Construction costs over the past 5-6 years have increased but not as dramatically as have land values. A bag of cement in 2006 cost $4.50 whereas in 2013 it costs almost $10. The cost of a block of cement (4 inches) has almost doubled whereas the cost of a skilled construction worker has increased from approximately $22/$25 a day to about $30/$35 a day. As a general rule, construction materials consume about 60% of the building budget whereas about costs account for 40%.
The cost to construct a high quality house in Coronado as of mid-2013 is approximately $1100-$1200 per square meter which works out to about $100 to $110 per square foot. Five years ago the cost was perhaps in the $750 to $850 per M2 range.
At the present time, in greater Coronado area, there exists a major shortage of skilled labor. It’s reasonable to expect additional pressure to increase wages for skilled workers in the near term. This shortage is the result of a significant increase in the number of new residential projects and commercial projects. It also has a lot to do with the fact that Panama has been growing by double digit or almost double digit percentages for more than 5 years with no end in sight.
In particular, there is a huge shortage of construction workers skilled in the “finishing details” of a high end house. It frequently takes 2-3 months to put the roof on a 4000 square foot high end house and another 2-3 months to complete the finishing details with a much smaller crew. Another distinct shortage is for highly skilled construction workers willing to supervise a construction crew and take responsibility for setting daily tasks, ensuring a flow of building materials and performing quality control tasks at a preliminary level.
Quality control is a critical construction activity and should ideally be performed by a person not involved in the day to day construction process. The architect sometimes acts in this role but typically the architect is not on site sufficiently often leading to additional costs if errors are not caught early. The good thing is that replacing a floor tile that is not perfectly level or has a hollow sound because of poor bonding is a relatively low cost task. Of course if your tile gang makes such errors often then the entire gang has to be replaced.
In summary, over the past 5-6 years, construction costs have not quite doubled whereas land prices in Coronado have often tripled and in some cases quintupled.