Latin America: Panama - Worth a Gamble?

Posted by Jude Buttle on Thursday, October 09, 2008

 In our fifth instalment on Latin America we sneak a peek at Panama. Most famous for its Canal, the country also has a spectacular coastline of palm fringed beaches and an astounding selection of tropical birds.

  

Country Overview

Panama is the southernmost country of Central America, situated on an isthmus and sometimes referred to as a transcontinental nation connecting the north and south part of America.

The real estate frenzy in Panama rages on. The expansion of the canal, a free-trade agreement with the US in 2006 and the rise of a service-based economy that provides administration back-up to American companies, has unleashed a building surge.

There are more than 35 towers going up, including the Trump Ocean Club, which is now under construction in Panama City. With another 300 towers in the planning process, it is estimated that there will be in excess of 40,000 flats on the market by 2010.

More condominiums are being built and major developments are underway as Panama starts to re-market itself as Latin America's regional logistics and services hub.

The county's GDP growth rate has been rising rapidly over the last four years. In 2007 GDP growth was 9.2 per cent, which followed on from 8.7 per cent growth in 2006, although in the first quarter of 2008, the increase was less impressive, due to the current concerns over the global credit crunch.  

Surprisingly, Panama's growth has been achieved with relatively low inflation - in 2007 it was only 2.6 per cent. Panamanian inflation is usually between one and three points lower than US inflation and the country has a Hong Kong-like system without a central bank.

The price of property and land in the country is soaring, but so is the cost of construction, with raw materials and labour charges rising.

Foreigners can purchase properties in Panama, with the exception of islands and properties located 10 km from the frontiers - according to the Panamanian Tax Code article 121. It is advisable to buy titled properties, which can be mortgaged, instead of properties with possession rights only, which cannot.

The country's capital, Panama City, has yields on apartments and condominiums reaching up to 11.23 per cent, for 190-sq. m. units. As the size increases, yields decline by 7.15 per cent, which is still a healthy figure.

Condominiums in Panama City are priced at an average of £955 per sq. m. This is slightly more expensive than houses located in coastal areas, which are selling for £795 per sq. m.

But Panama is still a country in transition, with poverty at just under 40 per cent, the continuing concern of corruption and the government debt increasing due to the Canal expansion project. Thus, there are still a number of uncertainties to put off prospective purchasers.

Problems in the US also appear to be moving southwards. Panama's economy decelerated sharply during the first quarter of 2008 to 6.9 per cent growth (annualized), a sharp downward turn on the 10.41 per cent economic growth during the same period of 2007.

Although still an emerging market, Panama continues to flourish as Latin America's call-centre capital, and with affordable prices, a sympathetic tax system and an increase in popularity, a shrewd investor could bag a bargain or two.

Property Info

Entry level - Construction has just started on this resort located near one of the most beautiful beaches along Panama's Caribbean coast, an hour's drive from Panama City. The development's apartments will range from studios to three bedrooms, each offering views of the ocean and mountain landscape. Prices start at £41,000.

Mainstream - A planned luxury ocean front development located in Santa Catalina, in Panama's Veraugas region. It is the first such development in the area and offers investors a laid back lifestyle surrounded by a pristine coastline and endless opportunities for outdoor adventure. The project boasts 220 upscale villas with spectacular views of islands, beaches, and the Pacific Ocean.  Prices start from £139,873.

Top of the range - Custom built just one year ago in Cardenas Village, this striking three level home has fantastic architecture and is adjacent to the neighbourhood's exclusive park. It boasts a spacious living-room with balcony and open island kitchen. Cardenas Village is a secluded quiet neighbourhood located in the refurbished area between Albrook and Clayton, near the Panama Canal. Price £393,940.

Search for property in Panama

Browse for property for sale in Panama

Photo by Steve Conover

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