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Our real estate team stands ready to assist you in finding the right property in Panama. The team leader sits on a government advisory board and is well respected in the industry. Whether you are looking for a (second) home for yourself or an investment property, they have an extensive listing of exclusive listings plus access to many others. Since there is no multi-listing service in Panama to speak of, it is important to work with a real estate group that have the connections and contacts to show you the widest possible range of options, and not just their own exclusive listings.
Below we have some helpful information on buying real estate in Panama and what the process involves. Our legal team can guide you through the whole process very simply so you that you do not unwittingly fall into any traps due to a lack of understanding. At the end of this section we have our recommendations based on our experience and knowledge of the best opportunities that exist.
Are there restrictions on foreign ownership?
For foreign buyers in Panama, the following restrictions apply:
1. Under Article 286 of the Constitution, foreign ownership of property within 10 kilometers (6.2 miles) of an international border is forbidden.
2. Untitled land must be owned by a citizen of Panama for a minimum of two years before it can be sold on to a foreign buyer. After the two-year period, the land can be titled and resold without restriction. (Note: Some untitled land can never be titled, so get professional advice before you decide to buy.)
3. There are restrictions on foreign ownership of waterfront and island property. Such restrictions may be avoided if you are investing in one of the Tourism Zones. By law, all beachfront properties must provide a public right of way starting from the highest tide to the property line. (This distance may vary.) Permits to build over the water require a concession from the maritime authority and the Ministry of Finance. (One exception to this restriction is Contadora in the Pearl Islands, where there is no restriction on foreign ownership.)
These restrictions are best discussed with our law firm.
What are my ownership options?
In Panama, you have the option to buy as an individual or through a Panamanian corporation. For large projects, its best to own property through a Panamanian corporation. Although not mandatory, it makes it easier for you to settle disputes, especially in court. However, even for an individual property there are some advantages especially when it comes time to sell, plus there are estate planning advantages as always. See Panama corporations.
Step One: Confirm the title
The first thing you need to do is confirm the legal owner of the property. After you’ve found the property you want to buy, ask the owner for copies of two important documents—the public deed containing the title (escritura) and the Ownership and Encumbrances Certificate (Certificado de Registro Público) from the Public Registry. You should then give these to our lawyer for an updated search. If these documents are not available, ask the seller for a property number (finca). With this information our lawyers will be able to search for the title.
The escritura states the owner and carries a description of the property. The Certificado de Registro Público document indicates whether there are any liens against the property or other legal complications. The copies of these documents must be checked by an attorney. An updated search is wise in any case. The seller must also provide copies of the survey plans of the property, and of any buildings describing the size and location of the property.
Getting clear title to property in some parts of Panama can be a problem if you’re not careful. It is best to avoid the San Blas region on the country’s eastern coast, for example, where the Kuna Indians live in what has been designated an independent, sovereign state, where private ownership of real estates is not allowed. Some people have attempted to partner with the Indians to do business here, with no success.
In addition, most of the property in and around Bocas del Toro (and in the country’s agricultural areas) is owned by the government. You cannot readily acquire título de propiedad (formal titled ownership) to any of these properties. Another way to acquire land is through derecho posesorio (rights of possession), which permit a buyer to acquire a right to possession that is transferable, as long as the land is actively used for the public good. This is a problematic area. For instance, a squatter may obtain title through the Panamanian court when the right of possession is over private property and his possession has been undisturbed for 15 years. If claim for ownership is filed in court, it would be turned to title. Rights of possession over government property may only be transformed to title by the Agrarian Reform, but this does not cover coastlands or islands. This type of ownership was created to give access to land to landless peasants; it was never meant for speculation. Disputes over possession rights are common. We recommend that you never purchase a property with possession rights only – though we know of several people who have done so without a problem.
Most property in Panama is titled, and the country has a sophisticated, computerized land registry through which you can easily trace the ownership of property. Nevertheless, in addition to having our lawyers do the background checking, we recommend that you take out title insurance for any property purchase in Panama, which we can assist you with.
