EFAM | Escape From America Magazine

The Evolving Real Estate Market of Panama

Just a few years ago Panama was considered the second best real estate market in the world behind Dubai mainly because of its strong new condominiums construction and sales.  Since then Dubai’s real estate market collapsed.  While Panama’s condominium sales peaked it never collapsed.  Today there are over 200 new condominium buildings under construction in its capitol Panama City.

While investing in Panama condominiums may no longer be a great opportunity, other chances to make a good investment in Panama real estate exist.

Panama has a long history of attracting foreign investors

Panama Pacifico Free Zone Housing

One opportunity is to provide the much needed future housing for employees of the Panama Pacifico Free Zone being developed by the largest property developer in the United Kingdom, London & Regional Properties (L&R).  L&R is the developer, owner and manager of more than US$20 billion of real estate on five continents.  The Panama Pacifico Free Zone is a 1,400 hectare (3,459 acres) site with an 8,500 foot runway cargo airfield located next to the Panama Canal.  By the time it is completed it will become a small city with corporate and bank offices, high tech manufacturing, call centers, aircraft repair and maintenance services, and export companies.

There are over 125 multinational companies now established there, with over 50 more coming soon.  However, there is little to no residential housing inside of Panama Pacifico for the employees of these companies.

Whenever a large commercial real estate development exists, there is always a need for housing its employees.

Panama City Metro Subway Housing and Commercial Real Estate

Another opportunity arrives in one year when Panama City completes the construction of its new US$1.5 billion subway system.  If you look at major cities around the world with subway systems, you will find that the apartments closest to the subway train stations fetch the highest rents due to the convenience of walking to the subway.  Panama City’s first subway line will be 14 kilometers (8.6 miles) long.  There is a lot of cheap real estate near most of the 16 subway stations.  Invest now and complete the apartment buildings in a year or so to capitalize on the demand to live near a subway station.  Commercial real estate investments will also pay off as businesses surrounding the 16 stations will benefit from increased pedestrian traffic.

Panama’s Rising Tourist Industry

According to Panama’s Ministry of Tourism, the number of tourists who visited Panama rose by 43% between 2006 and 2010.

Panama received 1.7 million visitors in 2010 and received at least 2 million in 2011.  During the first two months of 2012 Panama’s tourism grew by 5.7% compared to the same period in 2011.  Panama expects more than 2.1 million tourists in 2012.

A country whose tourism is growing is a good bet for tourism investments.

Panama offers both Pacific and Atlantic beaches, making it a tourist hot spot

Panama Beach Developments

Opportunities still exist with Panama’s beaches, both on the Pacific and Atlantic side. Some are being developed as resorts with room for more developments.  Because Panama is only between 60 and 177 kilometers (37 to 109 miles) wide both oceans are easily accessible.  There are many sleepy fishing villages next to beautiful beaches waiting to be developed.  Some of these villages are located just a short drive from a small local airport.  Panama has hundreds of islands with pristine beaches waiting to be developed.  Because Panama’s tourism numbers are increasing every year, the sleepy beach towns and villages will eventually be experiencing new resort projects.

Panama Infrastructure Improvements

Panama’s infrastructure is improving which will help all types of investments.  The infrastructure improvements include doubling the passenger capacity with a new terminal at Tocumen International Airport in Panama City which also includes improved cargo terminals for better importation and exportation of goods.  The Panama Canal expansion of a third set of locks to handle bigger ships is expected to be completed in 2014 which will deliver larger cruise ships, depositing more tourists spending additional money for local businesses.  The Canal expansion will also allow larger cargo ships for greater importing and exporting of goods.  Panama’s interior small airports will be expanded. Recently the city of David’s (population of 100,000) local airport was expanded to become an international airport.

Protecting Foreign Investments

Panama is a safe country to invest in.  There are specific laws protecting foreign investors.

