Panama's residential property price movements remain erratic, amidst increasing demand but weakening residential construction activity in the country.

Table of Contents

• Housing Market Snapshot
• Demand Highlights
• Supply Highlights
• Historic Perspective
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

In Panama City, the country's capital and largest city, the average price of apartments rose slightly by 0.83% to US$2,055 per square meter (sqm) in Q2 2024 from a year earlier, following year-on-year increases of 1.75% in Q1 2024, 2.74% in Q4 2023, 1.53% in Q3 2023 and 2.05% in Q2 2023, according to figures from the classifieds platform encuentra24.com. Quarter-on-quarter, apartment prices were down by 1.58% during the latest quarter.

On the other hand, the average price of houses fell by 3.2% y-o-y to US$1,333 per sqm over the same period. On a quarterly basis, house prices dropped 5.39% in Q2 2024.

In Panama's other major cities:

• In San Miguelito, the country's second most populated city, apartment prices fell by 4.1% y-o-y to US$1,722 per sqm in Q2 2024 while house prices dropped 2.3% to US$1,087 per sqm.
• In David, the capital of the Chiriquí province, the average price of apartments rose by 12.8% y-o-y to US$2,033 per sqm while house prices declined by 11.4% y-o-y to US$806 per sqm.
• In La Chorrera, the capital of the Panamá Oeste province, apartment prices fell by 16.5% y-o-y to an average of US$1,198 per sqm in Q2 2024 while house prices surged by 19.3% to US$860 per sqm.
• In Santiago, Veraguas province's capital, the average house price plunged 19.1% y-o-y to US$847 per sqm in Q2 2024.
• In Penonomé, the capital of Coclé province, the average apartment price plunged by 14.7% y-o-y to US$1,754 per sqm in Q2 2024 while house prices dropped 5.3% to an average of US$927 per sqm.
• In Colón, the capital of Colón province, house prices plummeted by 18.8% y-o-y to US$653 per sqm in Q2 2024.

During 2023, the value of residential construction rose strongly by 18.6% to PAB 746.8 million (US$746.9 million), following annual growth of 21.2% in 2022, and 83.4% in 2021 and declines of 58.5% in 2020, 14.3% in 2019, and 40.5% in 2018, according to the Instituto National de Estadistica y Censo (INEC). But construction activity seems weakening again, with residential construction value falling by 13.5% to PAB 294.9 million (US$295 million) in the first five months of 2024 as compared to the same period last year.

Demand remains strong. In 2023, home sales soared by 20.7% to 7,867 units from a year earlier, according to the National Board of Housing Developers (Convivienda). This followed home sales growth of 6.7% in 2022 and 46.2% in 2021 and a decline of 48% in 2020. Likewise, transaction values rose by 8.3% y-o-y to PAB 749.19 million (US$750.48 million) last year.

Foreigners and expats have buoyed Panama's housing market in recent years. Foreign homebuyers tend to be from the United States, Europe, Canada, and Latin America.

Foreigners can own real properties in Panama and are accorded 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.

Overall, Panama's economy grew strongly by 15.8% in 2021, 10.8% in 2022, and another 7.3% in 2023, as private consumption, business activity and export revenues return to pre-pandemic levels. Yet, the economy is expected to slow this year, with the International Monetary Fund (IMF) projecting a modest real GDP growth rate of 2.5%, mainly due to the closure of First Quantum Minerals' lucrative copper mine in the country. Accordingly, the mine's closure will result in a permanent loss of about 0.6% of GDP in fiscal revenues and 7.5% of exports of goods and services.

Panama City's top area

Panama City 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. House prices vary considerably depending on the location, size, and quality of the property.

• In Santa Maria, the capital city's most exclusive and best-planned residential golf community, average property prices currently range from US$2,500 to US$3,500 per sqm.
• In the prestigious neighbourhood of Costa del Este, newly constructed luxury apartments sell for about US$2,100 to US$3,000 per sqm this year. Costa del Este hosts the headquarters of many multinational companies.
• In Punta Pacifica, Punta Paitilla, and Balboa Avenue, property prices range from US$1,500 to US$3,000 per sqm. A modern, two-bedroom condominium unit in these neighbourhoods is priced between US$150,000 and US$250,000. In YOO and Villa del Mar, two of the most expensive buildings on Balboa Avenue, average property prices were about US$,3000 per sq. m.
• In Coronado and Pedasi, beachfront properties currently cost from US$1,200 to US$2,000 per sqm. A 150-sqm beachfront villa is priced from US$180,000 to US$300,000.
• In the highlands, such as Boquete, residential property prices are slightly cheaper, ranging from US$1,000 to US$1,500 per sqm. A 200-sqm mountain home is offered for US$200,000 to US$300,000.
• In San Francisco, newly built houses are generally priced from US$1,300 to US$2,700 per sq. m. In Coco del Mar, prices can go higher with starting prices of US$2,100, according to Panama Realty Zone.
• In the city centre's Calle 50, the price of newly built houses can go as high as US$3,000 per sqm.
• In El Cangrejo, known for its vibrant nightlife, hip bars, restaurants and cafes, and busy casinos, prices currently range from US$1,500 to US$2,800 per sqm.
• In Cinta Costera, a 26-hectare land reclamation project in Panama City, apartment prices vary from US$2,000 to US$3,200 per sqm.

