April 7, 2022
Jose C. Corcione
The Real Estate industry contributes approximately 7% of Panama's GDP depending on the five-year period in which it is measured. This industry, although it contributes a considerable percentage to the GDP, is one of the industries that has a multiplier effect in the economy far beyond its impact on the GDP due to the employment mania it generates.
Having established the importance of the industry, we want to mention that it is subject to market forces that are making it change. These changes are going to mean that the way we build ourselves and what we sell have to change. Traditional market players will have to adapt or disappear.
I estimate the cost of new construction will increase by 20% per Mts 2 in the next deliveries. Far beyond Panama's inflation, which is “3%”.
Those interested or participants in the Real Estate Market must adapt to the new conditions as soon as possible:
Consumer Tastes and Preferences: It is more important than ever for Developers to do consumer Market Research in order to create products that meet the needs of end users. Finishing issues such as open kitchen incorporated into the living room, lighting, ceiling height, among others.
Construction Cost: It is essential that builders change the traditional way of building. Topics such as Preformed columns, lightened slabs and walls, etc. to provide a reduction in cost. Also use elements that reduce maintenance costs. When I see the new CAPAC-SUNTRAC collective agreement, I think that the unions are not seeing these changes.
Design: Architects and engineers must also evolve in their designs, maximizing spaces and materials so that there is an impact on the cost and efficiency of construction. Maintaining a light and modern approach in your professional practice.
Financing: Banking must change its project financing model. That 40% Pre-Sale model and other issues will have to change to make access to housing viable for Panamanians.
Permitology/Tramitology: What can we say about the institutions that regulate the construction industry, which must be much faster. Municipal Engineer, MIVI, MOP, Public Registry, Etc. Panama is a country where the construction time of a 12-story building can be 9 months, but documentation in regulatory entities can take up to 18 months. We spend more time on perisology and processing than on the construction itself. This in turn addresses the very housing we are trying to provide. Especially in environments where inflation is a considerable factor.
Below we see a table of how the prices of inputs in real estate development have changed between December 2021 and April 2021. In the end, in 3 months we see an incidence of at least 13%, which by the end of 2022 could be much higher.