Panama’s Constitution Article 44 guarantees the protection of private ownership of real property and private investments: “Private property is guaranteed as long as it is acquired in accordance with the law by natural person or legal entity.”

The Civil Code of Panama regulates all contracts and specifies that Panamanian law applies equally to foreigners and citizens.

In addition, Panama enacted several laws protecting foreign investments.

For instance, Law 54 of 1998 clearly states that foreign investors and the businesses in which they participate in have the same rights as national investors and enterprises, including the freedom of trade, industry, export and import.

Panama has sustained an average 8% yearly GDP growth over the last 5 years

Panama’s Strong Economy

According to an April, 2012 report by the world’s largest bank, HSBC, Panama has sustained an average 8% yearly GDP growth over the past five years making it one of the strongest economies in all of Latin America.

The HSBC report also mentioned that when the Panama Canal expansion is completed in 2014 it is estimated to generate up to 40,000 jobs, increase cargo volume by 35%, and increase toll revenue by US$1.2 billion.  All of these will result in further domestic demand, greater tourism, a stronger international presence and more business opportunities.

It makes sense to invest in a country whose economy is strong and continues to grow.

Real estate investors should be able to make successful investments in a country with a strong economy, rising tourism, good infrastructure, laws protecting foreign investments, beautiful undeveloped beaches and islands, a new metro subway system whose 16 stations will need new businesses and housing, and a small city under construction with a need for housing.

You can’t go wrong by wisely investing in Panama real estate.

For more information on investing opportunities in Panama, check out www.twooceansproperties.com and www.swissmetalassets.com.

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13 Comments

  1. Ed Peters June 26, 2012 at 10:14 pm

    I would say the best opportunity in Panama is looking at older building and buy directly from the owner. One could also look at defaults and distressed developer sales in the near future.

    • Michael July 9, 2012 at 7:32 pm

      More often than not the owners & agents are one and the same . As an outsider you have no conection with forced or distressed selling . This privilage is reserved for closely connected people chiefly induced by hand outs and kick backs . You are on your own and you end up with a raw deal . However, there are some exceptions but you have to be extra careful .

  2. William Jones June 26, 2012 at 11:06 pm

    Refreshing article after all of the Panama real estate agents blah, blahing about Trump’s Ocean Club condominium project in Panama City which is in default to their bond holders. Too many condos in Panama City and this article offers realistic alternatives.

  3. RogueResider June 28, 2012 at 5:32 pm

    Great article on the Panama Real Estate market. I’ve been interested in moving there for some time…does anyone know of a good website to search condos or homes in the area? Seems like the search for properties is tough!

  4. Chris Frochaux July 5, 2012 at 11:58 pm

    Yes, searching for properties in Panama is rather tough – for a lot of reasons… some websites are more reliable than others, but anyone (posing as an agent) can advertise anything, frequently copying legitimate ads and changing the price just to snatch unsuspecting buyers. We are actively working on the implementation of a MLS, in cooperation with ACOBIR, the most relevant board of Realtors. Make sure the agent you get in touch with carries the mandatory real estate license. In many U.S. states it’s a felony to operate without a license, but those rules are loosely enforced in Panama. This is a wonderful country by the way…

  5. Gregg Camp July 6, 2012 at 8:05 am

    Really amazing to see and hear about this booms in other countries. While Dubai had their huge real estate growth during the major recession here in the United States, Panama must have been quietly building and establishing a huge base of investors.

    • Michael July 12, 2012 at 9:15 pm

      You cann,t buck the market . A correction is long overdue & it is on the way .

