PANAMA CITY, Panama:Showing a guest around his renovated apartment in Casco Viejo, this city's old district, the film director Luis Palomo shook his head over the sea of residential towers being built across Panama Bay.
"Are there really that many people who want to live here?" he asked.
It is a common question in Panama City these days. More than 35 towers, each of 20 stories or more, are under construction. Another 350 are in the planning stages, representing more than 40,000 units, according to local government estimates.
Fears that the market may be overheating were stoked last year by the abrupt cancellation of three of the largest announced projects, including the 104-story Ice Tower, which was to be the tallest development in the city.
"Right now, I believe the majority of the market is speculation," said Sam Taliaferro, a developer and consultant who writes the widely read Panama Investor Blog.
To José Manuel Bern of Empresas Bern, a local developer, the cancellations were a necessary "sobering up" for the market.
"We weren't ready for that," Bern said. "There is a ceiling for everybody. We're not Miami."
But some promoters are already calling Panama City the "Miami of Central America." Developers see Panama as a stable country, with an economy growing at a steady rate of 8 to 10 percent a year. Most Panamanians speak at least a little English and the U.S. dollar is the accepted currency.
"Panama is one of the safest countries in the world," said Julio Fernando Noval García, president of Spanish developer Grupo Mall, which is building Los Faros de Panama, a three-tower, mixed-use residential complex in the heart of the city.
Grupo Mall is not alone. Foreign investment in Panama grew almost 20 percent in the first six months of 2007, compared with the same period in 2006, according to government statistics. Construction activity increased by 17 percent, the data shows.
Developers are hoping a $5.25 billion plan moving forward to expand the Panama Canal will generate new buyers for the city's residential market. In addition, corporations like the computer maker Hewlett Packard and the construction equipment giant Caterpillar are moving their regional headquarters to the city.
Panama City also is increasingly popular with second-home buyers and retirees, like Frank and Maria Harrison of Chicago. Two years ago they abandoned plans to retire in Florida and bought a 4,500-square-foot, or 420-square-meter, condominium on the 11th floor of a waterfront tower.
"We really like city life," Frank Harrison said, adding that Panama's hurricane-free weather was another key factor in their decision.
But North Americans are only part of the equation. Venezuelans make up 60 percent of Empresas Bern's customers for residential towers in Costa del Este, a master-planned development being built on 300 hectares, or 740 acres, a few minutes outside the city center, Bern says.
Despite the much discussed concerns about overbuilding, the Panama-based developer Grupo Corcione is moving ahead with five tower projects in the city, including Ocean Sky, a 45-story tower with 106 units priced at $268,000 and $750,000.
Construction began in January 2007 and is expected to be completed by March 2009.
"We don't see a slowdown," said Ben Robinson, a consultant to Grupo Corcione. "There will always be speculators, but the long term prospects are very good."
In November, Newland International Properties sold $220 million in bonds to finance construction of the Trump Ocean Club, one of the most closely watched projects in the city. Scheduled for completion in 2010, the 69-story project, which is licensing the Trump name, will include more than 600 luxury residential condominiums priced from $500,000 to $12 million.
The Trump project is widely credited with boosting prices around the city. In the last two years, the average price for tower apartments has jumped from about $1,500 a square meter to $3,000 a square meter, or about $140 a square foot to $280 a square foot, in some projects, local experts say.
"It was as if the Donald Trump project lit dynamite under prices," said Paul McBride, chief executive of Prima Panama, Taliaferro's company.
Along with prices, complaints against developers have soared. More than 150 charges have been filed with the local consumer protection agency, according to Bill Schroff, a local consultant who runs a company called Panama Referral.
Two years ago, Schroff bought a tower apartment in the preconstruction phase, putting a 20 percent deposit on a unit priced at $157,000. Now that prices have soared, the developers are trying to get out of the contract.
"That happens a lot," Schroff said. The developer offered him $220,000 but he declined; similar units are now selling for $280,000.
Street Level Asset Management (SLAM) provides management, leasing and other services for investors with real estate in Panama and other countries. For more information on how to get better returns from your properties abroad, contact Street Level Asset Management (Panama), S. de R.L.