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Construction permits are greater than building space in Panama

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  • Wed, 12/05/2018 - 09:09
Construction permits suffer oversupply of projects in Panama
  • critica.com.pa

The Panamanian Chamber of Construction (Capac) began a very complex 2018 in construction matters, stating that the last month will be even worse the first quarter of 2019.

This analysis is based mainly on the figures released by the Comptroller General Office, noting that until October of this 2018, there is a considerable decline of 21.8% in construction permits, additions and repairs of housing projects. This percentage is established based on the figures for 2017, showing that the country's projections for housing have declined; in fact, when comparing figures in money, in 2017 the figure was $ 167.6 million and this 2018, $ 131.1 million.

Despite higher revenues in non-residential projects (+ 9.1%), the decline in residential projects (-30.0%) is a considerable burden in the numbers of the industry, so that construction ceases to be a profitable business within the trade and Panamanian work arena.

Areas such as Colón, La Chorrera and Panama recorded increases in demands and/or projects in non-residential constructions, while in Aguadulce, Arraiján, David and Santiago demands began to decline. However, the revenues left positive numbers for the construction companies’ coffers.

Meanwhile, residential projects increased in Aguadulce, Chitré, Colón and Santiago, but the drop in areas such as Arraiján, David, La Chorrera and Panama, left red numbers in the accounts and considerable losses for the end of 2018 in Panama.

Along with this, the world of building permits suffers an oversupply of projects, with up to 441% more, which has no space to know that the increase in areas to build (per square meter) only increased by 1%. In short, the permits obtained are infinitely greater than the spaces to do so, which is a considerable obstacle.

According to information in La Estrella de Panama, a CBRE report suggests that the availability of the residential market increased from 7.1% to 8.2%, while the sale of homes (built and in process) decreased from 92.3% to 87.4%.

How is it possible for availabilities to go up, sales drop and even so, projects increase? The first factor may be the economic growth of the country, which for Héctor Ortega, president of Capac, affected a lot after not reaching the projected 5% (it will close at 3.2% -3.5%). In the same way, he urges to remember that construction has been a great contributor to Panama's GDP, so another factor could be the little recognition of this sector within the Panamanian administration.

Ortega regarded the construction business as cyclical, so those involved are optimistic within this area and have met constantly to reactivate it, emphasizing the need for planning and certain changes that must be applied within the projects that exist so far.

One of the proposals for the Government of Panama is to raise the top of the preferential interest rate for houses up to $ 150 thousand, something that with the necessary bank guarantee, will increase production and reliability in the construction sector.

With the negotiations between China and Panama on the horizon, it is not ruled out that the fourth (or hypothetical fifth) round of negotiations for the FTA includes points referring to the subject, whether in labor, technology, resources or several points, on the verge of 2019, the changes in construction within Panama can be constant and significant soon.

In fact, from now certain changes can be seen, such as the construction of the fourth bridge over the Panama Canal, just under Chinese investment that begins to arrive with the treaties that began in mid-2017 and that now begin to lay important foundations to the point of having received Xi Jinping in Panama, sealing import exchanges with national production and also with companies from this growing country hand in hand with the Asian exchange.

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