What You Need To Know About The Panama City Rentals Market
How much does it cost to rent an apartment in Panama City?
Our Panama City-based team huddled around the conference table in our office the better part of Friday afternoon trying to find an answer to this question.
Here’s the first thing to know on this subject: Rents in this city have fallen significantly over the past 12 to 18 months.
When we moved here two years ago, the rentals market was at a frothy peak. Owners could name their price, and would-be tenants would bid against each other for even modest digs. If you found a place you liked and could afford, you knew to offer a cash deposit on the spot, lest you follow up even later that same day to discover the place had in the interim been grabbed up by someone else.
Our young Marketing Manager Harry, for example, rented a studio outfitted with what amounted to a nod toward a kitchenette (no kitchen sink, for example, and only a hot plate to cook on), because anything bigger was outside his budget.
“Do you remember that place?” Harry joked on Friday. “I can’t believe I lived there as long as I did. I guess those few months qualify as character-building…”
Harry paid US$650 per month for the privilege of renting that tiny kitchen-less studio.
And we, shopping for a three-bedroom apartment with space for an office at the time, had four such properties snatched away from us before we learned to bring a pocketful of cash with us to any viewing.
What’s the current state of the Panama City rentals market?
Rents have fallen 25% on average, and Harry’s US$650 today would afford him a one-bedroom apartment (with an actual kitchen) in a decent building in a convenient location.
What’s changed? Well, it’s a different world today than it was 2 or 2 ½ years ago. But, specifically, here in Panama City, a whole lot of new inventory has hit the market. New condo towers with units renting in all budget ranges (low-income local to international business executive) have come online, making the long-term rentals market more competitive.
Meantime, hundreds of new hotel rooms (including, notably, in the new, mega-sized Riu Hotel, the city’s biggest, opened last month) have also become available, having the same effect on the short-term and tourist rentals markets.
This is all good news. The Panama City rentals market was ridiculously over-heated two years ago. What we’re seeing now is a natural, welcome correction. And it’s creating an opportunity for you to rent for less in this town than has been possible for years.
We’ve agreed to reduce the rent for the tenant in our investment rental on Balboa Avenue. The nice Brazilian banker lady who has rented from us for the past two years wants to renew her lease again, but she has asked for a reduction in cost, as she recognizes the realities of the current marketplace along with everyone else.
We could have refused (as I know many other rental property owners are doing) and then hoped to find another long-term renter for a higher amount or maybe tried our luck on the short-term market.
Both those things seemed risky. In a market like this, you take the rent in hand and count yourself lucky to be able to continue to realize a reliable return.
Our net yields over the past four years we’ve owned this investment property have, at times, been absurdly high (more than 20% per year, for example). We knew that wouldn’t last and recognized that we were enjoying an anomalous period in this market’s cycles.
Our return last year, given the amount of rent our Brazilian banker lady was paying, netted to about 13%.
Our return this coming year, at the new rent she’ll be paying, will net to slightly better than 10%. On a global scale right now, a double-digit net yield is hard to come by. Again, we’re counting ourselves lucky.
Can you still buy today at a price that would allow you to realize a reasonable net yield (I’d say up to 8%) from rental income, even given how increasingly competitive this marketplace is growing?
Yep. We’ll detail how and where at our Live & Invest in Panama Conference later this month.
We’ll also walk through how much you should expect to pay in rent, neighborhood by neighborhood in Panama City and region by region beyond the capital.
This event has been sold out for some time. However, we’ll be recording all the sessions and presentations and will make the recordings available as soon as possible following the conference.
We’re planning our first Live & Invest in Panama Conference of 2011 for March 29-31. We’re not ready yet to take registrations for this event, as we’re still shopping for a venue. We need someplace bigger than where we’ve been holding our Panama City conferences, so we can accommodate more readers. We’re thinking the new Riu Hotel will be the place. It has capacity for up to 1,300 conference attendees. That should fit us!
We’ll publish full details for this program as soon as possible. Meantime, you can get your name on the pre-registration list to be eligible for special discounts off the registration fee.
Do that here now.