Investment Property Panama

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Investment Property in Panama - Guide to Investing in Panama Property

Another great reason to invest in Panama - Earlier this year Balbin Herrera, the Panama Minister for Housing announced that Panama will be expanding its property tax exemptions for international investors. Any overseas buyers that invests in a new housing development that has its building permits issues prior to the end of December 2009 will be exempt from paying taxes on property transactions through until 2030.

Panama has been of huge interest for a decade or so now, firstly with Americans and Canadians looking for a tax friendly place to retire. In recent years Panama has opened the doors to international investors from much further afield by introducing more tax incentives for individual investors and well as commercial ones.

Off plan developments were initially prevalent in and around Panama City and still continue today. However the coastal areas of both the Pacific and Atlantic Oceans are also becoming popular, but these new off plan developments are being driven by European buyers and long term residents who want to buy quality off plan resorts, rich with onsite facilities and management companies, as against the more traditional condo investments that are common in Panama City.

For investors from across the Atlantic there is obviously a distance issue and these investors are used to having management companies with offices either onsite or nearby to deal with their rentals and any maintenance issues that may arise, plus providing a certain security for their real estate.

The recent introduction of new laws aimed at creating favourable tax breaks are sure to push demand of quality off plan developments even higher. With the trend for long haul holidays, longer stays and overseas retirement on the increase, countries like Panama are striving to be the number one choice for both the international investment but also for the tourism driven revenue that will follow quickly as the off plan developments become signed off and ready for use.

Increasing regular flights from Europe will encourage families to try something different in this tropical location, as will the continued weakness of the US dollar, which is making these properties extremely attractive from a price perspective.

Panama City has been boasting rental revenues of between 7 and 11% for the last year or so and these numbers are based on long term/annual rental yields in Panama City, which tend to be poorer than short term holiday rental yields of properties in quality resorts and beach side locations.

There are close to 300 off plan condo/apartment projects either in construction or on the drawing board in Panama City, which, if all are completed, will provide more than 40,000 new units in the city. This could have an effect on rental yields, but given the recent rental revenues, there is a lot of room in the market before they become "standard rental yields." Off plan resort developments near the coasts provide a new market and a potential for higher returns as they are aimed at wealthier residential tourists AND short term holiday rental markets.

The introduction of Pensionada Visas a number of years ago, provided easy access to retirees who wanted to buy a cheap property and enjoy an inexpensive lifestyle. Even today the criteria for receiving a pensionista in Panama is very straightforward and open to a multitude of people from around the world and you do not even have to be retirement age - anyone from 18 years old who can meet the criteria can become a retiree in Panama

Panama - A Safe Haven Investment Destination

Many international investors are looking for a "Safe Haven" in which to invest in property. Panama offers investors not only a safe haven, but an extremely tax friendly regime, low property prices, growing tourism, equal rights as residents and nationals, political stability and a government that is aggressively advertising Panama as a wonderful place to live, work, holiday and invest.

The Panamanian Government is quick to promote the stunning scenery, the abundance of crystal blue waters, a favorable attitude to the environment and a stunning year round climate. Essentially everything that today's tourists are looking for. This improved attitude to tourism has already seen increased numbers of tourists from North American and Canada as well as attracting a wealthy new clientele from across the Atlantic.

Since the inception of the recent property boom back in 2004, the government has invested millions into transport links and infrastructure which was desperately needed especially in Panama City. These improvements are a work in progress and some areas around Panama City can still get congested, but hopefully not for much longer.
Current demand is primarily for villas, larger residential properties and quality properties along the coastlines; and developers are struggling to keep up.

Land prices are on the increase as are construction materials which in turn drive prices higher year on year. With the new tax breaks that were recently announced, we do not see the demand dropping anytime soon. Another investment opportunity is with the redevelopment and restoration of older buildings which can be used for corporate lettings in and around the city.

Tourism became the highest generator of revenue in Panama, overtaking the Panama Canal and the Free Trade Zone for the first time in 2003. It is holding on to this position and strengthening year on year.

Investing in Off Plan Resorts in Panama

There are many new off plan resort developments currently on the drawing board which are due to begin once the relevant infrastructure improvements have been completed. Experienced developers are well aware that once infrastructures are in place the market quickly opens up, as investors are often wary of investing in projects still off the beaten track.

Banking in Panama

For nearly 30 years, Panama has offered world class banking which is well regulated. All banks in Panama must have a physical presence in the form of an office, employees and operations.

Panama created in 1995 a Financial Analysis Unit to monitor money laundering. This body now supervises and investigated any transaction of over $10,000 especially where they could be suspicious. Although Panama offers investors secrecy for their finances, any funds in excess of ten thousand dollars MUST be declared upon arrival.

Rental yields in Panama

There are currently only for Panama City regarding rental yield as the areas along the coasts tend to operate on short term holiday rentals.

Percentages vary depending on the property and its location however apartments in the city with approximately 120m2 saw a yield of nearly 11% on the twelve months up until November 2007.

Apartments of 190m2 say a little over 11% for the same period. Larger properties in excess of 250m2 still faired very well with yields of between 7% and 9%.

Buying Investment Property in Panama through a Corporation

We would advise overseas investors to create a Panamanian Company with which to purchase and protect your property. This is easily achieved and can protect you from any legal proceedings or asset seizure in your home country. According to the Panamanian constitution, the government cannot seize any private real estate unless it a procedure which is similar to eminent domain. The owner will receive a fair market value for the land plus any improvements.

Why invest in Panama property?

Foreign investors are attracted to Panama property investment due to the following incentives:

• US dollar-based economy
• Low inflation and zero foreign exchange risk
• Absence of exchange controls
• Equal treatment of foreign and local citizens
• One of the most flexible company laws in the world
• No restrictions on 100 per cent foreign-owned companies
• No restrictions on mergers, acquisitions or joint ventures
• Excellent tax holidays for specific investments
• High percentage of labour force is bilingual

New & off plan property developments suitable for international investors
• Tropical Marina and Beach Resort - Las Brisas de Amador, Causeway Towers, Isla Perico - Nüere Boquete Panama.
• For investors seeking high end off plan opportunities the resorts of Punta Barco and Coronado have excellent beach access and are close to a golf course and are very popular with the more wealthy residential tourist and short term vacation visitors.