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Author: Klaus Happ
Real Estate Market Report Panama 2018 / 2019
This “Real Estate Market Report Panama” gives an overview about the development of the last years and describes the current situation. In 2010 I started to focus on the real estate market in Panama and then in 2013 I made my first real estate purchase. After years of research and network building in Panama, my own real estate company “FRAPAN-Invest” started operations in April 2017 and at the beginning of 2018 we started together with “arsago Real Estate” to build up a real estate portfolio (link). In the meantime, we have successfully completed various property purchases and also manage the properties.
To understand Panama and the real estate market in particular, I start with the main events in Panama in the last century:
- 1903 / Panama declares itself independent of Greater Colombia with the help of the USA. At the same time Panama adopts the USD as its currency and the construction of the Panama Canal by the USA begins
- 1914 / Completion of the Panama Canal
The basis for a solid and sustainable economy was set by the introduction of the USD and the construction of the Panama Canal.
- 1977 / US President Carter and Panama General Torrijos agree that the Panama Canal and the entire Canal Zone will revert to Panamanian sovereignty and control
- 1989 / The USA deprived dictator Noriega of power and Panama decided in the referendum to surrender its own military and to place itself from now on under the protection of the USA
- 2000 / The USA hand over the Panama Canal to Panama and all associated rights and assets
Panama was established in 1903. However, the country was “reborn” after the takeover of the Panama Canal on New Year’s Eve 1999 / 2000. Because now the country was additionally entitled to the income from the Panama Canal and the new opportunities resulting from it. In the first three years, investors still held back, because they wanted to wait for the development of the “new” Panama.
Panama already had a considerable skyline before. But starting in 2003, a real estate and construction boom began, as a result of which a large part of today’s known skyline Panama City was created.
- Early 2000s / Establishment of the Real Estate Tax Law, which states that all properties completed by 31.12.2011 remain exempt from property tax for 20 years
- 2003 – 2008 / Construction boom and massive rise in real estate prices. Real estate investors from North and South America invest in Panama. Increase in prime locations (Panama City, apartment, ocean front) up to 3,000 USD / sqm
- 2008 – 2011 / Decline in real estate prices due to the international financial crisis and the oversupply of real estate to prices in the low of approx. 2,300 USD / sqm for prime locations. Due to the conservative business policy, Panama’s banks will not experience a crisis during the financial crisis, as they are not invested in “US subprime”.
- 2012 – 2016 / Recovery of real estate prices to 2,700 USD / sqm in 1A locations.
April 2016 / The scandal of the “Panama Papers” shakes the country’s reputation and arrests it with prejudice. Although the “Panama Papers” do not have a major impact on economic growth (IMF forecast remains at around 6% p.a. for the next few years), real estate investors are holding back for the time being - 2016 – today / Due to the Panama Papers and the completion of major real estate projects, prices tend to move sideways or slightly lower (currently approx. USD 2,300-2,500 / sqm). At the same time, banks are now also more restrictive in granting loans and opening accounts for foreigners, also in order to no longer appear on the OECD and EU blacklists
For real estate buyers and to build up our real estate portfolio, we currently find a buyer’s market in Panama which, with the right strategy, delivers very interesting yield figures. While most real estate locations in the world have to struggle with very high purchase prices and correspondingly weak rental yields, we buy in ocean front prime locations at approx. 2,300 – 2,500 USD / sqm and rent at approx. 15 USD / sqm. This enables us to achieve rental yields of approx. 7% (net approx. 5%) in USD in the fastest growing country in the western world.
Property developers are currently going through a challenging phase in Panama, as they are facing a weaker market with the completion of their projects. We are not currently buying from property developers, but are buying finished properties in attractive locations at lucrative prices. We select the locations and properties in which the employees of multinational corporations and international organizations are expected to rent and live. Panama City is the headquarters of 250 multinational corporations, half of which have their operational headquarters for Central and South America in Panama (Nestle, Roche, Adidas, Bayer, Total, P&G, etc). The third largest United Nations headquarters in the world is in Panama. It is from here that they manage their activities in Central and South America. These are our target tenants and also the current tenants of the purchased properties.
