Market in Depth

Panama's housing market is now depressed

Lalaine C. Delmendo | November 13, 2020

Panama's housing market is now depressed. Homes sales and residential construction activity are both declining. Property prices have fallen in most major cities.

Foreign buyers have buoyed Panama's housing market in recent years, pushing up prices by 5% to 10% annually. Foreign buyers tend to be from the United States, Europe, Canada, and Latin America.

However this year, there is almost no market activity due to the coronavirus crisis. “At this time the decline in our sector may be between 87% and 90% of activity because we are simply not working,” said Elisa Suárez, executive director of Convivienda.

“Practically, we have had almost zero activity this year,” Suárez added.

In Panama City, the country's capital and largest city, the average price of apartments fell 4% y-o-y to US$2,007 per square meter (sq. m.) in August 2020, according to classifieds platform On the other hand, the average house prices increased by a minuscule 0.8% y-o-y to US$1,501 per sq. m. over the same period.

In Panama's other major cities:
  • In San Miguelito, the country's second most populated city, apartment prices fell by 1.3% to US$1,790 per sq. m. while house prices dropped 9.2% to US$1,129 per sq. m.
  • In David, the capital of the Chiriquí province, the average house price fell by 15.6% y-o-y to US$784 per sq. m. in August 2020
  • In La Chorrera, the capital of the Panamá Oeste province, houses prices fell by 13.3% y-o-y to an average of US$752 per sq. m. in August 2020
  • In Santiago, Veraguas province's capital, the average houses price plunged 36% y-o-y to US$460 per sq. m.
  • In Penonomé, the capital of Coclé province, the average house price surged 80.7% y-o-y to US$1,339 per sq. m.
  • In Colón, the capital of Colón province, house prices more than doubled to US$1,511 per sq. m. in August 2020

Residential construction continues to fall. In the first five months of 2020, the value of residential construction plummeted by almost 35% y-o-y to PAB 162 million (US$ 162 million).

The previous year was unusual. House sales rose strongly by 30% to 8,034 units in 2019 from a year earlier, according to the National Board of Housing Developers (Convivienda). Likewise, transaction values soared 58% y-o-y to PAB 875.83 million (US$ 875.83 million) last year.  But construction fell 14.3% in 2019 and 40.5% in 2018, according to the Instituto National de Estadistica y Censo (INEC).

Tourist arrivals ground to a halt after Panama President LaurentinoCortizo declared a total lockdown and suspended international flights in March 2020 to contain the rapid spread of the virus in the country. The government has recently announced that international aviation and tourism activities will resume on October 12, 2020.

Panama residential property prices
Foreigners can own real properties in Panama, and are accorded with the same property rights as Panamanians. However, mortgages can be difficult to obtain, especially for foreigners, and the purchase process can take two to three months. More than 80% of real estate transactions involving foreign buyers are in cash.

Analysis of Panama Residential Property Market »

Rental Yields

Panama: firm prices, yields good

Gross rental yields in Panama have declined somewhat over the past few years. But the gross yields in Panama - the rental return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs - are good, by international standards. Yields range from 5.7% to 7.3%.

There isn't much difference, in terms of yield, between beachfront and further back. Beachfront is more expensive, but you get a better rent. Smaller apartments do tend to yield more.

Read Rental Yields »

Taxes and Costs

Taxes are quite high in Panama

Rental Income: Net rental income earned by nonresidents is taxed at progressive rates, from 15% to 25%.

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%.

Read Taxes and Costs »

Buying Guide

Total transaction costs are low in Panama

The total roundtrip transaction costs for buying and selling properties are around 7.30% to 9.30%, including the real estate agent’s fee at 3% to 5%. The seven procedures needed for the registration process can be completed in about 22 days.

Read Buying Guide »

Landlord and Tenant

Panama's tenancy laws are pro-landlord

Panama’s rental market is generally pro-landlord.

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.

Read Landlord and Tenant »


Export-oriented Panama is Latin America’s Hong Kong

The Panama Canal accounts for about 40% of the country’s economy.

For the past decade, Panama was hailed as one of the fastest growing economies in the Central American region, with an annual average GDP growth of 6.2% from 2000 to 2019, based on figures from the International Monetary Fund (IMF).

Panama gdp inflation
“This increase is explained primarily by the behaviour of economic activities related to the external sector. Among them, those of the Panama Canal, air and financial services stand out positively,” noted a recent report of the Comptroller General of the Republic.

The US$5.25 billion expansion of the Panama Canal, which began in 2007, has experienced cost overruns amounting to US$1.6 billion. But the expansion, which started operations in June 2016, has doubled the Panama Canal’s capacity, with wider and deeper lanes and locks, and a new lane of traffic allowing more and larger ships. Last fiscal year’s tonnage of 469 million Panama Canal tons (PC/UMS) was the highest in its history, and a 6.2% increase from the prior year.

However the COVID-19 pandemic, trade wars and the suspension of the cruise industry have taken a toll. Transits through the Canal fell 8% y-o-y to less than 2,800 in Q2 2020.

The government is optimistic. “Despite the challenges faced earlier this year, I am confident we will see a steady recovery going into our 2021 Fiscal Year for both the Canal and its customers,” said Panama Canal Administrator RicaurteVásquez Morales.

Recently, the Panama Canal Authority decided to extend the temporary relief measures for shippers introduced in May 2020, including the suspension of advance payments for transit reservation fees and other changes.

In Q1 2020, Panama’s economy grew by a minuscule 0.4% from a year earlier, a sharp slowdown from annual expansions of 3.3% in Q4 2019, 2.7% in Q3, 2.9% in Q2 and 3.1% in Q1.

The economy is expected to shrink by 2% this year, its first contraction since 1988, according to the IMF. Unemployment is also projected to rise to 8.8% in 2020, up from 7.1% in the previous year and the highest level in 15 years.