Despite the recent economic downturn, investment interest in the country has not wavered. Many developments are being built, spreading to the outskirts of Panama City, and to the East and West of the country as well. Both apartments and stand-alone homes are being built.
In 2009 Forbes named Panama as one of the ten best retirement havens in the world. Panama’s advantages include ease of access from the US, world-class amenities, good beaches, low cost of labour and low taxes.
Panama City has been a long-time favourite of foreign nationals. It is divided into two main areas – the old colonial town of Casco Viejo, and the modern business and shopping district of high-rise buildings and malls.
Most properties in Panama City are apartments. Average prices for upscale properties depend on size and location. According to Global Property Guide figures, prices for Panama City at the end of 2010 were as follows:
• Inland apartments (90 sq. m.) – less than US$150,000
• Inland apartments (350 sq. m.) – a little over US$500,000
• Beachfront apartments (80 sq. m.) – a little over US$175,000
• Beachfront apartments (350 sq. m.) – more than US$550,000
• Beachfront houses – a little over US$900,000
Foreigners can buy properties in Panama except for islands and properties located 10 km from the frontiers. It is advisable to buy titled properties instead of properties with possession rights (derecho possessorio) only.
The balboa is pegged to the US$ at US$1=PA1
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 5%.
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.
However Martinelli’s Cambio Democratico party is a personal project with no historical lineage, and is largely populated by outcasts from other parties. Ricardo Martinelli come from southern Veraguas, long relatively conservative. There are three members of the right-wing Catholic organization Opus Dei in the Martinelli cabinet, but there are also Jewish ministers and the president has his following among Evangelicals.
Martinelli replaces a notoriously corrupt administration. But these things are not swiftly mended, given also that the legislature is also highly corrupt, and the court system, and most other things. Sure enough, despite the positive initial noises, the old worries have resurfaced. The administration has something of a case of ‘security paranoia’, with potentially alarming moves to change the constitution, a swiftly worsening human rights and native rights situation, and worrying new curbs on press freedom.
Former President Martin Torrijos’ referendum to expand the Panama Canal was massively supported in October 2006. The ongoing expansion of the Panama Canal accounts for about 25% of GDP. The project will allow the canal to accommodate larger ships, creating 7,000 direct jobs and 35,000 indirect jobs in the complementary services sector and canal transit activities. The canal expansion will also increase Panama’s revenue from shipping tolls and export quantities. Annual trade growth is expected at 11.6%.
Finally, a trade Promotion Agreement between the United States and Panama was signed in 2007, giving specially good access to the US market, but neither country has yetapproved the Agreement
Panama is an upper-middle income nation, based on its GDP per capita. More than US$13 billion worth of infrastructure projects is planned, including the US$1.2 billion metro system scheduled to open in 2014. But poverty and social inequality remains a problem, with over one third of the population in poverty. The expansion of the Panama Canal has yet to generate any visible improvement in this regard.
According to the IMF all the canal work could lead to an overheating of the economy. IMF chief Dominique Strauss-Kahn has warned the Panamanian authorities to keep an eye on inflation, given that Panama is a food- and oil-importing country.