Before we look at some news from Panama ( and it is all good stuff) I found last week’s international real estate news focusing on China. While it might not have a direct impact on Panama or the US, it may have an indirect economic impact as there is a huge overhang of product in China right now and even the Chinese Government is very concerned about the effects of a collapsing real estate market on the banking system over there. Think Greece times 1,000,000.
First came the headline from Bloomberg this week •China Said to Test Banks for 60% Home-Price Drop
Highlights
China’s stress tests of banks will assess the risk that a possible slump in property prices may strain developers’ finances and cause homebuyers to default, a person with knowledge of the matter said. The banking regulator told lenders to include worst-case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively, the person said, declining to be identified because the regulator’s requirement hasn’t been publicly announced. Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent. China’s property market is beginning a “collapse” that will hit the nation’s banking system, Kenneth Rogoff, a Harvard University professor and former chief economist of the International Monetary Fund, said July 6. Average prices may fall as much as 20 percent over the next 12 to 18 months, with declines of up to 40 percent in “big bubble” cities, Nomura Holdings Inc. said in a July 2 report.
Editor: I can remember back in 2005 and 2006 when I was in the hottest sector of commercial real estate back in Florida trading Net Leased Retail deals and the CAP rates were approaching 6 percent and CMBS loans were 5.5% fixed for ten years and interest only! We all looked at each other and agreed something is broken and we will all pay for this madness one day. Of course we would all turn to the residential builders and laugh about how big the overhang was in the condo market and their day of reckoning was also coming, sooner than ours. At the point where the inventory was projected to reach around 40,000 units the word Bubble was on a lot of peoples lips and just then four of the largest condo developers came out in an article stating that there was no Bubble and it was all false as the market was strong and would continue unabated. Then we ended up with the consequences that I predicted, affordable housing for Miami will finally be a reality!
Ok, flash forward back to China and the second headline form BLOOMBERG this week Beijing Billionaire Who Grew Up With Mao Sees No Housing Bubble
I love it when I hear this – “I don’t see any bubbles,” says Zhang, dressed in a white V-neck zippered top, black slacks and red heels. “The next few months will be a fantastic time to buy.”
And now for the third enlightening news I received on China, this time in an email that I received from a friend over there offering me an opportunity to work with him and brokerage an opportunity. a 480,000f2 building size, 1200 rooms for a service apartment in Guanzhou, Guangdong ,China.
This can be yours for only USD55,000,000
OK, I promise to stop beating this to death but before we go you have got to see this video on a City China built where nobody lives. This is how China keeps it’s GDP numbers up!
Empty city of Ordos in Inner Mongolia is China’s modern ‘ghost town’
The growth of Ordos is positively absurd; its density remains 17.8 people per square kilometer. By comparison, New York City has 157.91 habitants per square kilometer.
It took five years to build this ghost town with funds created by a $ 585 billion stimulus package meant to bolster China’s economy despite its painful recession. The Inner Mongolian city was meant to accommodate some one million residents and yet it remains empty.
Filled with office towers, administrative centers, government buildings, museums, theaters, sports fields and acres of subdivisions bursting with residential space, there remains only one small problem. No one lives there!
Now on to Panama and what’s hot but first a few highlights on Trump’s project and why, despite the over building in our own country, it has been a success here in Panama.
The $400 million real estate project “Trump Ocean Club”, is slated to be ready by early 2011 and sales top the 80% mark.
As reported last week, AméricaEconomía.com met at the offices of the Panamanian developer Roger Khafif, president of K-Group and partner in the Trump Tower, where the delivery of units is planned for January or February next year after topping out in May and work on the interior finishes are completed. This is one of the largest real estate projects in Latin America with a total of 2.8 million square feet and 70 stories. Looks like something from Dubai (I promise not to got there).
The K-Group, the real estate developer who heads the project was joined HBA / Hirsch Bedner Associates, which designed the 369 guest rooms and common areas of the hotel area of Trump Ocean Club.
The factors that lured Donald Trump to raise its mega building in Panama.
The sea and the City, a distance of just over 70 miles between the Atlantic Ocean and the Pacific, as well as government and economic stability, were some of the reasons that influenced tycoon Donald Trump to decide to invest in Panama for the construction of a giant sail-shaped tower, Trump Ocean Club, in the elegant area of Punta Pacifica in Panama City.