Rental prices have come back slightly in the last two years, but with approx. 15 USD / sqm in the prime locations are still very attractive. In Panama, people are waiting for new government-driven projects that will boost the economy, bring people to Panama and have a positive impact on the rental market. In Panama, the 5-year presidential elections will take place next year. Currently we are in the pre-election year, which historically is always a relatively weak economic year, as new projects are put on hold until the new government. This is how Latin America works…The IMF forecasts GDP growth for 2018 at “only” 4.6% after a 4-week strike by the construction union in May. According to the IMF, this will be made up in 2019 with growth of 6.8% and in the following years between 5.5% and 6%.
After diplomatic relations with China (Link) were closed in 2017, China is investing heavily in infrastructure in Panama. China has appointed Panama as its location for its silk road project due to its geographical location within Latin America and Air China has been flying to Panama twice a week since March 2018. What does this have to do with the real estate market? Because the Chinese are now allowed to travel to Panama with visa facilitation, they are now also acting as real estate buyers and through the infrastructure projects there are new jobs, which in turn generates rental demand.
Basically, Panama’s economy has to struggle with the following problems:
- Poor education system of the population
- Corruption
- Reputation as a tax haven, although Panama is no longer on the EU or OECD blacklist (Link)
Furthermore, a widening trade war between the US and China would affect the profitability of the Panama Canal.
Nevertheless, Panama’s economy is currently growing faster than most of the rest of the world and according to IMF forecasts, and the Panama Canal has closed the fiscal year with a record year (Link). These are important elements for the attractiveness of the investment location and the real estate in Panama.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Major infrastructure projects in Panama
Panama’s economy has always benefited from major infrastructure investments. In 2019, the airport terminal 2, metro line 2, the third bridge over the Panama Canal, the new cruise port and the congress centre will be completed. And a new giant project is just about to start construction.
Photo © Autoridad del Canal de Panamá (ACP)
At the beginning of 2019, several major infrastructure projects will be completed in Panama.
- After the inauguration of the first metro line in Central America in Panama City in 2014,
Metro Line 2 is now close to completion. This will expand the public transport network and hopefully reduce the city’s major traffic problem a little. - The modern Terminal 2 of the international airport in Panama City should be opened in the first quarter of 2019. The airport is currently working well beyond its capacity limits and urgently needs the new terminal. With over 80 direct connections, Panama flies directly to far more destinations than any other airport in Central and South America.
- After a construction period of five years, the third bridge over the Panama Canal will be completed at the beginning of 2019. This bridge was built on the side of the Atlantic Ocean and is part of a major infrastructure plan by the government to develop the Caribbean side of Panama (85% of life in Panama is on the Pacific side).
- The cruise terminal in Panama City on the Pacific coast will be completed by mid-2019. Until now, cruise ships could only dock on the Caribbean side of Panama (city of Colon). Now thousands of cruise tourists will be able to arrive or depart directly from Panama City. This will promote tourism in Panama, which is still in its very early stages, and increase the low hotel occupancy rate in the city.
- With the visit of the Pope and the World Youth Day in Panama at the beginning of 2019, the new congress centre, which will be the largest in Central America, will also be opened. The project with construction costs of approx. 200 million USD will bring more trade fairs, companies and tourists to Panama.
Construction of the fourth bridge over the Panama Canal will start in 2019. This bridge will be built in Panama City and will completely change the traffic situation of the city. In addition to cars and pedestrians, this bridge will also bring the new Metro Line 3 across the Panama Canal, connecting the hundreds of thousands of inhabitants of the suburbs with Panama City. This billion USD project is divided into the construction of the bridge (Chinese consortium), the metro line and the purchase of the metro trains (Hitachi). Completion is scheduled for 2022.
The infrastructure projects mentioned are good for the economy, create jobs, improve the quality of life and are important elements for the attractiveness of the investment location and the real estate in Panama.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Record year for Panama Canal
The Panama Canal closed the 2018 fiscal year with a historic tonnage record, an increase of 9.5% over the previous year. This significantly exceeded the original forecasts for 2018. The revenues from the Panama Canal and the national currency, the USD, make the big difference between Panama and most other emerging market countries in terms of a country’s economic stability.
The expansion of the Panama Canal, which was completed in 2016, is paying off. The increase was driven in particular by liquid gas tankers (LNG & LPG), container ships, chemical tankers and vehicle transporters. LNG tankers could hardly use the original Panama Canal due to the draught of the ships. The following overview shows the sub-segments in the time before the extension of the canal (Panamax) and currently (Neopanamax).
