Monday, August 11, 2008

Panama - Just a short ride in a Canoe?

The biggest rave in the industry in recent times during the demise of the European market has been Panama. Made famous more recently by the "Reggie Perrin" incident by a husband and wife team Anne and John Darwin who thought it might be a good idea to have a picture taken even though one of them was "dead" (Good call!) Then Anne deciding she would go back to the UK, somehow under the illusion that no wrong had been done. (Ask her that in 6 years)

In the real estate world though we saw a surge in developers arrive in Europe with all their dog and pony shows at the trade exhibitions, many with their amusingly miss-spelled brochures and charming good looks, especially at the 2007 SIMA exhibition in Madrid.

2008 though was a different story. Less Panamanians had made the trip, more western agencies were there though with the same product, literally! Whilst at the exhibition I stumbled across no less than 4 stands selling the exact same product from the very same developer, and then found the developer themselves also there, offering exclusivity to anyone wandering by! In 2007 the developer stands did appear to be busy, but 2008 saw less stands, most were not developers but agents, and there appeared to be less traffic all round.

Generally the SIMA exhibitions are a pretty good indicator for what is likely to be a popular seller for the coming year, not necessarily because it's good value, or a great investment, but simply because if the developers sign enough agents, they know the agents will advertise, the press will pick up on it and will make it popular for them. As a result, public being what they are and the sheep mentality that exists, the product will sell one way or another.

Panama now though as a seller? Not a lot seems to be happening there, I speak to agents on a regular basis that sell there, either in Panama itself, or remotely and it doesn't sound like it's moving all that fast.

The big question here has to be why? You would think Panama being a tax haven, low extradition laws, and limited space that prices would be off to the moon, and it would be the greatest thing since sliced bread!

The reasons are few and simple. Donald Trump, Resale Market (Or lack of it) and the inexperience of agents and Realtors there.
Just because Donald Trump buys or develops a building somewhere, it doesn't make it a good investment!

Donald Trump is a Bazillionaire, has an outrageous syrup, and most well known for saying "Your Fired". These are not reasons to base the largest investment you are likely to make in your life upon. Why not? He has the money and the name to manipulate the market, and he has the "sheep factor" behind him. If he buys somewhere and then tells everyone, you will buy too, push up the price, he will then let some company sell it to you at an exorbitant mark up, and then run away giggling. Just like Warren Buffet does with silver, and George Soros does with the UK stock market.

The Resale Market? There hasn't been one! Ask your friends, go to the pub, go on the Internet and see if you can find someone who bought a house before the arrival of all the developers. We saw a similar thing happen in Cape Verde. When the market started there any re-sale price or procedure was purely guess work, now though 5 or 6 years on, there is a steadily growing market, and ex pat agents are thriving.

Inexperienced Agents/Realtors? With no re-sale market to begin with there wouldn't be, so any agents there are ones that have fled Spain before the crash, or are some of the few Americans with a passport and/or a tax problem. I tried on many occasion to list and display Panamanian re-sale property on European websites, several companies touting to be Panamas largest, oldest and so on. Not one could come up with anything!

What now? If you have bought, sit tight. Personally I think the market is there, just not in the "get rich quick boom" that everyone was told, the weak dollar is still making it a value play for those with Sterling in their pocket. As to whether quite all of the developments will get built or not is another matter. The transition from what Panama was (Basically a tax haven) to a tourist destination for all to enjoy is a large one to say the least, and is certainly not a 5 minute job.

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