How Is Panama Real Estate Different?
Welcome to The Real Estate Espresso Podcast, your morning shot at what’s new in the world of real estate investing. I’m your host, Victor Menasce. On today’s show, we’re exploring Panama’s real estate scene after I spent three weeks touring the country. Panama boasts a wonderful climate, cordial inhabitants, fantastic beaches, and properties for sale virtually everywhere. However, despite these notable assets, things don’t seem very busy even during the dry season, when most ex-pats reside here.
Panama is famous for its advantageous tax regime and rules permitting foreigners to gain residency in return for investing in the country. This has triggered a surge in property construction, and the government here is highly supportive of businesses. There are a few communities that I deem quite developed. Yet, the local incomes are relatively low compared to U.S. and Canadian standards. The properties built for ex-pats, although pricier, offer a higher quality of living than most local options. Yet, they still fall short of North American standards. For example, we rent an apartment in a high-end condo building, but even here, the windows are single-glazed.
One term summarizes real estate in Panama: over-supplied. Unlike the U.S. or Canada, some properties in Panama are not titled; instead, owners have something known as the right of possession. This grants the owner the right to possess the property and to buy the title from the state, not actually owning the property until they buy the title. Since Panama lacks a centralized MLS system like those in the U.S. or Canada, some properties list on independent brokerage websites. Realtor.com is one of the larger multi-brokerage websites you’ll find listings on, but it’s not an actual MLS system.
Into the differences between titled and by right of possession property, the former is formally registered at Panama’s public registry with verified ownership and can be funded by banks. Meanwhile, right of possession lands, essentially belonging to the government, provides the possessor with rights to use it. The transfer procedures differ, and foreigners can own either type of property but land near borders. Banks avoid lending right of possession properties, underpinning complications in processing them completely, even triggering occasional bribe demands.
Throughout my tour in Panama, it was evident that properties are for sale everywhere, inclusive of vacant lands and well-maintained properties up to Western standards. However, some dwellings have clearly been neglected for a long time. As financing terms incentivize locals to focus on newer properties, older properties tend to receive minimal maintenance. Astoundingly, you sometimes find impressive-looking properties with multiple structures appearing sadly deserted. Another striking feature is the frequently incomplete roads in new developments, often due to depleting community funds, leaving a tough rutted mud pit behind. In contrast, in the US and Canada, developers must post a bond for off-site improvements to ensure their completion.
Since Panama lacks centralization, acquiring actual market statistics is nearly impossible, making it difficult to determine how many months or years of inventory are available in the markets. These are just some unique findings from my few weeks in this captivating country. As you contemplate this, have a fantastic day now! Go make some great things happen! We’ll talk to you again tomorrow!
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