Simply incredible. That's the only way to describe the property boom in Panama.
About 30,000 units were built between July 2006 and July 2007, another 40,000 announced and/or being built, and rental yields are going through the roof. Tourism and business are equally attracted. Global corporations like Hilton are building skyscraping hotel complexes and giving Panama City a skyline to rival any of the world's greatest cities. This may go some of the way to explain the influx of American retirees chasing cheap living in the sun. But where has it all came from, and why now?
In the case of property booms in Eastern Europe, it was easy to see where they came from: breakup of the Soviet Union and entrance into the European Union. But in the case of Panama, it is really more to do with what Panama hasn't done and what the U.S. wants to try and stop them doing: joining forces with Hugo Chavez's Venezuela in his socialist war of rhetoric with the U.S. and the West.
The closest thing to a trigger for the boom arising from this U.S. policy track is handing over control of Panama's canal. The Panama Canal is one of the most important in the history of international freighting, because it runs right through Panama to connect the Atlantic and Pacific oceans. This meant ships no longer had to take the treacherous routes of Drake Passage around Cape Horn at the southernmost tip of South America.
Handing over the Canal has been a massive boost to the Panamanian economy. But more than that, the U.S. is putting money into the Panamanian economy in the hope that the boom will set an example for other states that either already are, or are considering joining or forming an alliance against Western interests.
This U.S. policy actually seems to be working. More U.S. retirees are buying their retirement homes in Panama than anywhere else, and the country that has secured its place as the fastest growing Latin American economy is lining up to take its place as one of the hottest property investment destinations of 2008. Here's why:
A very conservative estimate on capital appreciation is 15-20%. Rental yields in the big cities are an astonishing 11.23% on a property of 190 sq.m, amazing for a property of such a size; another plus is the pro-landlord rental laws. The buying process for foreign investors is also incredibly simple, with only 7 stages that can be completed in around 44 days. There are no restrictions on foreign ownership – according to the salespeople I have spoken to, those are two of the key issues people look for when buying an overseas property: an easy buying process and freehold rights.
Article comments
1 - Jay
I moved to Panama in 2003. 5 yrs. ago the real estate boom was just starting. The real reason was that real estate investors began to promote Panama as a retirement haven. Later the Panama government joined this promotion efforts. The U.S. is not the largest foreign investor in Panama. If you take a look you will find that Spaniards and Venezuelan are investing heavily in Panama. The purchasers of the luxury condos in Panama are in its majority U.S., Canadians and European retirees. Wealthy Venezuelans running away from Chavez regime are starting to arrive to Panama. The Canal transfer 9 years ago has little to do with the real estate boom. The Canal expansion has to do it. The country has received a lot of exposure and more investors of all types have been attracted to this Caribbean country. Panama is basically a Caribbean culture. They have very little to do with Central or South America. Historical ties are inexistent and their culture has nothing to do with central or South America.
2 - Jimbob
I would agree with Jay except his last two sentences. Each countries culture is unique and made up from the people that live there. Yes Caribean has an influence similar to some influence from countries to east & west to a certain extent making it uniquely Panamanian culture.
3 - MR. DISENCHANTED
I ,ALSO, HAVE LIVED IN PANAMA 5 YEARS. A GRINGO FROM THE STATES. IT'S A GREAT PLACE WITH WONDERFUL PEOPLE BUT THE "HYPERS" HAVE SPOILED THE FLAVOR. TRUST ME THE BARGAINS ARE GONE AND THE GREED FACTOR IS EVERYWHERE. THE OLD BEAUTIFUL HOUSES OF MARBELLA, SAN FRANCISCO, BELLA VISTA ARE ALL GONE ,REPLACED WITH ANOTHER CONDO TOWER. THE TRAFFIC IS SO BAD THAT YOU ARE CAPTIVE IN YOU HOUSE.... UNLESS YOU WANT TO SPEND A FEW HOURS IN THE CAR. THEY ARE WORKING ON THE ROADS, BUT WILL NEVER CATCH UP. ELECTRIC RATES ARE THRU THE ROOF AND RISING AND YET THEY KEEP OOMING ....IF IT SOUNDS TO GOOD TO BE TRUE... IT IS. I HATE TO HAVE SEEN IT CHANGE SO QUICKLY.
4 - Jim
I purchased a pre construction condo unit in 02/07 and hope to flip it for a profit. I know it is a risk but I think I will do well. Panama City is very modern with malls, nice hotels and casinos. Inside one of the modern malls you would think you are in an expensive mall in Miami, Florida. I think the traffic is bad too, but I have faith in Panama. It has something for everyone. Beautiful beaches, wonderful hiking areas in the hills, attractive women and all this is along with stable banking and great tax exemption laws.
5 - James
I think many people with savings seek to escape the collapsing economies of the bigger countries. This is great for the buyers and places like Panama, it will strengthen their economy and provides a place for buyers to hold out while their home economies repair. This will boost the property value in Panama, giving the investors something to sell when/if they return to buying in their home countries.