  6. Michael July 7, 2012 at 9:25 pm

    Panama real estate is very expensive at the moment . The market in Panama city is substanially controlled by people with vested interest in keeping prices artificially high . As you know in real life prices are decided in a free market by demand & supply a very simple economic concept . Please explain to me why there are thousands of empty apartments in Panama City and the prices are not budging . You are tempted to ask how do I know these aparments are empty and I have the answer . If you walk at night and look at the
    residentail buildings you hardly see any lights in them . There are combinations of factors that determine
    that prices are still high without a reason . The first is that a lot of OLD money is involved with limited banking requirements . The developers & real estate agents are sometimes one & the same or closly connected . Obviously you may say there are many other independent agents and the answer would be yes but they only have access to a small slice of the pie . There is also the huge underlared or UNDER declared funds in both Panama & surrounding countries looking for a home to rest . The bankers are aslo involved in the process
    as they can keep their property portfolio as assets in their balance sheet . Should the bankers decide to sell at a loss they must decalre their losses on their books & risk a downgrade of their status . Please do not forget that should you end with a profit once you sell your property it is subect to Capiat Gains tax in Panama .
    The old way was to buy the property in a company name and just sell the company and avoid the tax.
    However , things have changed as you are liable to pay Capital Gains tax once directors are changed . Also bear in mind the cost of setting a Panamian company is about USd 2000 & service cost is about USD 750 per annum . Panama is a very nice country with people to match and I love the country & visit it frequently . I am also seriously thinging of retiring there . But do not hiped into thinking that Panama is a low cost tax free country with ever booming real estate market . We have been sold the idea by bankers , real estate agents as well as the government that we must buy our property . Whilst this is still very true in most cases I would advice that in Panama at the moment just rent a place and enjoy the freedom of movement .

  7. Jeronimo July 9, 2012 at 10:00 pm

    Michael,

    Why prices does not come down in Panama?

    Because in Panama a developer begins to build only when he gets 50% of the apartments sold on preconstruction sale price. This is the rule sets by the banks to make a loan to any developer. These 50% will pay for the work and for the bank interests.

    So, the other 50% are the developer’s gain. If he does not sell the entire tower apartments in time is not important. It’s like keeping some gold in his safe, waiting for the next up cycle in real estate!

    This is also the reason why the Panama banks are strong in Panama. The developer’s loan has 99% chances to be repaid in time The Trump Tower is the exception but they never got any loan from a Panamanian bank for good security reason!.

    About the apartments without lights.
    Take care not to confuse you. I guess you talk about the apartments in Punta Pacifica, Costa del Este and along the Balboa Ave. They are all high priced and most of them are bought by foreigners, not for living here but as second or even third home, just in case something turns out wrong in their own country like Venezuela or for a future retirement, taking advantage of the 20 years property taxes exoneration for 20 years (They think this exoneration will not last eternally). So they are used for short periods of the year, then without any lights on, during most of the year. Does not mean they are available for sale!

    Now, I hope everyone know some more secret about Panama never come down real estate prices!

    In fact prices came down for about five years just after the canal had been returned to Panama by the Americans. (Years 2000-2005) because so many apartments where occupied buy American employees and all these guys came back home to be replaced by Chinese workers (the canal is managed now by a Taiwan company) living close to the canal in dormitories houses.

  8. Commercial Real Estate July 11, 2012 at 1:21 am

    Great article!

  9. Metro Denver July 27, 2012 at 2:42 am

    Since Panama is a growing country , it is expected that all its establishments, job opportunities and lifestyle would be greatly influence. It is always a progress when a certain country is improving its structures and tourism. I have always wondered on how I wish I could visit one of its beautiful beaches and resorts.

  10. Hallgrimur johannesson July 31, 2012 at 4:37 am

    We are H.j.global holding & Co Consultant in London-U.K, we have an investor that wants to invest in your project,If you are interested you contact us through our direct Email so that we can commence negotiations. email;hallgrimurjohannesson@hotmail.co.uk

    Hallgrimur johannesson

    Thanks

  11. chuck strong January 20, 2013 at 3:49 pm

    Nice information. It would be nice to buy a building from a private owner, or even property from a hectare owner. I have a business in mind, about 20 miles from Panama City, and is looking to buy raw Hectares from a owner. Do you think this is possible.

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