Step Two: Promise to buy
Once you are satisfied that the title is in order you will enter into a Promise to Buy-Sell Agreement, whereby you give the seller a down payment and set a date for the transfer of title. Normally, there is a penalty if either party backs out. During the period set out in the agreement, the seller pays the transfer tax and obtains the clearance certificates necessary to transfer title. You arrange for payment by arranging financing, etc. (see our mortgage broker services). At the agreed-upon time, both parties sign the final contract.
Step Three: Transfer the title
Once Step Two is completed, our law firm will draft the final purchase and sale contract. We will gather all documents and make an additional search to make sure that no liens or mortgages have been filed in the meantime. Our lawyers will then put the contract into final form and draw it up as a public deed. Then all parties will go to a Notary Public to sign the deed. Panamanian notaries are high-ranking officials and are granted far more responsibility than their American counterparts. They represent neither the buyer nor the seller.
Step Four: Transfer the funds
The safest thing is to use our firm’s escrow service or you can pay the balance of the purchase price through an irrevocable letter of payment form a local bank in Panama. f you don’t have a bank account in Panama we can assist you in opening one and then the letter of payment can be easily procured from them bank once it has been funded. The irrevocable letter of payment (similar to escrow) is a letter whereby the bank irrevocably promises the seller to pay the balance of the sale price upon the transfer of the title to the buyer. The other, riskier way to pay the balance of the purchase price is to give the seller a bank draft drawn on a bank in Panama upon the signing of the public deed at the Notary Public. This draft can be obtained from one of Panama´s international banks if you already have an account with them. The risk is making the payment before you obtain the registered deed – usually the next step in the process.
Step Five: Record your purchase at the public registry
The purchase is not final until it is recorded at the public registry. This process normally takes a few weeks, but can be done in about 10 days by having our law firm file the documents directly at the main office of the public registry in Panama City. If you are in a great hurry, the public registry charges an additional fee of $250 for next-day registration (provided all documents are in order). Once the registration process is completed, our lawyers will give you the registered deed and will make sure that a copy is filed with the tax records department (catastro)…and the property will be yours.
Transaction Costs
Real estate agent commissions typically range from 3.5 to 5% of the selling price, and are paid by the seller. The buyer must pay the expenses regarding Title at the Public Registry. The amount to be paid is estimated according to article 314 of the Fiscal code. This scale is rather cumbersome, but as a general guide, closing costs typically amount to around 3% (including legal fees, registration and notary fees).
Panamanian Real Estate Taxes
Transfer tax: Transfer taxes in Panama are paid by the seller, and are 2% of either the updated registered value of the property or the sale price – whichever is higher. The updated value is the registered value, plus 5% per annum of ownership. If the property is bought by a corporation, it is customary for the shares of the company to be sold (instead of the property), thus eliminating the need to pay transfer tax.
Inheritance / gift tax: Inheritance taxes in Panama have been completely abolished. Despite this, taxes on gifts (inter-vivos) of properties located in Panama are in effect, and the rate depends on the degree of relationship between the donor and the donee. This does not apply to property owned anywhere outside Panama.
Rental Income Tax: If you receive rental return on your property, you will be liable for income tax up to a maximum of 30% (on returns grater than $200,000). However, if you invest in one of the special “tourism zones,” you may be exempt from income tax for 15 years.
Property Tax: Properties with a registered value of $20,000 or lower do not pay property tax. For properties of a higher value they pay as follows: 1.75% from $20,000 to $50,000; 1.95% from $50,000 to $75,000; and 2.10% over any property value above $75,000.
