development scene to make sense of current conditions.

Isaac Benhamu G.
Inversiones Inmobiliarias BAIT
Luis Fernando Ayala S.
General Manager
Casas Grandes

How would you assess the current state of development of the construction and real estate sectors in Panama? And where do you fit in?

ISAAC BENHAMU In the past, the risk of a real estate bubble was palpable in the industry; however, this is already in the past, because at the moment we have a stable and consolidated market. Now, the sector, especially in the commercial offices segment, is slowing in terms of readjusting prices and balancing offer and demand. Therefore, I am not expecting impressive growth for the sector over 2014. In fact for the commercial office segment, I foresee two to three years of readjustment. However, this is nothing dramatic, because it is part of the industry's cycles. In addition, we have to keep in mind that this has been a presidential election year, and investors tend to put their projects on hold to better evaluate political developments. I expect other segments of the industry picking up once the electoral effect is over. In this particular sense, I have high expectations for the near future developments in the luxury-housing segment in Panama.

LUIS FERNANDO AYALA Panama suffers from a housing deficit, where there are not enough real estate companies to satisfy demand. This remains the case despite Panama's large volume of FDI. Meanwhile, our other project Villas del Golf targets a wholly different high-income clientele. There is still a great opportunity for FDI in the Panamanian market since profitability remains relative high. This year we have undertaken projects with a projected value of over $138 million, such as Praderas de San Lorenzo, in which we have already sold 33% of the houses. We call our projects Praderas as a part of our brand strategy. The Praderas are subsidized by the government. It does not directly subsidize the real-estate companies, but rather, assists our clients with bank loans. This measure renders the real estate sector robust as would-be buyers have more opportunities to make a purchase.

What are some of the key elements of your ongoing projects?

IB The main projects we are currently working on are Mystic Hills, Mystic Village, Atrium Tower, and Belle View Tower. Both Mystic Hills and Mystic Village have had previous development stages. For example, Mystic Hills sold 172 units in its previous development stage, whereas Mystic Village is currently in Phase III. These two projects have benefited from the inertia and momentum of the sector over the last few years. As per Atrium Tower, this is a building with offices, and we see that sales trends have slowed down. It also affects the current excessive offering in the office segment of the real estate market. Finally, Belle View Tower has only a few available units left. It has almost sold out, and we finished it some time ago. This last project enjoyed great participation from foreign investment. In fact, the Panamanian real estate sector benefited from a large arrival of foreign investment in the last few years.

LFA We are determined to increase our operations in Chorrera and also in the east and north of Panama City. Growing in three areas simultaneously is not easy. We have changed the company's structure whereby the previous 200 homes we sold annually have today risen four fold to almost 800. We are currently dealing with projects of 2,500 houses. Another challenge for us is the difficulty of finding human resources, which remain limited, and which also includes the developers themselves; this is significant as we hire them for specific projects and do not build ourselves.