Transparency In Panama’s Real Estate Market Improving, Yet Still Low, According To “Real Estate Transparency Index”

Panama was one of seven Latin American countries to see transparency improve in real estate markets over the past two years, according to Jones Lange LaSalle’s “Real Estate Transparency Index.” Panama was among the ten “most improved” real estate markets on the list, which is based on five sub-indices: performance measurement, market fundamentals, listed vehicles, legal and regulatory environment, and transaction processes. Despite Panama’s improvements, the country was still categorized as having “low transparency in real estate markets,” and placed 62^nd out of the 81 markets listed on the index.

While corruption and lack of transparency are still major issues in Panama, the significant gains in the index over the past two year exhibit the major changes occurring in Panama. According to the transparency index report, Panama’s improvements were due to several factors, including the country’s strategic location in the Americas, economic and political stability, favorable climate and cost of living, and the availability of capital for real estate development.

For more information, read the full report here (registration required).

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“Is The Panama City Condo Market Going The Way Of Southern California?” Asks “The Panama Report”

 A recent post in The Panama Report investigates the current condo market boom in Panama City. The author of the article, a real estate development consultant based in Panama City, discusses the fundamentals of the condo market in Panama City, which have led him to conclude that the market may be on the verge of busting. Many condominiums are now selling between $300,000 and $600,000, with a median price per square meter of $3,000. The author worries that as banks in Panama become more conservative with loans in response to the conditions in the United States, it is likely that developers are going to take the brunt of the damage as speculators fail to make payments. Most deposits on units range from 10 – 30%, meaning many developers could be left with 70-90% of the cost if investors begin to back out of the market.

I have to say that I agree with what Mr. Quesada warns of in this article, and admit that I would be pretty nervous if I was developing upscale condominiums in Panama City right now. I do have a few caveats though. While I do think that there are similarities between the current situation in Panama City and in the United States several years ago, there are several important differences. Unlike the United States, Panama does not offer mortgage backed securities. While this will tighten lending in the country and decreases liquidity, it should prevent the bubble from becoming too large too fast as it did in the United States – particularly as it did with the subprime mortgage mess.

 Another potential factor in Panama City’s condo market are European investors. Depending on how the euro and pound sterling fare, Panama City could continue to be a relative bargain for Europeans. While the infrastructure in Panama City still lags behind cities such as London or New York, the cost of living is not likely to be quite as expensive as these cities.

There is no doubt that the condo market in Panama City is likely to cool off in the near future. Yet the city continues to be promising as a long term investment, particularly once the bubble begins to deflate and a better price equilibrium is reached in the market.

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CNN On Panama’s Pearl Islands: “A Beach Bum’s Paradise”

Panama’s Pearl Islands were recently featured in an article on CNN, and were described as a “beach bum’s paradise.” The Pearl Islands are located 30 miles off the Pacific coast of Panama in the Gulf of Panama, and can be reached via a short 20 minute plane ride from Panama City. The tropical islands were the location of three seasons of the American television program ‘Survivor.’

The Pearl Islands, which are said to have been stop off point for Spanish Conquistadors on their way to bring treasure back to Spain, are now the location of many wealthy Panamanian’s vacation residences. The Pearl Islands were briefly the home of the Shah of Iran following his exile in the late 1970s.

The author visited Contadora, one of three islands in the archipelago that are accessible by plane, and Mogo Mogo, a deserted island used to film seasons of ‘Survivor’ (which is still used as the location to international versions of the show). The Pearl Islands feature pristine beaches, fantastic snorkeling, and chance run-ins with television crews.

For more information the CNN article can be read here

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Panama’s Economic Activity Is Up Nearly 7% In June Versus Same Period Last Year

Panama’s government is reporting that economic activity has increased 6.96% this past June in comparison to the same period last year. Panama’s economy still appears to be staying strong, despite the sinking dollar and turmoil hitting the markets in the United States and Europe. It will be particularly interesting to see if the trend continues as numbers continue to come out for the later summer months, when increasing gas prices and uncertainty in the finance industry put pressure on the United States economy.

Source:
Panama June economic activity up 6.96% vs year ago (Economictimes.indiatimes.com)

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Panama Enacts New Immigration Regulations

Panama has amended several immigration regulations that impact real estate investors in Panama, according to the My Panama Lawyer Blog. Some of the laws changed include the length of stay allowed for tourists, regulations on foreign workers, changes in the minimum investments for forestry and other visas, and an increase in the required minimum income for the pensionado program.

