| In the new century, Panama has established itself as a | | | | bank situation as “extremely liquid. Nevertheless, the |
| player in international real estate investment. The | | | | Panamanian and foreign banks have assumed a |
| country’s economy continues to grow year on | | | | defensive posture as the foreign correspondent banks |
| year. Foreign Direct Investment is still coming in. There | | | | have cut the lines of credit to all the local banks. This |
| are a variety of potential moneymaking real estate | | | | has resulted in the continuation of real estate projects |
| sectors. In short, Panama is more than holding its own | | | | that had already started, but with more stringent credit |
| during despite today’s global investment uncertainty. | | | | policies. The developers have to come up with their |
| However, prospective investors should be aware of | | | | part of their investments upfront, and any cost |
| some very important changes affecting real estate | | | | overruns have to be met by the developer.” |
| investments in Panama in 2009. | | | | In addition to what LBC describes above, foreigners |
| The basics are the same | | | | attempting to obtain financing should also be aware |
| Foreign investors have chosen to put money in | | | | that LTVs are dropping, so getting 70% is doing very |
| Panama because: | | | | well. Also, it is important to remember that financers in |
| The economy is strong. Panama has shown strong | | | | Panama fund renovation and construction; they do not |
| growth for the past five years (over 11% in 2007 and | | | | usually lend for the purchase of raw land. |
| over 9% in 2008, 3.5% predicted this year). | | | | On a final financing note, private funders from the U.S., |
| Foreigners have the same rights to property and | | | | and to a lesser extent other countries, are still doing |
| business as nationals. | | | | deals in Panama. LTVs run about the same as above, |
| Panama uses the U.S. Dollar for currency. | | | | and more than sweat equity up front is the norm. |
| Tax breaks and exemptions are available. | | | | The condo and residential craze is over – at least |
| These pillars may be adapted somewhat but the base | | | | for now: |
| for solid opportunities show no signs of change. | | | | Estimates for new condos and high-end residential |
| Enter Ricardo Martinelli | | | | units currently available, under construction or slated for |
| This year Panamanians elected Ricardo Martinelli, a | | | | construction are at 12,000+. There is no MLS system in |
| self-made millionaire who owns businesses including | | | | Panama as of yet, so real median prices for units are |
| supermarkets, banks and agricultural companies. | | | | hard to determine. What is certain is that prices have |
| Martinelli and his party hold the majority of seats in the | | | | dropped, but not bottomed out. Speculators are trying |
| National Assembly. This allows him to implement his | | | | to get their deposits back. New sales and rentals are |
| reforms, three of which affect real estate investment. | | | | stagnant. |
| The first reform focuses on reviewing development | | | | On the flip side, some great deals can be |
| and concession agreements to make certain taxes | | | | negotiated—but make certain the building is |
| are applied to all and—in a major change from | | | | completed! |
| before—they get paid (in order to get money for | | | | Commercial properties remain strong |
| infrastructure and social improvement projects). This is | | | | Megaprojects |
| not an idle goal; Martinelli has already temporarily shut | | | | Big commercial development is moving ahead. Some |
| down some major real estate development projects in | | | | examples are: |
| the Amador Causeway and has taken on the | | | | The $5+ billion Panama Canal expansion. |
| merchants of the Colon Free Zone, which is | | | | A new terminal for Panama’s Tocumen |
| Panama’s second largest moneymaker. Some of | | | | International Airport. |
| these actions have lead to payment schedules and | | | | A new convention center. |
| increases, and some are still in the “But I’m | | | | Panama Pacifico, a 1,400 hectare, mixed-use free |
| innocent” stage. | | | | zone, located in the old Howard U.S. military base. |
| Second, Martinelli has begun the process to change | | | | The giant Metromall, under construction near Tocumen. |
| Rights of Possession (ROP) property into titled | | | | Hotels |
| property. If and when this is completed, it will have a | | | | Hotel rooms are a hot sector. In 2007, Panama climbed |
| huge impact on buying real estate in Panama. Buying | | | | to second place in the world in hotel occupancy on the |
| ROP has always been a riskier move, but some prime | | | | Deloitte Global Ranking Index, with 84.7% occupancy. |
| land could be obtained at bargain prices. Now the | | | | For 2008, international branded properties in Panama |
| inverse is a possibility. It should be noted that the | | | | City performed at about 78% occupancy and an |
| prospect of titling ROP is making some who have | | | | average daily rate of near US$175 per night, according |
| purchased ROP nervous. | | | | to Rogerio Basso, a hospitality analyst with Ernst |
| Finally, a flat tax of 1% is being introduced on real | | | | & Young in Miami. |
| estate. According to the La Prensa newspaper in July | | | | Nineteen major projects comprising 4,119 rooms were |
| 2009, “Property tax would decrease from 2% to | | | | in development as of the close of the third quarter of |
| 1% for those who willingly update the value of their | | | | 2008, according to the Portsmouth, New |
| properties in the civil registry.... The 2% real estate | | | | Hampshire–based Lodging Econometrics. Many |
| property tax is the highest of the region, we will be | | | | more have been started since and most agree that |
| more competitive with the 1% tax incentive.” | | | | even more rooms will be needed. |
| In another article, La Prensa gives these comparison | | | | Offices |
| rate for taxes in Latin America: Colombia pays an | | | | Finally, there is a chronic shortage of Class-A office |
| average tax of 0.75%, 0.25% in Costa Rica, | | | | space due in part to Panama’s Law 41 initiative for |
| Guatemala 0.56%, and in Mexico and Venezuela 0.6%. | | | | multinationals. Again the numbers are sparse, but |
| Martinelli still has five years in office, so watch for | | | | availability is estimated down from 30% last year to |
| more business-based reforms to come. | | | | 3% now. Naturally, lease rates have risen accordingly. |
| Financing is available but the rules have changed | | | | And the winners are |
| Due to a conservative lending and investing policy, | | | | They can still be both you as an investor and Panama |
| Panama’s International Banking Center has | | | | as the place you invest in. You simply have to dig |
| weathered the world financial crunch very well. Be that | | | | below the hype to find the real story as it exists today. |
| as it may, financiers are being cautious in order to | | | | Can you say ‘Due Diligence’ anyone? And, |
| protect their position. | | | | welcome to Panama. |
| Latin Business Chronicle (LBC)describes the current | | | | |