If you buy or build a residential property in Panama, you may be exempt from property tax for up to 20 years. However, this provision is being phased out gradually, although it has been rolled back twice. The 20-year exemption applies to cases where the construction permit is issued before June 30, 2006 and the completed construction registered before Dec.31, 2007. Houses or apartments where construction permit is issued after June 30, 2006, will have the following exemption on property tax, unless it is rolled back again:
° Value up to $100,000: 15-years exemption
° Value form $100,000 to $250,000: 10-years exemption
° Value over $250,000: Five-year exemption
The exemption is transferable during the exemption period to any new buyer. The land itself is not exempted and would continue to pay property tax, if its value is above $20,000.
Capital gains tax: Real estate gains should be included in the annual tax return, and are taxed at whatever level the individual is being assessed for income tax.
Financing
It is easier to get a mortgage in Panama than anywhere else in Latin America. Local financing is widely available for foreign residents – that is, residents holding an approved visa, even if they do not spend all year in Panama. See mortgage brokering services.
Where to put your money in Panama
1. Casco Viejo is the oldest city on the Pacific coast of the Americas. It sits right at the western mouth of the Panama Canal, on a peninsula jutting out into the Bay of Panama. This treasure of a neighborhood was the cultural and political center of Panama City until the early part of this century. But its intricate labyrinth of streets was too norrow for the modern world, and its building lacked the shine of new money. And so, as Panama City modernized, this historic part of town was left to decline.
The Casco Viejo neighborhood is now at a turning point. Renovations are under way, and there are some wonderful homes for sale here. It´s a good time to buy. Plus, government incentives mean doing business here makes even more sense for forward-thinking investors.
In 1997, UNESCO listed Casco Viejo as a World Heritage Site. That same year a government restoration project was put in place. Casco Viejo is now positioned to become a major world destination. Good news for Panama City – and maybe good news for you, too. You could play a part in the restoration of this neighborhood, the heart of the first European settlement on the Pacific coast of the Americas…and benefit from government incentives to boot.
Americans have experienced the renaissance of many neighborhoods before, including SOMA (South of Market) in San Francisco and South Beach in Miami. Casco Viejo´s potential is no different, except that its history and architecture are infinitely more significant. Centuries-old homes with decorative iron balconies draped in bougainvillea enjoy unobstructed views of modern Panama City.
With its Decree Law #9 of Aug.27, 1997, the Panamanian government created great incentives for property developers interested in Panama City´s Casco Viejo. For instance, any income you make from the sale or rental of your property is exempted from income tax for 10 years. Plus you won´t have to pay any duties on any materials you import to complete the renovation.
You won´t have to pay any property taxes for 30 years. Nor will you have to pay any transfer taxes – providing the property costs $50,000 or more. If you build a parking garage on an empty lot in Casco Viejo, you can enjoy tax-free income from the business for 10 years. This is almost a license to print money, as parking is very scarce in Casco Viejo – hence the incentive. Signs of private investment prompted by these incentives are everywhere. You cannot walk far without passing a restored building or one in process of renovation. Scaffolding seems to be on every corner. There´s an almost “land rush” feel to condominium development in the area.
One-bedroom duplexes (approximately 800 square feet) are renting for $650 to $750 per month. Renting in the area is becoming more and more popular with Panamanians, because Decree Law #9 makes it possible for renters to deduct their rents from income taxes for a period of five years.
Residential construction is booming. The area immediately surrounding the Plaza de la Independencia, continuing to the Presidential Palace, and then along the bay (near the French Embassy), is seeing the most growth. Casa Remon, a small development of three condos across from the Panama Canal Museum, has units from just under 1,300 square feet for $125,000 to ones with 2,450 square feet for $245,000.
Renovated properties in Casco Viejo are selling for $90 to $140 per square foot, depending on location. Some, with rooftop terraces and city views, command more.
The Panamanian government followed up its investment-incentive legislation with some investment of its own. It renovated the Ministerio de Gobierno y Jusiticia (Ministry of Government and Justice) and the Teatro Nacional. But probably the biggest and most reassuring sign of the government´s commitment to the area, is the complete renovation of the old La Salle Parochial School, located on the Parque Bolivar. This multi-million-dollar project will bring hundreds of government jobs to the area.