Here is a selection of some of the changes, which will be effective starting  August 25th, 2008:

-Tourists may remain in the country only for 90 days, with only those with an original period under 90 days being able to ask for an extension to complete the 90 days when justified (Art. 21),

-Forestry temporary visa minimum investment is raised to US$60,000, up from US$40,000, with an additional requirement of 10 hectares purchased (Art. 100),

-Forestry permanent visa minimum investment is doubled to US$80,000, with an additional requirement of 20 hectares purchased (Art. 180),

-Self-solvency investor visa minimum investment is increased to US$300,000, up from US$200,000 left in Panama bank account for 3 years (Art. 192).

-Self-solvency investor visa minimum investment alternatives include also real estate for which at least US$300,000 is paid for, free of mortgage (Art. 193) or a mixture of a 3-year deposit and mortgage-free real estate up to a combined minimum of US$300,000 (Art. 194),

-Self-solvency investor visa real estate may be held under a Private Foundation which founder or beneficiary is the applicant,

-Pensionado minimum income is raised to US$1,000, up from US$500, or a mixture of US$100,000 in directly-held Panama real estate (Art. 200 – it does not specify if the property is free of mortgage),

To read more of the important changes in the immigration regulations, read My Panama Lawyers full post here, or download the full documents in Spanish here and here (yahoo ID required).

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Panama Has The Highest Foreign Direct Investment to GDP Ratio In Latin America

Panama has the highest rate of foreign direct investment as a percentage of GDP of any country in Latin America, says the Latin Business Chronicle. Panama’s $1.8 billion FDI contributes to 9.1 percent of the country’s nearly $20 billion GDP. Following Panama on the list were Chile, El Salvador and Costa Rica. Ecuador and Venezuela had the lowest rate of foreign direct investment of all of the Latin American countries. Despite Panama’s high foreign direct investment, Panama’s FDI actually decreased by 29 percent from 2006. Both Chile and Panama  topped the Latin Business Chronicles ‘Latin Business Index,’ which was published in May.

Source:

Venezuela: Lowest FDI per GDP (Latinbusinesschronicle.com)

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The Panama ‘Pensionado’ Program

Panama has consistently been ranked among the top international retirement destinations (and held the penultimate position in International Livings rankings until being beaten out by Mexico this year) in part because of the country’s generous ‘pensionado’ program. Anyone over the age of 18 with an outside pension income (including social security) of over $1000 can apply for ‘pensionado’ visa. Once qualified as a ‘pensianado’ you are eligible for discounts from a variety of different sources. Here are a few of the benefits, as outlined in an article from MSN Money:

As a qualified pensioner in Panama, you would be entitled to:

• 50% off entertainment anywhere in the country (movies, theaters, concerts, sporting events, etc.)
• 30% off bus, boat, and train fares
• 25% off airline tickets
• 50% off hotel stays Monday through Thursday, 30% off Friday through Sunday
• 25% off restaurant meals
• 15% off at fast-food restaurants
• 15% off hospital bills (if no insurance applies)
• 10% off prescription medicines
• 20% off doctors’ consultations
• 15% off dental and eye exams
• 20% off professional and technical services
• 50% off closing costs for home loans and more

While the ‘pensionado’ program makes Panama an attractive place for foreigners to retire, the program is not without opponents. Some business leaders, particularly in the hospitality business, oppose the program on the grounds that wealthy retirees (both domestic and expatriate) take advantage of the program. Areas that have high numbers of wealthy and international retirees are particularly affected by this, as prices become inflated when the majority of patrons use their ‘pensionado’ status to receive the 25% discount at restaurants. For some perspective on the issues surrounding the ‘pensionado’ program, read this post from the Panama Investor Blog.

I invite anyone familiar with the ‘pensionado’ program in Panama to weigh in on this topic.

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James Bond And The ‘Canoe Man’ Draw British Tourists To Panama

Unlikely current events have been fueling a sharp increase in British tourism in Panama; the ongoing investigation of John Darwin, the infamous ‘canoe man’ who faked his death and fled to Panama, as well as the upcoming James Bond film ‘Quantum of Solace’ (filmed in part in Panama) have brought attention to the country, kindling a recent spike in tourist activity. According to an article in The Times, one of Panama’s largest tour operators in the UK has seen an increase in sales upwards of 249%.
 