62.8 percent of the cargo that crosses the canal comes from the United States or is destined for the United States. The main countries using the interoceanic route were: United States, China, Mexico, Chile and Japan. Panama is benefiting from economic growth in the USA. At the same time, however, Panama would also suffer from an intensified trade war between the USA and China.
The income from the Panama Canal is between USD 2 – 2.5 billion annually, which is a stable and high income for a small country like Panama with 4 million inhabitants. The country’s national debt, measured as a percentage of GDP, is around 39%, partly because of the revenues from the Panama Canal. This is low by international standards (EU 81%, USA 108%, Japan 235%).
The booming Panama Canal is an important component of the economy and promotes prosperity and the growing infrastructure in the country. These are important elements for the attractiveness of the investment location and the real estate in Panama.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Beach Apartments in Panama
If you are looking for a relaxing apartment at the beach with good infrastructure near the metropolis Panama City, Coronado is the place to be. Only one hour away from Panama City is Panama’s biggest and most developed beach area. On the beautiful beaches of Coronado you will find all necessary facilities of daily life like restaurants, supermarkets, nightlife and medical care. This makes you independent of the metropolis of Panama City, but still close enough to be able to dive into city life at any time.
The beach community Coronado originates in the 1970s. At that time, one of Panama’s wealthiest families built the first golf club in the area and in the following years expanded it to include a beach club. As a result, the first weekend homes in Coronado were built by families who live in Panama City but like to spend the weekend in their properties on the beach in Panama. As a result, there were the first restaurants, supermarkets, etc. in the area.
However, the real construction boom started in 2008, when one of the big Panamanian property developers came up with the idea of building the first large residential complex with apartments in Coronado, which met with great demand from North Americans especially.
There are four large supermarkets, several bars, a cinema, one hospital and much more, so you don’t have to leave for Panama City. The mountain range of Panama with the popular mountain village “El Valle de Antón” and always springlike temperatures is only 45 minutes away by car. The area is one of the driest and most sunny in Panama, so it is bathing season on 10 months a year.
In the Coronado area, there are about 15 such large residential complexes, three of which went bankrupt and were taken over by others. We prefer only three of these properties because of their location, quality, price, leisure facilities (pools, sports activities, restaurant, etc) and beach. In the last few years, the property market in this area has been characterized by slightly declining prices, as too much has been built. For apartments on the beach in Panama in good locations and qualities you pay about 2,500 USD/sqm in this area, which corresponds to the prices in Panama City. Maximum prices were paid in 2012 at just over 3,000 USD / sqm.
Unlike Panama City, renting by airbnb is allowed here, so you can rent out your apartment in Coronado at good yields. There is hardly any competition from hotels in this area with regard to rental. The rental period here is usually from the weekend up to six months. Tenants are people (locals and expats) who live in the city and spend their weekend and annual holidays here and tourists from Europe and North America. This area is particularly popular with North Americans, as flights to Panama from there are much cheaper than to the Caribbean. Furthermore, Panama is much cheaper and safer than most Caribbean countries.
No matter whether you want to use your apartment in Coronado yourself or as an investment property, we are happy to help you with your real estate in Panama.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Panama Canal is booming
Two years ago, the extension work on the Panama Canal was completed. Since then, the LNG (Liquid Natural Gas) giant tankers have been able to use the canal. Ships exporting natural gas and oil products from the USA are the fastest growing business for the Panama Canal, as annual revenue from passage fees has increased more than 20 times in the last two years.
For US energy companies, this means time and cost savings of over 30% on their way to their largest customers, the Asians and a large additional source of income for Panama.
LNG transports through the Panama Canal increased to six million tonnes last year and this year, according to Jorge Quijano, the canal’s manager, this figure is expected to almost double. In 2015 these were still at zero.
“It is a booming business that will continue to grow” said Mr. Quijano, “because Panama now handles about 45% of US LNG exports and 46% of LNG exports. These ships together account for about 10% of the canal revenue.
The fuel cost savings are one of the benefits of using the Panama Canal, which reduces shipping time from Asia to the US East Coast by more than 10 days compared to using the Suez Canal. “They consume less fuel but pay high tolls in Panama,” said Peter Sand, chief analyst at Bimco, a global shipping association. “The total cost may be the same, but the transport time saved is very significant.”
Mr. Quijano expects container traffic via the canal to increase by an average of 5% per year over the next few years. The channel also handles about 30% of US grain exports to Asia.
But he also warns of the danger of trade tariffs between the USA, China and Europe.
