According to recent and former studies, the construction is an industry that is characterized by cyclic changes in terms of investments into residential and commercial projects with general duration of 17-18 years per cycle.
Construction cycle is a process where a slowdown in development and later appearing deficit increases rents. This in turns pushes the investors, which due to their nature react slowly. Growing investments later cause excess of supply to the real estate market which in result lowers the rent rates and the cycle repeats again.
The effect of such cycles on the economy looks as follows:
- When the phases of economy and construction cycle are synchronized, the slowdown and bottom of the cycle is deeper and longer as they enhance each other;
- With the downturn in the economy, but boom in construction, the economy crisis is smother and lasts less;
- When both cycles are their peak, the economy will be flourishing and receive the major effect.
In the case of Panama, economic activity in the country coincided with the booming construction, which produced unprecedented results described in the latter case. If the theory of construction and economy cycles works, then we can assure prosperity to Panama until 2020.
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