Not surprisingly, Panama has shown this year as one of improving conditions for attracting investment, through developments such as the recognition by the rating agency Fitch Ratings, Standard & Poor’s and Moody’s of an investment grade “BBB. The eyes of international experts have recognized the phenomenon of the Panamanian economy, with one of the fastest growing in recent years in Latin America, through a growth rate of over 11 % in 2007 and 10.7% in 2008, but especially from 2.4% in 2009, the year of the Great Depression. @010 is forecast to grow at a respectable 4 ot 5% and sustain the highest growth rate in Latin America for the period 2010 to 2014.
Back to Basics
One of the biggest real estate sectors that continues to grow here in Panama as well as other regions of Latin America is that of affordable housing both from a subsidized category of $50,000 to $80,000 to the middle class sububan market that is in the $150,000 to $190,000 market
As reported by La Prensa this week ( a machine translation )
From where the road ends from the Centennial Bridge and Highway begins from Arraiján-La Chorrera, are the roofs of new projects that have arisen in the area.
Throughout, both the Inter-American highway and the highway Arraiján-La Chorrera, heavy equipment, the movement of workers and large billboards are a sign that the area is attracting new residential as well commercial real estate projects. But what has caused this awakening to take place?
Developers agree that the highway expansion into four-lane road linking the districts of Arraiján and La Chorrera, all the way to the Centennial Bridge has had a great impact. This and the development of the Panama-Pacific project in Howard and not having to pay tolls on the highway are determining factors in its decision to build new residential projects.
In addition, the opportunity to acquire land ranging in price from one dollar and $ 20 per square meter, while in Panama City these range between $ 800 and $ 5,000 per square meter.
Royal Investment Consulting built Maria Bonita residential complex of 400 houses, including social area, swimming pools, jacuzzi, basketball court, chapel, nursery and clinic in a field of 221 thousand square meters. “The houses are from 130 to 165 square meters of construction and ranging in price from $ 90,000 and $ 195,000,” says Paolo Quarta, chairman of the developer. A few meters from Maria Bonita and entering the highway Arraiján-La Chorrera, the Oak Group continues to build its project, Groves. It is a form of urbanization developed in gated communities with a perimeter wall, with social area and bicycle lanes. They are currently finishing the first of nine communities of cluster homes in stages. The first stage consists of 480 houses that are one or two levels. At the end of the year they expect to begin the presale of the second phase of the project, including residences of $59 000 to $ 80,000.
Something for everyone
On the other side of the highway construction is also dynamic. There, in Long Street in La Chorrera, another company closed sales on 680 homes ranging from $ 57,000 to $ 175,000 in the project Mystic City. Amenities include basketball court and football fields, barbecue areas, meeting room and playground for children. These added values are those that are influencing consumers when deciding for a particular project. Walter Cardenas, general manager of Universal Property Group is well aware of this and is developing a project in La Chorrera as well as starting the movement of land for another project in Arraiján. Bothe will have social areas with pool, gazebo and sports fields. “That’s what you’re now building for the buyer,” he points out. The other is the project Arraiján Country Club, consisted of 108 houses ranging in price from $79 000 $ 90,0000 and $ 120,000.
Power Mall area
All these projects are reasons for Grupo Los Pueblos, the developers of the Allbrook Mall to develop Land West Mall, an investment valued at $ 80 million. Promoters agree that the development of this shopping center will push more investment in place, as residents no longer have to travel to the city to shop and have access to everything in one place.
“This makes it much more attractive for the purchase of land in these areas, because people no longer have to move on the weekend to the City,” said Walter Cardenas. The progress of the mall has made sales rebound in his residnetial projects in recent months and he acknowledges that not many predicted his success in this type of project Arraiján exceeding $ 100,000.
Well that’s a rap for this week as I must pack my bags to head to Panama City for a week, but before I leave, a friend of mine in Richmond, who was another big player in Net Leased Retail, called out of the blue and said “I have a guy for a 5 star luxury hotel in Panama City, so send me some sites”. What a great call from a real player in the US, one by the way that thought that I was crazy for moving here while the market was still hot in the US back in 2007. Well Joe, here is a nice site that may not be a 5 star luxury hotel site but will make money for someone who focuses on a business hotel model and keeps the rates within reason. And the price is right for $1,900,000.
All the concept plans are done, the entitlements completed and it is ready for building plans and permits. It is located in Bella Vista, just a few blocks up the street from the Miramar Intercontinental Hotel. Plans are available upon request.
Click on the picture for details
Come on down Joe, bring your guys to Panama and thanks for calling me.
Very truly yours,
Tom Brymer
305-448-1003
In Panama dial 507-6810-1074