Demand Highlights

Home sales rising strongly

Demand continues to increase. During 2023, home sales were up strongly by 20.7% to 7,867 units from a year earlier, according to Convivienda. This followed home sales growth of 6.7% in 2022 and 46.2% in 2021 and a decline of 48% in 2020. Likewise, transaction values rose by 8.3% y-o-y to PAB 749.19 million (US$750.48 million) last year.

Beach apartments were in demand by both local and foreign buyers. The most popular areas include Punta Chame, Playa Blanca, Farallon, El Palmar (Hato River), Santa Clara, Coronado, and Rio Mar (San Carlos).

Residential property demand is expected to continue rising this year, with Convivienda projecting a record number of homes sold of 10,071 units for the whole year of 2024. The estimated transaction value this year is PAB 962.08 million (US$963.75 million).

Supply Highlights

Residential construction activity weakening again

During 2023, the value of residential construction in the country rose strongly by 18.6% to PAB 746.8 million (US$747.4 million) from a year earlier, following annual growth of 21.2% in 2022 and 83.4% in 2021, according to the Instituto National de Estadistica y Censo (INEC). Yet it remained far below the record PAB 1.34 billion (US$1.34 billion) registered in 2017.

However, residential construction activity seems weakening again this year. In the first five months of 20204, residential construction value fell by 13.5% y-o-y to PAB 294.9 million (US$295.2 million).

By major cities:

• In Panama City, the value of residential construction fell by 21.1% y-o-y to PAB 173.4 million (US$173.5 million) in Jan-May 2024, based on figures from INEC.
• In Colon, the value of residential construction soared by 834% y-o-y to PAB 13.9 million (US$ 13.9 million) over the same period.
• In David, Chitré, Santiago, Aguadulce, and La Chorrera, the value of residential construction fell slightly by 1.3% y-o-y to PAB 68.4 million (US$ 68.4 million).
• In Arraiján, the value of residential construction fell by a huge 21.9% y-o-y to PAB 39.3 million (US$ 39.4 million) in the first five months of 2024.

From 2013 to 2017, residential construction activity in the country grew by an annual average of 22%, all of which follows a decade of breakneck building which raised occupied housing units by 31.5% between 2000 and 2010, according to the National Censuses.

In the succeeding years, residential construction declined sharply, with residential construction value falling by an annual average of 38% from 2018 to 2020.

Historic Perspective

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).

"This increase is explained primarily by the behavior of economic activities related to the external sector. Among them, those of the Panama Canal, air, and financial services stand out positively," noted a 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. The year 2019's tonnage of 469.6 million Panama Canal tons (PC/UMS) was the highest in its history and a 6.2% increase from the prior year.

By end-2019, 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.

During 2020, Panama experienced a deep economic recession, with real GDP contracting by a huge 17.7% - the first decline since 1988 and the country's worst economic performance in recent history.

Despite the pandemic-induced recession, trade wars, and the suspension of the cruise industry, transits through the Canal remained more or less steady. There were 12,169 transits with a total of 474.5 million PC/UMS in 2020 and 12,449 transits with 516.2 million PC/UMS in 2021.

The year 2022 broke records, with a total of 13,003 transits and a cumulative 518.2 million PC/UMS. During 2023, the Panama Canal received 12,638 transits and a total of 510.4 million PC/UMS.

Fortunately, the economy bounced back quickly in the succeeding years, as private consumption, business activity and export revenues returned to pre-pandemic levels. The economy grew strongly by 15.8% in 2021, 10.8% in 2022, and another 7.3% in 2023.

