Monday, February 26, 2007

Price index. Investors look for returns of at least 1% per month.

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By Marianela Palacios Ramsbott of La Prensa
mapalacios@prensa.com

The price to rent apartments and houses in Panama has only increased 2.5% in the last six years, according to the Consumer Price Index (Precios al Consumidor or IPC) of the General Controller’s Office of the Republic (Contraloría General de la República).

However, Luis, who lives in a three bedroom apartment on Vía Argentina, pays 20% more for rent than the prior tenant.

“They charge me 600 dollars and in 2005 they charged 500 dollars,” he said.

The difference in the price variation is understandable. The Index of the General Controller’s Office is based on the weighted average of the properties offered by real estate firms in Panama City, San Miguelito and the rest of the country’s urban centers.

“That percentage is an average of the variations that all segments collectively contribute, but the prices vary a lot from segment to segment,” clarifies Ivan Carlucci, the new president of the Association of Real Estate Brokers (Asociación de Corredores de Bienes Raíces or Acobir), who assumed the position Thursday night.

“For example, the rise in rent in the case of residences over 100 thousand dollars should be around 25%.”

Towards the Future

This increment is not only related to the rise in construction material and the appreciation of new dwellings, but also to the market tendencies that have produced the real estate boom. People that buy property with the intention to rent expect a return on their investment of at least 1% per month.

“If you bought an apartment in 2000 for 60 thousand dollars, you would rent it for 600. But a similar apartment now would cost 80 thousand dollars and therefore the owners are renting them at 800 dollars,” comments Carlucci.
Hopefully, as a result of the expansion of the Panama Canal, the rental market will recover again beginning in 2008.

2 comments:

Patrick said...

Thank you for the kind words regarding real estate. I am humbled by this.

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internationalrealestate said...

I admit, I have not been on this real estate blog in a long time… however it was another joy to see it is such an important topic and ignored by so many, even
professionals. I thank you to help making people more aware of possible issues.
Great stuff as usual….

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