Although I feel my years as I quickly approach my 32nd birthday, I by no means consider myself a seasoned real estate expert. However, I am quite an observant guy who likes to read about topics and study trends from various angles. This is more than I think most people do when jumping on the flavor-of-the-month investment bandwagon. I’m surprised people in general don’t want to know the details of the Atkins Diet or Google’s debt-to-equity ratio. Instead, they seem to only care about everyone else saying he’s a winner.

In the 1980s they were junk bonds. In the 90s it was day trading and the dotcom boom. In the 2000s it was housing. I’m not the only one predicting that in the late 2000s the big investment will be “international real estate.” Before I get too comfortable on my stump, I must reveal that I was involved in the boom in points and now international real estate trends. But I’ve learned that whether it’s Salsa dancing or investing, timing is everything. And unless you pay close attention to when to get in and out, the toes that get stepped on can be yours.

This brings us to the current condominium boom in Panama City. The volume of construction here, the ambition of these projects, and the luxurious amenities that are promised are truly impressive. Panama City is not a third world city that has just been discovered. It is a modern capital enjoying a full-throttle gold rush. Dozens of skyscrapers are in progress and many more await approval. Big names like Trump are here, as well as investment groups from South America, Spain and the Middle East. Innovative exterior designs, opulent materials, polished brochures, and well-decorated model units are used to sell preconstruction units like Budweiser in a tractor pull. Some buildings sold out within weeks of the initial offer. Buyers are buying units with little more than rough renderings and a price list.

So why am I skeptical? First, I am cautious because my Irish-American parents taught me healthy skepticism. Second, I have been a buyer and agent involved in the sale of these condos, so I understand the current relationships between buyers, real estate agents, and developers in Panama. I also have a tourism business here and I notice that there are not that many foreigners who travel to Panama for pleasure or to live/work/retire. So here are my concerns about this condo boom:

Hyper Supply – The rate at which construction is happening is staggering. Every week a new project is announced. Developers typically got the land cheap or have owned it for years, have excellent credit and/or bank board seats, and know how to make deals happen. The largest families in Panama are doing most of the development and they can’t seem to build these condominium towers fast enough. The result is a huge number of condo units that will be online in the next 48 months. Can the market absorb this offer?

Promises, promises: As developers compete for customers, they’re making ever higher promises of amenities (you need to see what Trump “guarantees”), like marinas, imported materials, elaborate social areas, and more. As construction costs rise and margins shrink, I wouldn’t be surprised if expenses shrink and amenities disappear.

Deadlines: I purchased a pre-construction condo almost two years ago. I moved in this week, a year after my promised completion date. As developers juggle so many jobs and materials, machinery and talented work crews become scarce, one can only hope that delivery dates will drag on even longer.

Construction costs: As the workforce sees developers getting fat, they will no doubt want to dine at the same price. The project where I bought my condominium had several strikes. For materials, with increased demand, suppliers can naturally adjust prices, resulting in lower margins for developers. A contractor I know in Costa Rica recently told me that it is almost impossible to get steel because Panama consumes so much.

Overestimation of demand: besides the speculators, who is really buying all these condos? As a real estate agent and travel agent, most of the buyers I have met are buying units for investment or part-time living. Panama is a great place, but it’s not Miami… and the condo market imploded there not too long ago. To demonstrate comparable demand online, where many travel and real estate searches begin, take a look at these statistics. These numbers are from Yahoo’s keyword estimation service.

Keyphrase / # searches last month

Trips to Miami / 33,419

Trips to Costa Rica / 9,851

trips to Panama / 2,913

Miami FL Real Estate / 85,959

Real estate in Costa Rica / 24,766

Vacations in Panama / 6,531

These numbers put this boom in Panama into perspective, right? Could it be that the boom is driven by developers and not demand?

Unrealistic Prices – The increase in prices for new units in Panama has begun. The prices of some projects have been doubled before starting. Prices have risen to a point where foreign buyers will start to compare prices here with those in their hometowns or more fashionable places. It’s one thing for Panama to be promoting $150,000 ocean view apartments. It is quite another to expect foreigners to purchase $500,000 per bushel units when Panama does not yet have broad brand appeal.

Greed – At the heart of any raid is old-fashioned greed. Let me tell you friend, I have seen greed rear its nasty head here in Panama. Developers are pulling nasty tricks to squeeze a few extra bucks out of buyers now that they think they’re in the driver’s seat. For buyers who secured preconstruction units “too early” and paid “too little,” developers are enacting clauses to raise the price or even find ways to cancel contracts so they can resell units at higher prices. When it comes to amenities and detail work, basic items are suddenly considered extras. I personally had to pay a multitude of odd fees and fines, although some were removed with some minor efforts from my attorney. When buyers start to have a bad taste in their mouths, this boom could end even faster than it started. As the old adage goes, a satisfied customer tells a person. An angry tells everyone. As Panama continues to fight the specter of Noriega with one hand and climb to success with the other, it is in no condition to get greedy.

So what’s my advice? To quote the Greeks, “A bird in the hand is better than a hundred in flight.” The finished product is available and often represents hidden value. There will be opportunities to snag completed units in the coming months as I think some speculators have overextended themselves and will need to put their condos on the market. Units in older buildings and in less modern areas like Bella Vista and El Cangrejo offer an excellent advantage as the market turns to newer, shinier products. There are still opportunities to make money in this market. But look at the worst case scenarios and make sure you can live with them. As sure as gravity, for every boom… there’s a bust.