Yet, the economy is expected to slow this year, with the IMF projecting a modest real GDP growth rate of 2.5%, mainly due to the closure of First Quantum Minerals' lucrative copper mine in the country. Accordingly, the mine's closure will result in a permanent loss of about 0.6% of GDP in fiscal revenues and 7.5% of exports of goods and services.

Unemployment is also projected at 8.4% in 2024, up from 7.4% in the previous year but still lower than 8.8% in 2022, 11.3% in 2021, and 18.5% in 2020, based on IMF estimates.

Before the pandemic, the country's jobless rate averaged 5.4% annually from 2010 to 2019.

Rental Market

Good rental yields

Panama's gross rental yields are still good, despite having declined over the past few years. The average gross rental yield in the country stood at 6.42% in Q2 2024, not substantially different from 6.52% in Q1 2023, according to recent research conducted by the Global Property Guide.

• In Panama City, apartments offer rental yields ranging from 4.83% to 8.87%, with a city average of 6.78% in Q2 2024.
• In Panama Oeste, one can get rental yields from apartments between 5.41% and 6.71%, with a city average of 6.13%.
• In Coclé, apartments offer gross rental yields from 6.26% to 6.42%, with a city average of 6.34%.

According to International Living, the top three spots to live in the capital city are Cerro Ancon, Casco Antiguo, and San Francisco.

Cerro Ancon is a lush and green neighborhood filled with wildlife. It is popular with both expats and Panamanians because it is close to the city but at the same time offers plenty of outdoor space. Most of the properties in Cerro Ancon are single-family homes, sometimes divided into apartments. Sample property prices for Cerro Ancon are as follows:

• A 7-bedroom plantation-style house with a large covered terrace - US$370,000
• A modern 4-bedroom, 4-bath house with 2 terraces - US$875,000

Casco Antiguo is Panama City's historic district. Its candy-colored buildings, plazas, restaurants, cafes and bars, and historic places such as the San Jose church are a tourist must-see. Sample property prices for Casco Antiguo are as follows:

• 1-bedroom condo, about 96 sq. m. - US$295,000
• 2-bedroom condo with a private roof terrace and parking - US$650,000

San Francisco, known as the heart of creative Panamanian cuisine, is a chic metropolis area in Panama City comprised primarily of higher socioeconomic classes. Sample property prices for San Francisco are as follows:

• 2-bedroom condo, about 70 sq. m. - US$155,000
• 3-bedroom, 4-bathroom penthouse condo with 2 large terraces, about 340 sq. m. - US$470,000

Outside Panama City, the town of Boquete in Chiriqui province and the country's Pacific coast are also popular among North American retirees and second-home buyers.

Boquete, in Panama's mountain highlands, has a fast-growing expatriate community. The popular option here is to buy land and build a home, but there are many completed homes on offer. Sample property prices for Boquete are as follows:

• 2-bedroom, 2-bathroom single-family home on a quarter acre of land - US$199,000
• 1-bedroom, 1-bathroom condo - US$147,000

Another desirable location is Coronado, a popular beach town located on the country's Pacific coast. It is a relaxed community for expats and only an hour from Panama City. Sample property in Coronado is as follows:

• 4-bedroom, 4-bathroom home on a quarter acre lot - US$310,000

Mortgage Market

Mortgage market growth moderating, interest rates rising gradually

The total mortgage credit outstanding rose by a modest 3.7% y-o-y to PAB20.8 billion (US$20.8 billion) in April 2024, a slowdown from annual growth of 3.9% in 2023, 5.6% in 2022, and 4.1% in 2021, according to the Superintendencia de Bancos de Panamá (SBP).

Banco General, S.A. accounted for about 21.5% of all mortgage credit outstanding as of April 2024, followed by Caja de Ahorros (with 12.6% share), Banistmo, S.A. (12%), Banco Nacional de Panamá (11.3%), Global Bank Corporation (10%), The Bank of Nova Scotia (5.8%), Banesco (Panama), S.A. (5.2%), and BAC International Bank Inc. (5.0%).

By the start of Q3 2024, the domestic mortgage market reference rate was 6.25%, up by 25 basis points from the previous quarter, based on figures from the SBP. The domestic mortgage market reference rate, which is updated quarterly, is an interest rate benchmark used to set mortgage loan rates.

Through Panama's preferential interest law, first-time buyers of new homes can avail of lower mortgage interest rates. However, the property must be for residential purposes and the amount financed must be between US$35,000 and US$120,000 after the down payment. The law also requires that the loan should not be more than 95% of the property's appraised value and should not exceed a 15-year term.

