| Investment Property in Panama |
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One of Central America’s richest and most stable societies, Panama occupies a position of immense strategic importance thanks to the canal that bears its name. Every year over 14,000 ships traverse this incredible feat of engineering, carrying almost 280 million tons of goods between the Atlantic and the Pacific. The USA, whose economic and industrial might made it the key player behind its construction, has traditionally regarded the canal as virtually part of its own coastline and has consistently stepped in when necessary to safeguard its own interests in the region; this has ensured Panama a long and bountiful supply of investment as well as the most potent guarantees for its own security. |
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With a population of over a million spread across its metropolitan area, Panama City is by far the biggest and most economically significant city in Panama. In stark contrast to several other Central American capitals, the city acts as an important regional hub for finance and commerce and boasts an infrastructure which puts most other settlements to shame. As might be expected in what remains very much a developing region, this has led to the creation of a wealth gap between Panama’s urban and rural inhabitants. Nationally unemployment runs at just over 7 per cent, but this figure drops below 4 per cent in the capital while in some of the country’s poorer rural districts unemployment is well into double figures. Likewise, the national per capita GDP of $9000 is a misleading average when considering Panama City since it includes many thousands of poorly paid, unskilled rural labourers, a significant number of whom are now migrating to the capital in search of better-paid regular employment. Hand in hand with Panama City’s economic growth has come a real estate boom which is of increasing importance to the city’s economic development. Billions of dollars have poured into new developments in the city and its suburbs, and some of the most well-known and respected developers in the world of property, including Donald Trump, have taken on projects in the capital. Building standards are now extremely high and luxury goods readily available; nevertheless, the cost of living in Panama remains very low compared with most Western European or North American cities and a growing number of end-users, as well as pure investors, are picking up Panamanian property. This explosion of interest has seen consistent double-digit growth in property values in the city since the turn of the century, which has further fuelled the capital’s, and the nation’s, economic development. While it’s always dangerous to oversimplify matters, in general demand for property in Panama City is based not so much upon growth in the city’s population as upon increased affluence. While the city is getting bigger – and, presumably, will do so at a faster rate in forthcoming years as a result of the canal expansion project – it is not doing so at a rate which impacts dramatically on property prices. However, the fact that demand is already high while supply is limited is coinciding with the key issue: the city and its inhabitants are getting richer and, as a result, demand for new, larger, prestigious properties is soaring The longer-term rental market is flourishing, and the investor has three main target-groups to consider: the professional class; the domestic family market; and retirees. The second of these, while potentially lucrative for those wishing to maintain a very long-term presence in the city, is probably the least attractive of the three; traditionally, far more affluent Panamanian families own than rent, and the cost of buying a family home in a good area (thus ensuring significant capital growth) combined with sluggish rental and sales markets tends to discourage investment here. Panama City’s professional class – Panamanian and foreign – are big business when it comes to rentals and investors looking to the city could do a lot worse than to target this sector. Demand is high and supply is restricted, but growing; tens of thousands of units designed for exactly this sector have been completed in the last year alone, thousands more are currently in development with yet thousands more at the planning stage (work is currently underway on over 100 high-rise buildings in the city). These are, typically, one- to three-bedroom apartments not too distant from the city’s commercial heartland (public transport in Panama is comparatively efficient but hardly luxurious) built and fitted to a high standard. Increased affluence among Panamanians has led to the demand for higher-calibre homes more suited to the successful urban businessman or –woman, while the foreigners jetting in by the planeload tend to come from large firms based in big Northern Hemisphere cities and, consequently, to have already developed a taste for the finer things in life (such as waterfront views, hence the growing demand for upper-end waterfront units.) Obviously, while rentals provide a tasty income it’s the growth in the value of the asset itself which provides the payoff for investors, and with demand high and growing house-prices are soaring as never before in the capital. Capital appreciation in Panama City is said to exceed 20 per cent annually at present although conclusive official figures are not available; certainly some districts have witnessed growth in excess of this figure based on off-plan prices per square metre. City-centre apartments cost around $1,500-$1,800 per square metre, with rental yields at a very attractive 7 to 9.5 per cent. This editorial is abridged. Please click here for a more in-depth article with additional information on Panama’s history and demographic breakdown. |
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