The Republic of Panama's real estate industry relies on foreign investment. The sector has grown since 2006, as such investment has helped to fuel Panama's economy and housing market.
In spite of the economic and housing market growth, poverty is a problem in Panama. Most indigenous people live in extreme poverty while others located in rural areas live in basic poverty. Lack of sanitation, electricity, basic water, health, and education amongst the poor is a serious problem affecting Panama’s housing conditions.
In an attempt to encourage foreign investments for real estate projects and infrastructure, the government of Panama enacted laws protecting foreigners and citizens who make investments.
Corruption permeates the real estate market including claims of drug profits and money laundering financing real estate projects.
Similar to the U.S. and Canada, Panama uses a system of publicly recorded titled deeds as proof of real estate ownership. A unique Rights of Possession system exists allowing individuals to occupy unused government lands in order to make improvements to them.
Background The Republic of Panama is located in Central America between the Republic of Costa Rica and the Republic of Colombia. Its political structure is that of a presidential representative democratic republic with a multi-party system.Republic of Panama's Ministry of Foreign Affairs, "Operations Manual Summit of the Americas 2015", Page 2, http://cumbredelasamericas.pa/wp-content/uploads/2015/04/manual_en.pdf
Since the Panama Canal opened in 1914, the country's economy has depended on banking, transportation, and the service industry. According to a 2012 report by the U.S. State Department, Panama is open to foreign investment with a generally positive investment climate and "sterling economic success" enjoying high economic growth with expected continuing "strong growth in the years ahead". The World Bank reported Panama has experienced the fastest economic growth in Latin America for the past ten years. In spite of its growing economy, nearly 25% of Panama's population were living in poverty in 2015.
Poverty
The World Bank states that while Panama has experienced the fastest economic growth since 2006, indigenous children have "significantly less access to basic services such as education, electricity and sanitation than children in rural or urban areas." The World Bank also claims that Panama has the largest inequality of separation between the rich and the poor in the world. Poverty amongst the indigenous areas is "abysmal" where 95% are poor and 86% "live in extreme poverty". In the rural areas away from the cities 65% live in poverty and 39% live in extreme poverty.
According to the Global Brigades, an international non-profit organization dedicated to alleviating health problems and economic disparity, nearly 30% of Panama’s population lives in poverty in rural communities lacking in basic water, health, and education.
Investment security
According to Christopher Howard who has authored 15 books on retiring and investing in Latin American countries including Panama wrote: "Foreign investment is encouraged by a business oriented government". Professors Edward Jackiewicz and Jim Craine of California State University at Northridge claim that Panama in 2010 found a temporary niche as a safe place to invest. Panama has a specific law protecting foreign investments called Law 54 of 1998. According to the Panama government, The Foreign Investor Protection Law states that foreign investors have the same rights as nationals in Panama.Panama Government Agency "PROINVEX" http://proinvex.mici.gob.pa/index.php?option=com_content&view=article&id=85&Itemid=91&lang=en
The U.S. State Department reported in 2013 that numerous U.S. investors complained about fraud and corruption involved with purchases of titled real properties in Panama. Other possible investment risks are connected to long standing corruption, cronyism, being a zone for cocaine transshipments and drug money laundering, and high exposure to North and South American economic environments.
History: 2006 - present
Panama's real estate market began to grow in 2006.Kent Davis, "Panama Real Estate an Insider's Game?", The Visitor, May 31, 2013 https://ftp.thevisitorpanama.com/2013/05/panama-real-estate-an-insiders-game/Eugene Kiselev, "The concrete Jungle: Panama's Construction Explosion", Lehigh University Press, https://martindale.cc.lehigh.edu/sites/martindale.cc.lehigh.edu/files/the_concrete_jungle.pdf
2006 - 2007
The building boom began with the proposed skyscraper project called the Palacio de la Bahia, even though it was cancelled in 2006. A second tall skyscraper project was also proposed around the same time. The Ice Tower was to be 104 stories on the seafront Avenue Balboa in Panama City began construction in 2007, but was cancelled later that year.Emporis, "Ice Tower", http://www.emporis.com/buildings/250025/ice-tower-panama-city-panama The media publicity regarding both of these projects generated interest in Panama real estate. "The real estate boom in Panama City started in 2006."PTY English News, http://www.ptyenglishnews.com/Panama-Real-Estate.html
Panama City's real estate boom really got a lift when Donald Trump announced the construction of a huge hotel, casino, condominium apartments, and office building on the waterfront in 2006. The Trump Ocean Club International Hotel and Tower was to be a $220 million development including a hotel, casino, yacht club, full-service spa and a private beach club.; building shaped like a ship's sail was to be the most expensive and largest building south of the United States with Donald Trump's name helping Panama's image worldwide. Donald Trump's Trump Ocean Club International Hotel and Tower began construction in 2007 and the hotel officially opened on July 6, 2011. The Trump name was later stripped from the structure in 2015, and hotel in 2018, which is now known as the JW Marriott Panama.