John Darwin, who has become notorious for faking his own death while on a solo canoe trip, fled to Panama with the hopes of opening an eco-lodge in the country. The ongoing investigation of Darwin and his accomplice wife has unintentionally brought a great deal of publicity to Panama and the eco-tourism industry in the country.
 
The timing of the buzz around John Darwin has also coincided with the filming and promotion of the upcoming James Bond film “Quantum of Solace.” The movie (which has yet to be released in theaters), was filmed in parts of Colon and Casco Viejo, and has spurred tour operators to create “James Bond” tours that visit locations from the film, and hotels that Bond actor Daniel Craig stayed in.
 
While I don’t find it all that shocking that the John Darwin story has spurred an increased interest in vacationing in Panama (I mean, if someone fakes their death to move to Panama, there must be something appealing about the country.. right?), I am surprised that the upcoming bond film, which has yet to be released, is bringing tourism into Panama already. I imagine once the film is released it will provide another bump to the tourism industry in Panama, although this will likely depend on how the region is portrayed in the film (as Colon is meant to represent Haiti in the film, not Panama itself), and whether or not the latest Bond installment is as successful as its most recent predecessors.

Con artist John Darwin has unintentionally boosted tourism in Panama

Source:

Canoe Man and Bond boost Panama tourism (TimesOnline.com)

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Pedasi: Small Fishing Town Beginning To Attract Investors

Pedasi, a small fishing town on the Pacific coast of Panama, is beginning to attract the attention of investors and developers. The area, which is still relatively undeveloped, is the birthplace of Panama’s first female president, Mireya Moscoso. The quaint town primarily attracts surfers and fishermen, yet the town is beginning to attract the attention of more tourists and expatriates.
 
Matt Landau, of The Panama Report, described Pedasi in a post a few months ago:
 

“The downtown part Pedasi, if you are courageous enough to call it that, is saddled by long stretches of rolling hills, not unlike you’ll see in the countryside of Vermont or Maine. For you Californians out there, the rustic coastline and jungle-icious mountain backdrop is quite similar, in my opinion, to the Tustin and Laguna areas. The people of Pedasi though, don’t wear stupid sunglasses. They don’t call you annoying things like ‘bra’ or ‘dude’. They don’t drive flat little convertibles that look like roving mousetraps and they definitely don’t know who Paris Hilton is…”

 
As Pamama’s economy remains strong and real estate markets in the popular areas of Panama City become increasingly overbuilt, it is likely that areas such as Pedasi will begin to attract the attention of real estate developers and investors. For Pedasi, this has drawn criticism, as described in a post on the Panama Investor Blog, in which a local newspaper lambastes developers for coming to areas such as Pedasi.

As with any newly discovered area, there is always risk that development could destroy the charm that initially brought people to the region in the first place. Yet there is always a flip side to this argument. Emerging and undeveloped markets can provide a unique experience, a clean slate to develop regions in a way that can be beneficial both to the local population as well as the local environment. As more development comes to Pedasi, and other areas like it, one can only hope that those with the ability to do so will embrace eco-tourism, sustainable practices, and provide fair wages to those working on their projects.

For a walking photo tour of Pedasi, check out this post from Panama Travels.

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Keep Up To Date On Panama’s Public Holidays

When conducting business or investing in real estate in a foreign country, it is always important to be particularly aware of the country’s customs, holidays, and social practices. Being negligent of these factors can be extremely damaging; even unintentional mistakes can sour deals that otherwise would have worked. A recent example is that of Anheuser-Busch, brewers of Budweiser Beer, who are currently being acquired by the Belgian conglomerate InBev. Some have speculated that the company could have avoided the recent buy-out, had they cultivated a better relationship with Modesto, the Mexican company that brews Corona, and which Anheuser-Busch owns a stake in. The two companies had an unfortunate fallout following, of all things, a fishing trip that occurred over a decade ago. Apparently the head of Anheuser-Busch, insulted his Mexican counterparts when he became anxious after hooking a Marlin, a fish that can take up to three hours to reel in, and passed off his rod so that he could take a phone call. Ultimately, both the fish, and any hope of a healthy partnership between the two companies, were lost.
 
Understanding different social customs is extremely important, and one mistake that is both easy to make, and even easier to avert, is being aware of the national holidays in the country you are investing in. Being aware of public holidays can help avoid any unnecessarily negative situations.
 
To avoid any potential tricky situations, here is a list of public holidays in Panama, for 2008 (click the image to enlarge it):

Source:
http://www.qppstudio.net/publicholidays2008/panama.htm

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