Panama Real Estate Buying Guide

Here we will cover Panama homes, land for sale, apartments, realtors, MLS, condos, houses, and property in general as in pertains to the Republic of Panama.

Why Panama Real Estate on a Panama Law Site? – The answer is simple. We have a large amount of clients that are interested in purchasing Panama Real Estate so we thought we would include some basic information about Panama Real Estate.

Panama Boom or Bust – Is it false or real? This is a good question and only time will reveal the true answer. Two years ago prime Panama City Real Estate could be had for $900 - $1000 per square meter. This price included condos, houses etc. Land for sale was of course priced differently. Please bear in mind that Panama has no MLS. I am talking beautiful 40+ story buildings with concierge, security, enclosed parking, pool, and unobstructed water and city views. Now we are seeing prices that hit $3000 a square meter for newer properties that are not as nice. What is going on is the real estate market trying to see how high they can drive prices as fast as they can. Flipping is a common way to get the prices up high. Can they sustain these prices? Will the actual investor owner occupant ever fund the actual unit and live in it on completion? We will look at some of these issues.

Panama as a Retirement Haven – Often quoted as being the number one retirement haven is something Panama is riding high on. And of course this is affecting the cost of homes. However when Panama received this rating the cost of prime Panama City real estate such as houses or condos, was $900 - $1000 a sq. meter. Let’s see how it fares as a retirement haven with prices of $2000 to $3000 a sq. meter. In the last year we have seen many restaurants raise their prices 15% or so just because they could. Once this trend starts it tends to keep going. I have spoken to people from Mexico who told me that drinks were $1.50 a drink and then before you know it some years later drinks are $7.50. So many people have moved here recently that the cost of a live in maid has risen 20% and now maids are even hard to find at any reasonable price. The agencies ask one to pay $250.00 per month, where two years ago maids were available for $160.00 and last year they were costing $200.00 per month. One year ago you just went to an agency interviewed a maid and took her home and she started work all in a few hours.

The traffic is getting noticeably worse, much worse. The construction causes bottlenecks. There are more people and more cars. Every new home, apartment or condo usually has at least one car, sometimes more. There are at least 25,000 homes either newly completed, under construction or in planning. We could assume that will mean another 30,000 cars. Now we need to add in extra vehicles to service these new added residents. There are delivery vehicles, service vehicles like for telephone service, cable, food delivery, more taxis, and more buses, more of everything. Panama City is a city of 7.9 square miles so this is a serious increase in traffic, very serious. How will Panama City fare when street parking is non existent and the roads are land locked? The government has plans, decent plans but we will need to wait some years to see if and how they are implemented.

Retirement Haven Attractions – The main pull Panama has is in these areas: weather, cost of living, crime rate, beaches and proximity to the USA. The weather is not going to change so we will leave this subject alone. There are a lot of foreigners looking for a place to retire where they can comfortably live on a pension and their savings. Panama is even seeing newly built assisted living communities popping up. Retirement is very cost effective in Panama and those on a pension can get granted a Pensionado Visa which entitles them to discounts on almost every major expense greatly helping them preserve their savings.

