Real Estate Overview

If you found this page and are reading this I assume you are from one of the following countries: USA, Canada, UK, Northern Europe, or Australia. I further assume you are thinking of investing in Panama and/or living here. In this introduction I am unashamedly trying to give you a cold harsh blast of reality shock! This article is mostly written from an American perspective but a lot of it is applicable to other countries as well.

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What you see in your own country (if you are reading this page it should apply to you) is not encouraging economically. The economy basically is receding and has been getting worse for a while. Inflation has been destroying your purchasing power. Unemployment is at a dangerously high level. Health care has been diminishing in quality for the last 25 years and the costs have been rising steadily the last 10-15 years at an alarming rate. Prescription drug costs are becoming staggering and insurance coverage is dropping, by the way prescription drug costs in Panama are about one third of the USA price. Hospitals are closing all over the USA in record numbers. Taxes are at an incredibly high rate while government benefits are at an all time low. America and many other countries have wobbly economies with massive debt loads. As of November 2005 the State of Vermont has taken official steps to secede from the Union, no kidding do a Google search for Vermont secession. I understand Hawaii and Alaska are right behind.

Now let's look at rising interest rates. Imagine what those variable rate mortgages will look like in a few months! What about all those mortgages in excess of three hundred thousand dollars - what are these people going to do? Sell, no way the new buyers will never qualify because the interest rates have pushed up the payments so much. So they hang on and suffer. Okay now let's look at rising gas prices. In the cold areas home heating oil costs are going to be $300-$400 per month higher this year (2005-2006 winter) than last year and they were high last year. So now the mortgage payment is up and so is the home heating cost. Now let's add in the rising gas prices. Take a family where there are two commuters going an hour each way to work in their SUV's. This is a common scenario in many parts of the USA. These people are spending an extra $400 - $600 a month on gas combined, and this gets added into the rising mortgage rates, the rising home heating oil costs, the rising health care costs. Wait it gets worse. When the food and hard goods manufacturers bill the supermarkets, stores etc. for food and goods they are adding in a fuel surcharge which gets added into the price you pay which means your cost of living is inflating again every time you buy anything in a store. Let's look at credit cards. Lots of people are maxed out on their credit cards. If they read the terms of agreement with their credit card companies they will see that if their credit scores get adversely affected or they are late in payments the favorable low interest rates they got will go to the marginal credit interest rates (think 18%+). The real bad news is that when the credit card companies run their credit reports and see that they are maxed out on their cards that reduces their credit scores and thus the high rates will kick in. Have you noticed that America recently changed in Bankruptcy laws making it very difficult for a person to use the protection of the Bankruptcy Courts anymore, this is not a coincidence.

More and more jobs in America are moving overseas. Levi Straus no longer makes any products in the USA. Yikes!! Do the big corporations know something we don't? Loss of jobs means that in turn more jobs will be lost since purchasing power diminishes when one is unemployed. What will happen when people can not afford the extra gas costs for their SUV's. If they go to sell their SUV's they'll find the resale value is thousands of dollars below what they owe due to declining used car prices on gas hogs. So selling is not an option for the average cash strapped family. Have you ever heard of an employer increasing wages due to rising energy costs, me neither. This winter you will see families walking around inside the house wearing down vests in America. People are already making fewer trips to the supermarket to save on gas. Carpooling is about to make a big comeback. In any event do you see rising housing prices in the USA as a likely outcome? I don't. I can find no reasons to make me think housing prices will rise in America for many years. Do you see declining housing prices as a likely outcome - I do. Hurricane season has now become a six to seven month event. Those that can move out of hurricane zones will do so and I expect they will be selling cheap and thus buying into lower price areas. Hurricane insurance costs will be skyrocketing after this season as well and the banks will take that into account decreasing the amount of mortgage a person can qualify for even further. Those in the cold zones will be suffering from those big heating bills this winter and this can only serve to drive down housing prices. The banks will take the rising energy costs into account when qualifying people making it harder to quality for the same value house one could qualify for two years ago and without the cooperation of the banks real estate prices decline. Rest assured the banks are quite scared about now.