Another feature of Casco Viejo and the surrounding area is the abundance of tourism-related attraction, which can only help the revitalization of the old town. There are three museums, including the beautiful restored Panama Canal Museums, as well as several cathedrals.
One square in Casco Viejo, Parque Bolivar, offers the best example of what could be the next Old San Juan in Puerto Rico or Cartagena in Colombia. Nearly every building around the square has been completely renovated. There are four restaurants, a condominium, and the Ministry of Foreign Relations building (currently under renovation), individual residences, a school, and one of Panama´s most celebrated cathedrals, La Iglesia de San Francisco de Asís.
2. Rest of Panama City: Currently there are 121 individual skyscrapers plus another 100 that have been permitted or are under construction. The city skyline is rapidly changing with the area on reclaimed land close to Paitilla known as Punta Pacifica having the most intense building activity at present. There are literally dozens of different high rise condo developments to choose from -from palatial “mansions in the sky” to more economical one and two bedroom apartments. Prices have been creeping up this past 2 or 3 years as developers mostly find their projects are all but sold out before they even break ground. However, despite all this new supply coming on to market the rental market is excellent, and promises a healthy 10 to 12% return on your investment. The Panama canal expansion project, assuming it goes ahead, promises to bring in an influx of up to 10,000 skilled and well paid foreign workers for this 10 year project. Likewise the commercial real estate market is showing excellent returns especially for office space.
Single family homes also present buying opportunities – either in some of the more established residential neighbourhoods like San Francisco or El Dorado, or newer developments in Costa del Este or Clayton. The buying opportunities that existed on the old reverted U.S. bases are mostly gone although some remain in Fort Clayton.
3. Panama Highlands: Altos de Maria, Cerro Azul, El Valle are all within a 1 to 2 hour drive of the city and offer the best of both worlds with easy access to the city and cool eternal spring like temperatures year round. Further a field about 6 hours from Panama City lies Boquete which has become popular with foreign retirees. Here over the course of a few years land prices have gone up ten times from the former depressed prices of agricultural land that existed just prior because of the slump in coffee prices. Volcan and Cerra Punta further up the road towards Mt. Baru have not yet been discovered but will probably benefit from the inevitable spill-over effect. Further East back towards the city the province of Veraguas with its highlands has some potential areas to be discovered.
4. Panama Pacific Coast: A lot of new development is centered on Coronado and further points to the West to Santa Clara and beyond all within easy access of the city, only 1 to 2 hours away to the west. Beachfront and Ocean view properties along this stretch are already high but will probably continue to appreciate just like such properties elsewhere. However, there are more isolated developments and even project development opportunities where prices become a lot more reasonable the greater the distance you go towards Costa Rica away from the city. Going East in the other direction from Panama City lies Darien province, truly a last frontier. A few remote fly in eco-resorts have been developed. Out in the middle of the Panama Bay lie the pristine Pearl Islands, where buying opportunities exist.
5. Panama Caribbean Coast: Bocas del Toro tops the list here, and it could be said that it has been well and truly discovered. The biggest problem that has plagued Bocas is the lack of titled property available, although the government has resolved this issue somewhat, at least for those that held property with only rights of possession or for those that had large projects waiting in the wings. Related to this resolution are the recent announcements of a number of high end resort type projects that will offer buying opportunities for villas and other holiday type accommodation. The rest of the coastline from Bocas which is close to the Costa Rican Border to Colon is largely undeveloped with no infrastructure and little or no access roads, although this will gradually change with the building of the much anticipated autopista to Colon. To the East of Colon as far as Isle Grande, where there are two resorts, there are some potential good buying opportunities but other then Isle Grande very little development has taken place yet. Once you go further East you run into Kuna Yala where of course there are no opportunities at all. This huge stretch of coastline as far as the Colombian border is probably the loveliest section of coastline Panama has to offer.
For further information follow the links below:
View our current property selections
Panama mortgage broker services
Panama real estate title services
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View our current property selections