There was strong demand from US, Canada, Venezuela and Colombia, and the improving economy of some European countries like Spain and UK also helped. So too did a lower supply of new apartments.
The election of rightist businessman Juan Carlos Varela as president in May promises continuity, and a reduction of tensions with Venezuela.
There has been a noticeable rise in the last six months in property values in waterfront districts like Balboa Avenue, Punta Pacifica and Costa del Este.
Today’s vibrant scene contrasts with the price declines of recent years. After the building boom, prices in many projects dropped 30% to 50% from 2008 to 2012 according to industry estimates.
Analysis of Panama Residential Property Market »
Apartments away from the beach sell for slightly less.
Gross rental yields remain good, ranging from 8% to 9.3%, with not much difference between apartment sizes. Gross rental yields have somewhat declined over the past 2 years on smaller apartments, but have arguably improved on beachfront apartments.
Rental income is also subject to VAT at 7%.
Capital Gains: Capital gains realized from transactions not related to business activities are taxed at a special flat rate of 10%. Otherwise, capital gains are taxed at the standard progressive income tax rates.
Inheritance: Inheritance tax was abolished on 26 December 2002.
Residents: Resident individuals are taxed on their Panamian-sourced income at progressive rates, from 15% to 25%.
Rents: Rents can be freely agreed between landlord and tenant. In general, lease agreements can freely incorporate increases in the rent every certain amount of years, as agreed between the parties.
Tenant Security: In general terms, the court systems works, although the caseload is substantial and it may take several months to finalize the evictions, says Patton, Moreno & Asvat, a Panamanian law firm.
Martinelli was a dynamic and pro-business president, but was widely seen as authoritarian, and in 2011, The Economist described foreign investment as hurt by "doubts about the rule of law", citing suspected corruption in the bidding for the metro contract and the flooding of a wealthy Panama City neighborhood with sewage due to a lack of enforcement of planning laws. Reports of Martinelli receiving a bribe from Italian president Berlusconi featured prominently in the election campaign. There was intense bitterness between the candidates. Hearing of Varela's win, Martinelli said "I know the candidate, and really, may God help us!".
Varela, a former Martinelli ally, is a free-market conservative, but he takes office with a legislative minority that will force him to negotiate with the centrist and centre-left politicians that dominate Congress. Despite winning the presidency, Varela's Panameńista Party only got 11 of the 71 seats in Congress which were also up for election.
The new president is likely to continue former President Ricardo Martinelli’s investment program that maintained strong economic growth for Panama, but also says he will focus on reducing inequality and helping the poor.
Among the first countries to congratulate Varela was Venezuela, which earlier this year broke ties with Panama, accusing the Central American nation of fomenting a coup against President Maduro by offering support to a Venezuelan opposition leader. Maduro has announced that his government is restoring diplomatic relations with Panama now that the country has a new president.
The ongoing US$5.25 billion expansion of the Panama Canal, which began in 2007, was delayed with cost overruns amounting to US$1.6 billion. Currently 70% completed, the project will allow the canal to accommodate larger ships, and is expected to more than double its average annual earnings of US$2 billion to around US$5 billion in 2015.
The United States and China are the principal users of the Panama Canal. In 2007 Panama and the United States signed a Trade Promotion Agreement, or a free trade agreement. Panama approved the TPA the same year, and US in October 2011. The agreement took effect since October 2012.
Other major infrastructure projects include Panama’s metro rail system, the first in Central America, with Line 1 having been completed in April this year, while the second line is expected to be completed in 2017, as well as the planned US$8 billion upgrade of the port of Colon.
Panama’s economic growth is expected to remain buoyant over the medium term, as it continues to enhance its regional and global logistics role for the movement of goods, capital, and people and its moderating inflation.
The expansion of the Panama Canal is not just expected to boost annual revenues upon completion, together with other major infrastructure projects, it will improve the connectivity of the country, and breathe new life to the economy and the real estate market.