Panama Crime Rate - The crime rate has maybe changed a tiny bit upwards but Panama is still a very safe country and this is not likely to change. The Police do a good job, they are vigilant and criminals get apprehended. Panama has a lot of trouble with illegal immigrants from Columbia that engage in crimes of various sorts. The Police really manhunt these criminals and roadblocks are not uncommon. Violent crime other than domestic abuse is very low. Panama has recently suffered from some home invasions which in many cases were attempts that failed. The single family home is generally more at risk. Those that practice good sound security with alarm systems are not the targets. Usually there is some sort of an inside job element at work like workmen that lawfully came into the house act as spotters for the crew doing the robbery. There have been a few home invasions in brand new hi-rise buildings. Again it is suspected that the building security people were operating in conspiracy with the thieves. Most residents have their guard down in these condos. They have one lock on the door relying on building security to keep them safe. They are asleep in the back bedroom with the air conditioning on, the bedroom door closed and do not hear the intruders enter while they use pry bars or drills to get in through the door. If the people went to a security door like multi-link this would keep the intruders out. If they even used a reinforced door frame and a strong metal door with two serious locks this would probably be enough to thwart such an attack. Of course the best is to additionally alarm the entry doors and the balcony doors so a call goes to the alarm dispatcher and a siren goes off if tripped. In the older buildings the people are wiser to things like crooks working with the security guards of the building so the security dare not try something like this. In the brand new buildings where the residents are mostly new to Panama there were a few incidents. Generally the police round the whole gang up and it stops. We never hear of car jacking, people getting snatched off of the streets, retail store robberies, taxi driver robberies, or armed robbers on the streets. Panama is a safe place. The police will be courteous to you, unlike what is experienced in North America and other countries. The police in Panama do not like any violent crime. If you go around and point a gun at someone you would literally be taking your life in your hands because the police may shoot you very fast for such behavior and ask questions later. They will demand the bad guy lay down his weapon immediately and after an extremely brief wait proceed to shoot the bad guy. If one is interested in owning a gun it is not very hard to do so if you have a legal residency in Panama. If you can own the gun lawfully, you can carry it concealed as well. Panama does have a few bad neighborhoods where on would not want to go through day or night. In these neighborhoods there are street gangs similar to Mexico and North America. The gangs are not active outside of their neighborhoods. They recently had a gang gun fight over gang turf and stray shots went into houses of innocent residents of these poor neighborhoods. One of the shots hit a gas tank and caused a major fire. This will probably prove to be a serious mistake on the part of the gangs and will probably result in their being broken up by the police. Interestingly enough several years ago there were no bad neighborhoods in Panama that were so unsafe you could not go through them. Again in order to be fair no neighborhood any of you readers are likely to reside in has such gang activity and you would probably have a lot of trouble even finding these isolated bad neighborhoods.

Panama Cost of Living – This is going up fast and hard. One of the biggest attractions to the retiree was the low cost of homes which is going away as fast as the realtors can drive the prices up. When one considers that the real estate prices (condos and houses) are down in USA and Canada one can see it is a double whammy for the retiree from North America. When they sell their existing residence they will get less than they would have one or two years ago. A lot of USA real estate is down 25% to 40% and the time required to find a buyer at these much lower prices can often be one year. The retirees are forced to wait for the market to turn around. Nice idea but I can not find any reasons for this turn around. Unemployment is up in the USA. The manufacturers are leaving the USA or already have left. The government regulations, controls and taxes are killing the remaining businesses and even the icons like General Motors are going through layoffs and possibly facing bankruptcy. Home foreclosures and bankruptcies are at an all time high. Turn around, well as a minimum should not be expected any time soon, if at all. So the USA retiree buyers are no longer a good market. Some can still afford to come but why would they want to pay the high prices Panama is striving for. There are other places to go in Latin America that are still cheap and by cheap we mean housing is 40% of Panama prices or less, restaurants and food are also 40% of Panama prices. The real estate price rise is forcing the developers to look at new markets for buyers. Generally they go to the EU for buyers now. Panama is not 2.5 hours away from the EU countries. What they get from the EU is flippers. People who want to buy in pre-construction and then sell before completion for a nice leveraged gain. This is not a real buyer. These investors never intend to be owner occupants. We are already seeing investors who actually closed on completed units offering lease purchase agreements to potential buyers because they can not re-sell the units at a gain. The general theme could be a lot of non-owner occupied units on the rental market which means a drop in prices on rentals and purchase prices. We are hearing of investors who paid money down on projects not yet completed trying to sell them at a loss and not able to find buyers. Hmmm wonder if they will actually fund the unit at completion?
Some of the Panama City condo projects are not real projects at the time they are marketed. A developer gets an option or control of a piece of land. He then puts up a big billboard with an artist rendering of the project. A model is built. A sales office is set up. Now the project goes into the sales phase when there is nothing there except a lot, a fence and a billboard. There are no approved plans, approved blueprints, zoning authorizations, building permits, nothing. It is a concept more than a project. If the marketing is not successful at projected prices then it is scrapped. If the marketing is successful then the developers go and start getting everything approved of course they are already collecting deposits. They may hit snags in the plans. An 80 story project may only be allowed to be a 55 story project. But moving along the developers open up sales offices in foreign countries making presentations to foreigners who may never ever come here and sell them the units. Problem is these people are flippers not serious buyers. The project starts based on sales to flippers. The flippers flip once or twice and now like in musical chairs the last layer of flippers have bought in too high and can not find any more buyers. Will they actually fund the unit on completion, walk away or do what. Will the bank get scared as the flippers disappear and shut down the projects? Time will tell. Generally the flippers are doom and gloom for the developer.

