3 trends in Central American real estate as developers and buyers respond to market conditions
Times are certainly tough. But sometimes its the tough times that provide space for innovation and new ideas. Yes, some real estate projects in Central America are stalling, but others are responding to the tough economic news with new products and attractive incentives to persuade buyers to purchase. Here are 3 trends that we’re seeing in the Central America real estate scene.
1) Developers are going to greater lengths to woo buyers
Developers, particularly those at early pre-construction stages, are pulling out the stops to generate sales and maintain project momentum. From guaranteed rental agreements, free in-country tours where all expenses are paid, lot/home packages where the home is built at cost, to attractive seller financing, special programs for defaulting buyers and even buy-back guarantees.
As one real estate agent remarked, ”It’s a way sellers can drop their prices without really dropping their prices.” Developers know that momentum is king. A stalled project is hard to re-start and prospects quickly sense a lack of activity and progress.
2) Plans are being scaled back, pushed back and offerings altered
Months are being added onto construction time-lines for golf courses, clubhouses, restaurants and even basic infrastructure work. Developers are no longer emphasizing trophy apartments and ostentatious mansions. Instead they’re releasing simpler, smaller and more functional properties more in line with the current economic mood.
Some are fractionalizing existing real estate to offer a more accessible price-point. There’s also more focus on green building to appeal to a demographic whose decisions take into account social and environmental considerations.
3) Re-sale properties offered for less than developer direct sales
Existing owners who are feeling the pinch are motivated to flip their properties and some are pricing them well below developer prices. In situations where they purchased pre-construction, the price for re-sales can be as much as 30-50% lower. Re-sale properties are harder to track down and don’t always have the same marketing support as developer direct sales. But right now, it’s worth putting in the effort to dig them out.
What trends are you seeing in the market place? Let us know below or leave a comment on a property hotspot that you are familiar with.
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Apr 04, 2009
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Kent Davis
Apr 17, 2009
Another interesting study may be a pre-boom pricing survey from, say, 2006 in Panama City. While the resale market is definitely driving down what the developer can expect for their remaining units, there has to be some sort of pricing floor.
When was the last time that new construction was $1000 per square meter in El Cangrejo? Could oversupply drive it back below that level in 2009, or has the city come so far along with new infrastructure, new business, and new opportunities that it will never see that price point again.
You guys seem to have a bigger crystal ball than I do…Thoughts?
Reveal Real Estate
Apr 18, 2009
Yes, it really would be great to get hold of reliable 2006 data.
We right in the middle of our Q2 2009 data collection and from what we are seeing so far many developers are holding their official asking prices quite firm against the Q4 2008 benchmark that we collected. We’re not all the way through the analysis so I don’t want to jump the gun on this point. But we were expecting to see asking price reductions across the board. Of course developers will likely accept offers below asking in the present market where little is moving. We should get initial conclusions from the data out in the next few weeks and look forward to more dialogue on this. When looking at future prospects for Panama City the key will be to maintain its status as a safe haven location for investors (a portfolio play out of US stocks for example). The second/vacation home market (or lifestyle market) alone, combined with the oversupply factor, will be too weak to sustain current prices.
Would love to have more on-the ground perspective on this. So welcome additional thoughts.
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