Some of you will say - well if so many countries are going downhill economically what about the Republic of Panama? Well this is a good point. Panama is actually not dependent on any one country to any appreciable extent. In Panama 15%-20% of the economy is dependent on banking. Panama has about 150 banks that are from many different countries around the world which due to Panama's Neutral Status and Bank Privacy Laws has turned Panama into the Switzerland of Latin America. Panama is not in any tax treaties is one reason this goes on. Income tax evasion is still a civil offense in Panama. Panama is the Switzerland of Latin America but in reality the protections and privacy laws in banking and in general are better here than in Switzerland, check it out for yourself. What this means is that it is unlikely for Panamas banking system which is a vital part of their economy to ever get hurt since it is spread out into so much of the world.

In Panama there are still Bearer Share corporations which are owned by no one on record anywhere but by the person who has the papers for the corporation. Thus corporations can be transferred in a few seconds with no recording of anything. It is very common to have a bearer share corporation own real estate in Panama thus making the real estate ownership untraceable and most inconvenient for an entity that goes around confiscating assets which governments and lawyers are so fond of doing. This has given Panama a healthy business regarding corporation registration and formation which again is another aspect of the economy of Panama likely to not be threatened. Similar to this is the maritime ships registration business which also brings in a lot of money to Panama and again is most unlikely to be at risk.

To further assist people with privacy and protection Panama has foundations which no one really ever owns and one can have the bearer share corporation owned by a foundation. If you could ever penetrate the corporation far enough to see who owned it the circumstances would be most confusing so it is a commonly employed asset protection tactic used by people worldwide. Any sort of property can be owned by a bearer share corporation in Panama - a store, real estate, artwork, collectibles, jewelry. It is a way of owning and controlling things that are impossible to trace back to you thus protecting the asset from litigation etc. A bearer share corporation can not have a bank account without providing the bank with what is called the beneficiary owner of the account which sort of reduces the privacy value of this vehicle when it comes to banking. Could one have a bearer share company own the house they live in and pay rent to the corporation in cash getting receipts from the corporation, sure why not.

Panama does not import or export that much to the USA. Panama trades a lot with many other countries. I can not ever once remember seeing an advertisement of any sort in the USA for tourism to Panama. Panama has a nice and flourishing tourism industry but it is not all that America dependent. Lots of tourists come from Central and South America. Mostly American go to the Caribbean. Prices are good enough and the travel times are somewhat less. Panama tourism involves tourists from many different countries not being dependent on any one of them. Let's not forget the Panama Canal which generates one billion dollars a year in revenue which is a lot for a country of only 3 million people. They are considering expanding the capacity of the canal to handle super ships but in any event this revenue is most unlikely to go away, thus it is another ingredient adding to the stability of Panama. Panama is just beginning to exploit ecotourism another fantastic source of revenue. After this medical tourism will be pursued as another source of bringing revenue into the country. Panama grows things and manufactures very inexpensively - two vital ingredients for stability and economic growth. If this is not enough Panama uses the dollar as currency so you can have all the stability of the dollar and since oil is priced in dollars demand for dollars will be high especially with rising oil prices so you avoid any currency conversion costs and have stability. My bottom line is that Panama may very well be more stable and economically secure than your home country plus offer you a better lifestyle! Think about it!

Now there is a migration of people who want to live here which is just starting a real estate boom which you can still get in on at close to the ground floor. Remember such booms in the USA and how easy it was to make money. Remember buying a house and selling it at a profit before the construction was finished. Here is your second chance because this is happening in Panama right now. What is my point- sell your house while you can still realize some gains and come enjoy the good life in Panama while real estate is still a steal and what the heck buy a couple of spec houses or lots if you have the money - opportunities like this don't come around that often.

Housing costs are not what they used to be. Housing prices are shooting up in recent years as more and more Expats discover the advantages of life in Panama. The peak in housing prices will be at the very end of 2007 or in 2008 (my guesstimate) then prices will stagnate for a while and probably fix there. A price decline would require a shortage of incoming Expats which is something I do not see happening any time in the near future. Most Expats are probably buying homes/apts for an average price of $160,000 taking into account many live in many different rural areas of Panama (see our real estate advertising section for details). As long as the Expat can sell their current home for more than the cost of their Panama home they will keep coming. Many Expats are getting $300,000+ for theircurrent homes trying to cash out before the bottom falls out due to rising unemployment, rising interest rates, rising bankruptcies, energy costs affecting commuters and home heating oil costs soaring too. Many Europeans are coming here to take advantage of the high Euro. Since Panama real estate is priced in dollars it is like getting a 20% discount for the Euro buyer. Now when the Euro falls they sell their real estate which in Panama is priced in US dollars thus when they convert back to Euros post sale, they will buy more Euros with their dollars which would rise in value if the Euro fell. Sort of a fail safe for the European speculators which there are plentiful of these days.