Socio-Economic Contex

The business environment wows foreign investors

Panama's business environment has really been improving. In the past recent years, starting a business has taken an average of only six days, far lower than the region's average of 28.8 days, according to the World Bank's Ease of Doing Business report. Likewise, registering a property requires 7 procedures and 22.5 days only, a lot faster than the average of 63.7 days in Latin America and the Caribbean region.

However, in terms of overall competitiveness, Panama ranks 66th out of 140 countries included in the World Economic Forum's Global Competitiveness Report. Though both The World Bank and the World Economic Forum have not published similar reports since the Covid-19 pandemic.

Panama draws multinational companies and foreign investors with its significant tax breaks, the free-trade zone, improved infrastructure, and a low cost of living. The expansion of the Panama Canal, which was opened in June 2016, is expected to bring in over US$2 billion in annual revenues by 2021.

"There are so many new businesses moving to Panama," said Kent Davis of Panama Equity Real Estate. "It's one of the reasons people are coming down - because there is still money to be made, locally, and as a regional base of operations."

Panama encourages FDI in real estate by offering various incentives such as property tax exemptions, according to Jeff Barton of Punta Pacifica Realty.

"People aren't just moving here to relax," Davis added. "They're coming here to work because there is so much business around."

Panama has had one of the highest levels of FDI in Central America, a trend that continued even during the Covid-19 pandemic," according to a 2023 report released by the U.S. Department of State. Through the Multinational Headquarters Law (SEM), the Multinational Manufacturing Services Law (EMMA), and the Private Public Partnership Law (PPP), Panama offers tax breaks and other incentives to attract foreign investment into the country.

In fact, Panama contributed substantially to the rise in FDI project announcements in Latin America and the Caribbean in recent years.

"Large-scale projects were announced in the renewable energy and transport and storage sectors, totaling some US$ 4.3 billion. In addition to the bioenergy production megaproject, Switzerland-based Mediterranean Shipping Company (MSC) announced a project to build a container terminal in Panama, with an estimated investment of US$ 1.4 billion," according to the United Nations ECLAC report published in 2023.

Accordingly, the expansion of the Panama Canal and the country's development as a logistics and transport hub have driven FDI growth in the country in recent years.

For what it is worth, International Living's 2024 Global Retirement Index names Panama as the world's fourth best place to retire in 2024, due to its convenience (ease of access from the US, currency in US dollars, English is widely understood), world-class amenities, good beaches, and affordability.

But let's look at the dark side too. Despite economic growth and a GDP per capita of US$18,726 in 2023, poverty and social inequality continue to worsen in Panama. Elite families of European descent control most wealth and power, while about one-third of the population lives below the poverty line.

Panama officially removed from FATF's "grey list"

In June 2014, Panama was placed on the "grey list" of financial crime watchdog Financial Action Task Force (FATF) of countries not doing enough to fight money laundering. Accordingly, no real controls prevent funds moving through Panama to terrorist organizations, nor do money laundering prosecutions actually take place. Moreover, Panama's powerful criminal syndicates remain fully operational. Panama is a major transit point for U.S.-bound drugs and illegal immigrants, and has an international reputation as a haven for money-laundering.

Two years later, FATF officially de-listed Panama due to the government's series of legislative reforms.

But in June 2019, FATF put back the country on the grey list, demanding further reforms, including introducing an adequate verification and updating of beneficial ownership information by obliged entities; establishing effective mechanisms to monitor the activities of offshore entities; assessing the existing risks of misuse of companies and other entities; and introducing measures to prevent the misuse of nominee shareholders and directors.

A report released by the Latin America Financial Action Task Force (Grupo de Acción Financiera de Latinoamérica - GAFILAT) enumerated the sectors of real estate, banking, and corporate services, and free trade zones as the most vulnerable sectors to money laundering.

In its March 2020 review, FATF still retained Panama on its grey list as it must "continue working on the implementation of its action plan to address its strategic deficiencies."

Then in October 2023, FATF officially excluded Panama from its grey list, citing the country's strengthened anti-money laundering and counter-terrorist financing prevention system and the implementation of substantial regulations that have allowed Panama to take a vital step forward in international transparency.

"Panama's removal from the grey list solidifies Panama as an attractive, stable, and safe destination for foreign investment. Panama boasts a track record second to none in the region in building critical business sectors from financial services to the maritime industry to logistics and shipping. As one of the leading investment destinations in Latin America, Panama welcomes the continued interest of international businesses from a wide variety of sectors," said Minister of Foreign Affairs Janaina Tewaney.

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