Panama Infrastructure – Panama has roads that were designed for the population ten years ago, the growth is taking its toll on traffic conditions and will continue to do so. Panama lacks most of the appeal of the large cities like: Rome, London, Naples, Paris, Tokyo, New York, etc. The shopping is limited. There is a lack of theatre, opera, ballet, dance companies and symphonies. There are some medical centers like John Hopkins Hospital but it lacks the medical facilities of the large cities of the world. There is no major league baseball, basketball, football, hockey etc. There is soccer. There is no major stock, options or futures exchanges. Panama manufacturers precious little and its industry is basically banking and service industries. Work visas in Panama are hard to come by so hardly any incoming residents are here to work or start businesses. New office space projects are sitting empty. Businesses are not coming to Panama. New jobs are a result of the retirees but are mostly service industry positions.

Panama has a fine airport and has several airlines offering serious service but it is nothing like Charles De Gaulle airport with hundred of flights daily.

Panama has some fine beaches. The beach resorts are barely built up with few beach front hotels and they with the help of the realtors are running their prices up as fast as they can.

Panama has some very nice restaurants with great food and reasonable prices. Panama does not have world class restaurants like Paris or London.

Panama has no mega entertainment centers like Six Flags, Disney, Universal Studios etc. There is only one real tourist draw site – the Panama Canal.

The point of all this is Panama realtors want to sell property for $3000 a square meter hoping to eventually get it up to $5000 a square meter and that is nice but why the heck is someone who spends that kind of money on a home going to come to Panama to live. What is in for them? Does Panama have the allure of the Left bank of Paris? There is no Metropolitan Museum of Art in Panama. The waterways of Venice are not here. The subcultures of Amsterdam are not here. The history of London is missing. The Broadway Plays of New York are not here. The wonders of modern Tokyo are not here. The food and history found in Rome again not found in Panama. The people that pay big money to live in these cities are not coming here. The flippers are the ones who are the buyers. Panama’s big pull was it is only 2.5 hours away from Miami by air. Great. Now the Miami area real estate prices are down 40% which sort of throws a wet blanket on the Miami sale situation for Panama developers. The EU countries are many more hours away and direct flights are not commonly available.
Panama has no industries with high paid executives except for the banking industry. There are 150 banks, say each bank has 20 high earning executives that comes to 300 people and the vast majority of these people have been here since before the real estate boom so they are not viable prospects for hi-end real estate purchases. Panama has no hi-tech manufacturing industry like Taiwan, or China. Panama does not make cars or machinery. We just have no idea who is going to pay these prices to live here in panama. We do understand why people would invest as flippers looking for a quick gain.

Panama Rural Real Estate – If for some reason against all fundamental indicators Panama real estate takes off and prices soar how do they compete against the developments reaching out into the suburbs with much lower prices. There is no shortage of land in Panama. When you drive through the countryside you quickly realize Panama could easily house millions more people. So the prospect for lower price houses in the suburbs is very real and again another factor against high real estate prices sustaining in Panama. We are even seeing apartments popping up in the suburbs although they often start out as a condo project.

How to Buy Panama Real Estate – What we think the shrewd investor should do is buy only existing housing. If you can walk in, see the closets, flush the toilets then it is real. The older condos seem to have been built much stronger and better and their prices are not as high as the new ones – no flippers driving prices up, get it. It is real cheap in Panama to resurface cabinets, redo closets, bathrooms and kitchens. Most of the floors are marble or tile and can be polished in a few hours. Remember the walls, floors and ceilings are thick concrete. Go after existing housing that is several years old. Avoid the not yet completed projects, not telling how long they will take to complete if ever. The new construction condos will probably begin to drop in price once the flippers leave the market. Some of the projects have been dropped before construction even started, more will likely be dropped in a similar fashion. Buyers may not fund at completion since they can not flip them profitably so they will walk away and take a loss on their deposit. This means the bank and/or the developer will be carrying inventory. Banks do not like to carry inventory. This means lots of rentals and lower prices. When there are a lot of rentals sale prices can drop, why buy when you can rent cheaper. One could rent for a while and watch the market for a drop. Avoid building your own house. There are shortages of building materials and you could get messed up pretty good especially if you have never built in Panama before. Leave this to people who have lived here for several years. Never sign anything without your lawyer (hopefully us) reviewing the documents first. Panama is still a great place to live, just avoid the real estate games and enjoy the good life.