I would speculate that Panama City houses run about $1000 a square meter (a sq. meter is slightly over 10 square feet). So a 200 square meter apartment (approx 2100 sq. ft.) would be $200,000. Now this would be the starting price and you could surely negotiate this down somewhat. Prices in other outlying areas will vary so do check our real estate section for current prices and offering with pictures so you can see what you'd be getting.

Rentals in Panama city come in two flavors - furnished and unfurnished. Furnished units are hard to come by. Most furnished units will not have really nice furniture, got it? The furnished apartments will usually have furniture that shows wear and may not be so clean, even if you spend $1900 a month. So what we learned was this. Furniture in Panama is very nice and cheap, real cheap. Like a king size bed, no headboard with frame for $210. The mattresses are great, not cheap foam but hand built and firm. We bought a nice sofa, love seat, plush chair with an Italian fabric we picked out, custom built for us in five days, delivered $595. The furniture here is not upholstery over fiber fill but solid foam, it is hand built and really solid. You can easily nicely furnish a 2 bedroom apt for $2000-$3000 assuming there are appliances which it probably will have. A nice brand new with warranty washer, dryer, stove, refrigerator will run about $1600 - $1700 delivered and set up. To really put the dog on and go first class for a 2 bedroom figure $5000 for furniture (not including appliances) and we are talking really nice stuff - rosewood, plush sofas with big pillows, solid wood all the way. If you spent $8000 on a four bedroom house it would look like $35,000 of furniture stateside but would wear better and be more comfortable. Dishes, lamps and stuff like that are really cheap. Consider not bringing your furniture down. Sell it and buy new stuff here with the proceeds, you can really do it. Anyway if you rent unfurnished there will be many more places to look at in the city or in the outlaying areas. Unfurnished rents are cheaper and you can take the savings and invest in your own furniture.

Okay in Panama City you can get a nice two bedroom apt in a decent neighborhood where you will be happy for about $900. If you want to live in a high end neighborhood by the water it can get up to $1800 which would be top drawer. Three bedrooms would start at about $1000 for a nice apt unfurnished up to $2500 for top drawer in modern buildings on the water on a high floor with an unobstructed view. We saw nice furnished apartments with views, three bedrooms for $1100 a month. Most all of these building will have some view - city or water. There will usually be a balcony. There will usually be a swimming pool and a gym but do not expect much with the gym typically too under equipped to be of any value. There will be enclosed parking (2 spots usually) and very adequate security. Nice comfortable apartments that do have closets. In the outlaying areas rents are less and the amount of available rentals is also less with furnished rentals being especially hard to find. If the project of building the extra canal goes through it is expected to result in an apartment shortage due to extra workers being sent here by their companies which of course means you could buy an investment unit furnish it and rent it out for big bucks for many years while the new canal is being built, not kidding about this. As a Pensionado, if you buy or build a new house, you won’t pay property taxes for 20 years, nor will you pay taxes on foreign-earned income. Make sure you check out our real estate section to get up to date prices on rentals and purchases.

Most apartments and houses have maids quarters. They are usually the size of a large walk-in closet with a full toilet attached and not air conditioned. This is the way things are down here. A maid will run about $200-$250 a month, her benefits will be about $27 a month. The maid is on 6 days a week, off Sunday (is this why so many people eat out on Sundays). The maid will cook, clean, do laundry and even shop for groceries. She may or may not iron - this is a sore spot with maids????? Maids will also serve as babysitters but many have an additional nanny. You can also hire a driver for about same money if you let him live in. Some may elect to have a live in driver and have a day maid. Most dwellings only have accommodations for one servant to live in. A driver drives you to restaurants and then when ready to leave you call him on cell phone and he comes to pick you up in front, same for going to mall, movies, bank etc. He will also help with errands and around the house.