The former U.S. Howard Air Force Base was to be developed on a specialized economic zone of 1,400 hectares called the Panama Pacifico to be developed by London & Regional Properties from the United Kingdom, with an initial investment of $705 million, which included 20,000 homes, according to the government's Panama Pacific Agency (APP).Panama Pacific Agency (APP) http://www.app.gob.pa/index.php?p=app
Reuters claimed that Panama's construction boom may have been fueled by illegal drug money based on the amount of empty new condominium buildings while construction continued including 9 out of 10 of Latin America's tallest buildings.
Corruption has always been a factor affecting Panama's economy.Mauricio Cárdenas and Natalia Salazar, Inter-American Development Bank Report, "Panama's Growth Diagnostics", Page 22, September 17, 2007 http://www.iadb.org/res/files/GDM/September/PA-final.pdf In February 2007, a study published by Vanderbilt University disclosed the cost of Panama's corruption on its economy was between $600 million and $1.2 billion causing the nation's growth rate to fall 0.5% to 1% in 2006.Orlando Perez, Ph.D. and Mitchell Seligson, Ph.D., Vanderbilt University, "The Political Culture of Democracy in Panama: 2006", Page 72, February 2007 http://www.vanderbilt.edu/lapop/panama/2006-politicalculture.pdf
Despite all of the positive publicity there were some speculating a real estate bubble would burst because most Panamanians couldn't afford the high prices and not enough foreigners would purchase the expensive new apartments.
The skyscraper construction boom caused abusive conditions by developers against buyers resulting in a Third Court of Appeals of Panama decision dated November 27, 2007 whereby new rules were created to stem the abusive conditions in new construction purchase and sales contracts.Eduardo Achurra M. of Pardini law firm, HG.Org Legal Resources, May 20, 2008 "Real Estate Buyer Rights in Panama: Recent Developments" http://www.hg.org/article.asp?id=6188
Regardless of the real estate economic boom, The World Bank published a report in 2007 calling for more progress with poverty reduction in Panama.
2008
Spanish real estate developer, Interplus, planned US$280 million real-estate investments in two projects in Panama City's Balboa Avenue." Spanish real estate developer, Marina d'Or, planned a US$18.6 million condominium tower in Panama in 2008. The $246 million investment began for The Hard Rock Hotel in Panama City in 2008. Investors from the U.S., Colombia, Europe, and Mexico were looking to invest in construction projects.
In 2008, Panama's poverty rate remained high in spite of the country's strong economic growth.
2009
The effects of the 2008 global economic crisis had little effect on Panama's housing market compared to other countries. 7,656 new Panama homes were sold from September 2008 to September 2009 with a net of $861 million USD. Every part of Panama was seeing an increase in shopping mall developments in 2009.
Venezuelans deposited over $1.4 billion USD into Panama banks in 2009. Venezuelan capital amounted to $2.5 billion in 2009 in Panama's Colon Free Zone.
According to The Economist, "Panama's income distribution is among the least equal in the world."
2010
Panama's 29 banks were offering up to 98% financing for 30-year mortgages with preferential interest rates including free appraisals and commission waivers in 2010.
The new residential and business park complex, Panama Pacifico, was expected to invest $345 million USD in the next five years.
Panama's real estate market grew in 2010 due to increase in tourism, having U.S. Dollar currency, growing economy, good medical care, and low cost of living. Tourism grew by 6% and it was estimated that 1.9 million would visit Panama in 2011.
Panama was now experiencing a buyer's market because of a condominium over supply. According to the president of Panama's real estate association, there were up to 8,000 unsold luxury apartments while other market observers were claiming as much as 15,000 unsold apartments.
In 2010, Panama's poverty level was 29.8% of its population.
2011
Construction of residential and non-residential properties grew by 64% in April. Panama's Superintendency of Banks (government banking watchdog) issued a study of the real estate market showing growth in the construction sector. Bank loans for commercial construction grew by 32.4% from June 2010 to June 2011.
Fifty skyscrapers had been built or were near completion since 2007 raising questions about over development in Panama City having dreams of first world hope built on third world infrastructures. In spite of the growing economy and proclaimed real estate boom, many new condominium buildings were unoccupied suggesting no tenants and absentee owners with U.S. law enforcement officials believing the construction boom was based on illegal money laundering. Over building of offices created a bubble and the rural poor remained poor as the economic boom had no effect on them. The real estate boom did not help Panama's poor as approximately 1/3 lived in poverty.
2012
Panama's present and future infrastructure projects included a new rail system, new roadways, airport expansion, large-scale event venues, mega shopping malls, and thousands of new hotel rooms.Latin Trade Magazine, "Panama's Travel and Tourism Boom" 2012 http://latintrade.com/panama%e2%80%99s-travel-and-tourism-boom/ Prices continued to rise in Panama's housing market with no signs of a housing bubble. A group of Panamanian companies called, Convivienda, projected $665 million in sales for 2012 delivering 7,429 new homes. During the first seven months, $918 million of approved building permits for construction projects amounted to a 45.3% increase over the same period in 2011.