“We are just one link in the global supply chain (…)” said Mr Quijano. “I am confident that the US and others will approach world trade in a balanced way. World trade is good for everyone. The duties are not good for anyone.”
The booming Panama Canal is an important part of the economy and promotes the country’s prosperity and growing infrastructure. These are important elements for the attractiveness of the investment location and real estate in Panama.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
How to buy real estate in Panama
We have realised many different real estate purchases in Panama. With this article we would like to give you an overview of the most important steps when buying a property in Panama. Furthermore, you will find a description of the transaction costs in Panama.
Purchase Process in Panama:
Existing property
- Purchase offer and price agreement
- Reservation agreement (Usually digital signature, 15 working days, 1% deposit)
- Legal Due Diligence
- Technical inspection of the property
- Purchase contract (45-60 days closing, 10% deposit)
- Buyer: Application of an irrevocable letter of payment with his bank in Panama (amount must be in the account)
- Seller: Pay relevant taxes & obtain water and electricity certificates
- Notary appointment and handing over of the payment cheque
- Registration in the land register
- Cashing the payment cheque
Property in a real estate development
- Purchase offer and price agreement
- Reservation (Usually digital signature / e.g. 2 weeks, 10,000 USD deposit)
- Legal due diligence
- Purchase contract (Usually digital signature, 10% – 30% down payment, depending on project)
- Remaining deposits (up to a total of 50%) according to construction progress
- Buyer: Application of an irrevocable letter of payment with his bank in Panama (amount must be in the account)
- Seller: Completion of the property
- Notary appointment and handing over of the payment cheque
- Registration in the land register
- Cashing of the payment cheque
Once you have found your property, you can also complete the property purchase in Panama from home. Because you do not have to be in Panama for the above points, because you can do some of them online or with a power of attorney for your lawyer in Panama. Your lawyer will then represent you in the purchase process with a special power of attorney, which is best given to him during your trip to Panama. You must be there in person to open your bank account in Panama. Take the help of our lawyers to ensure that everything runs smoothly.
We accompany you through the entire buying process in Panama.
Our experience shows that our efficient process takes us about 3 months from price agreement to registration in the land register.
Transaction costs in Panama:
What are the transaction costs when buying a property in Panama? We would like to give you a brief overview of the costs involved in buying real estate in Panama.
- Usually the legal, notary and land registry costs together amount to approx. 0.8% – 1% of the purchase price (assuming a purchase value of 400,000 USD)
- The buyer usually pays the notary and property registry fees in Panama. The lawyer’s fees are to be paid by each party
- The bank fee for the above mentioned irrevocable letter of payment is 0.25% – 1% depending on the bank
- There is NO inheritance tax
- Exemption from property tax until 2031 for properties completed before 2011 / thereafter 0.6% – 1.0% p.a.
- Sales tax is 2% and capital gain tax 10% (on profits)
- Any brokerage fee (usually 3-5%) is paid by the seller
We are more than happy to help you with our experience when buying a property in Panama.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Real estate portfolio & strategy in Panama
After “FRAPAN-Invest” and “arsago Real Estate” from Frankfurt established a partnership for real estate investments in Panama in July 2017, we started to build up a diversified and profitable real estate portfolio (Link) in Panama in January 2018, in which investors participate as limited partners.
With the following presentation we would like to present the real estate market in Panama, our strategy and our current real estate portfolio. By clicking on the link you will be taken to the corresponding presentation ( Link).
The real estate market in Panama counts internationally as one of the most interesting locations for property investment. We would like to be your local trusted adviser and to take care of your investments in Panama.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Property management in Panama City
Since April 2018, we offer to real estate owners property management in Panama City. This allows us to offer real estate investors an all-in service for their properties in Panama (consulting, brokerage, purchase processing, management and investor trips to Panama).
As part of our management of properties in Panama City, we offer the following services:
- AirBnb service (marketing, administration, customer care, cleaning, etc)
- Long-term rental
- Furnishing and turnkey solutions
- Support in finding tenants
- Organisation and supervision of necessary repairs
- Network of reliable tradesmen
- Coordination of air conditioning maintenance
- Coordination of access to public service providers (water, electricity, etc.)
- Control of incoming rent and expenses
- Inspections
- Participation in owners’ meetings
- Monthly reporting
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. Furthermore, Klaus Happ will be happy to advise you personally on the subject of “Plan B in Panama”.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama