In a previous report, we discussed the cancellation of the Ice Tower project in Panama City and the subsequent refunds issued to investors. Many of these investors had secured their units for as little as $1,000 per square meter. Considering that current market prices range from $2,000 to $3,500 per square meter, a figure potentially exceeding Florida real estate values, the initial investment appeared promising.
The issue lies with the prevalence of speculators, often called ‘flippers,’ who buy with no intention of residing in the properties. These individuals aim to capitalize on price increases, selling to another speculator, creating a chain reaction. Eventually, this resembles a game of musical chairs, where the music stops, and some are left without a chair – unable to sell their condos for a profit.
Their options are limited: forfeit their down payment, which could amount to 30% of the purchase price upon completion, or proceed with the purchase, hoping for future appreciation. Renting the units becomes a common strategy. However, an oversupply of rentals, caused by numerous ‘stuck’ investors, can depress rental rates. If potential renters can secure units cheaply, the incentive to buy diminishes, hindering appreciation and potentially triggering a real estate downturn.
While Ice Tower investors initially anticipated substantial profits, they now face the prospect of a mere refund. Furthermore, they’ve incurred an opportunity cost, missing out on potentially profitable investments in other projects that have since been completed. At least they are getting their money back and are not forced to close on a losing investment.
On June 24, 2007, cement mixers were observed pouring concrete into the former Ice Tower foundation. The activity raised questions: Was this simply filling the hole, or was it the groundwork for a new structure? According to La Prensa newspaper, the Ice Tower team indicated that another building would replace it, suggesting the latter scenario. Regardless, the concrete trucks are there, and construction continues.
In related news, the replacement building is rumored to be named Iron Tower. Supposedly, the same developer will construct Iron Tower, a 75-story building on Avenida Balboa. Existing Ice Tower purchasers are allegedly offered a discounted price of $2,500 per square meter, compared to the list price of $3,200. They can transfer their investment to the new project or opt for a refund. As developments unfold, we will provide further updates on Panama’s dynamic real estate market.