Saturday, December 11, 2010
Dear Reader,
It's my home base, when I'm not on the road scouting for real estate. It offers exotic beach hideaways, cool coffee-growing country, and immense jungle wildernesses. The capital city is cosmopolitan, multicultural, and boasts First World infrastructure. The cost of living is low...acceptance of foreigners is high...and it's a fun place to live.
I won't pretend that I slashed my living costs when I moved here from Europe. Instead, I've upgraded my lifestyle. I eat out more, travel more, treat myself to luxuries...I know I can afford it now. I enjoy year-round tropical warmth and sunshine...no more freezing winters. And my private medical insurance (with cover at the local Johns Hopkins-affiliated hospital, and worldwide when I travel) is an enviable $82 a month.
I'm talking about Panama.
In the last few weeks, this little country made news headlines worldwide with the signing of a tax information exchange agreement with the US on November 30th. The agreement still needs ratification by Panama's National Assembly. Nobody seems certain how much of an impact this agreement will have on Panama's banking secrecy laws. We'll just have to wait and see. The headlines imply that the tax agreement means that Panama is no longer attractive to retirees or those looking to relocate. But I disagree...
One of the reasons given for Panama signing the treaty was the need to get a Free Trade Agreement signed with the US. This would benefit Panama's already booming economy. Forecasts predict growth of 6.5% next year.
The Latin Business Chronicle rated Panama top of its Latin Infrastructure Index, which covers 19 countries. The four key categories covered are transport, technology, water and electricity. Panama emerged as the clear winner, followed by Chile and Uruguay. Panama scored highly in the category for trading across borders. That's not surprising, given that Panama is home the "Hub of the Americas" airport, and to the Panama Canal.
One of the factors that influenced my decision to move here was the hub airport. Most of my scouting is in Latin America, with additional trips to the US and Europe for conferences and meetings. From Panama's Tocumen international airport, I can fly direct to much of Central and South America, the Caribbean, the US, and parts of Europe. Tocumen's undergoing an upgrade as we speak which will both expand the airport and improve amenities for passengers.
Panama's Copa airlines just signed a contract with Boeing for $1.7 billion, for 22 aircraft, with delivery scheduled for 2015-2018. The airline is one of the fastest growing worldwide, and expects to increase capacity by 17%-19% in 2011.
The Panama Canal performed well this year, delivering almost $815 million in revenue to the government, $60 million more than projected. The expansion of the Canal, already underway, will double the current annual capacity to 600 million tons.
Now, all of this positive economic news might leave you thinking that Panama must have a thriving real estate market. In fact, we had a real estate boom, which peaked in 2007. Today, the market is soft. The official price per square meter for property remains high, but you can find deals.
Individual owners, who purchased pre-construction property in the last three years, and paid 30% of the purchase price during construction, now need to close. To do that, they need to come up with the remaining 70% of the purchase price. Many can't afford to do that, so you see fire sales, sometimes at a lower price for the finished unit than the original buyer paid pre-construction.
There is over-supply in the city, and the shortage of hotel rooms that gave the city an 87% occupancy rate in 2007 is a thing of the past. Up to 12,000 more hotel rooms come online here in the next two years. In tandem with all those condos under construction or recently delivered, you face stiff competition if you own a rental property here.
So, don't buy here for short-term appreciation, or rental income. Don't buy pre-construction...it's always a risk, and in a soft, over-supplied market, the risks are higher. Look for a distressed sale, if you plan on relocating or retiring here.
And that's the point: this is still a fantastic country to live in. I fell in love with Panama when I first spent time here on a business trip in 2006. I still find myself smiling on the way to business meetings in the city, in the back of a taxi...with salsa music playing, the sun shining, and an ocean breeze stirring the sultry air. I'm still in love with Panama. It's not just me...read this traveler's five good reasons why you should consider Panama, too.
Margaret Summerfield
P.S. If you'd like to check out some distressed opportunities in Panama, contact Jim Hawley at (JavaScript must be enabled to view this email address).Jim is part of Panamasol Realty, a real estate broker company we work with here. He's an expat himself (originally from Minnesota), and has lived here for the last six years. He's happy to provide details of some of the best property deals on offer right now. He'll also organize a customized property tour for you, if you plan on coming to Panama. Just let him know what you're looking for, and when you're planning your trip: (JavaScript must be enabled to view this email address).
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