Acker is a fairly typical second-home buyer in Panama. He is a baby boomer within 10 years of retirement and is thinking of where he would like to spend his leisure time while diversifying real estate investments. Acker is also an Orlando, Florida-based Realtor who bought property in Panama primarily as an investment and secondly as a possible place to retire. This is a combination not typically found in other Central American markets. While someone moving to Honduras or Nicaragua probably is focused on an alternative lifestyle, Acker bought in Panama with an eye toward gaining equity via property appreciation while not discounting the possibility of living there. As an investor, salesperson and baby boomer, Acker provided helpful information about buying property in Panama.
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Q: What made you decide to buy property in Panama?
A: I have traveled to many areas on behalf of international real estate, including eastern and western Europe and some Latin American countries. What I saw in Panama was amazing. There aren’t many places within a few hours’ flight of south Florida where construction is priced as favorably as Panama. I was impressed at the quality of construction, too, and the first-world feel to this hot market.
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Q: Are there any risks involved in buying in Panama?
A: Risks are inherent in any international real estate investment, but I bought in Panama for a variety of reasons. Firstly, I like what I see there economically. A referendum on expanding the Canal is expected to pass, which will create jobs and economic activity. Americans are moving there in large numbers and the lifestyle appeals to them. I can make it from my home (in Orlando) by leaving in the morning and arriving to Panama at lunchtime. I will either keep my unit in Panama or resell. In any case, I’ll collect rental income while it appreciates in value. Several Realtors also bought real estate while I attended a conference there. We know good value and appreciation when we see it. Panama’s risks are low (at this point in time).
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Q: Where did you buy and why?
A: I bought a condominium in a new construction building called Green Bay Plaza, which is in a neighborhood called Costa del Este. Costa del Este lies halfway between the international airport and downtown Panama City on a key artery highway called the Corridor. The look and feel reminded me of Florida. Efficient zoning creates good aesthetics. It is close to employment centers, which translates into rental income. And it would also make a great second home. From my unit, I get an excellent skyline and ocean view. Low monthly maintenance fees include parking, pool and security. Prices were unbelievable and you can get in on the ground floor (literally) with new construction developments there.
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Q: How is the buying process different than in the United States?
A: I’ve learned that things operate on a different time frame. The developer reserved my unit with a minimal down payment—but completing the contract took months, which is different than in the United States. There is negotiation in everything but the buying process and contract process are remarkably similar to the United States. Documents are fully translated into English.
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Q: There seems to be a lot of new construction developments in Panama City. Is it recommended to buy new construction or resales?
A: New construction is where the action is right now, and those who buy early have the potential of good appreciation. New construction projects have a 20-year exemption on taxes. The building designs and construction quality improve dramatically year after year. But resales are also a viable option in Panama. What is challenging is the lack of a multiple listing system (MLS) like one would find in the United States; this makes it hard to determine the true market value. But this will change in the future. As is the case with any property purchase in Latin America, you need to make sure you are dealing with a reputable agent and/or developer with solid credentials and a good track record.
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Q: Would you retire in Panama?
A: I would absolutely consider retiring there. The low cost of living, lifestyle and proximity to the United States are primary reasons. Not only is real estate well priced, but you can go out to dinner at high-quality restaurants at a fraction of the cost. Everything from health care to entertainment is cheaper. But the lifestyle is also very comfortable, especially for Americans. The close proximity to the United States means that I could live there for a few months of the year—possibly during hurricane season in the U.S.— and rent it out at other times and/or lend it to family and friends. What I really like about buying (in Panama) is that I’ve got a variety of options.
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Government incentives
for second-home purchasers
It’s no longer the best-kept secret in second-home possibilities. Publications such as Modern Maturity, International Living, The Wall Street Journal and The New York Times have published stories explaining why Panama has finally hit the radar screen as a retirement and second-home location. However, the benefits and rationale go beyond the gorgeous landscapes and bargain-basement prices. The Panamanian government is very keen on increasing second-home ownership and has outlined several programs through which investment in the country is rewarded with economic incentives. The most significant incentives are exemption of property taxes on new construction properties for up to 20 years plus one of the most generous pensioner/retiree programs in the world.
While the plan is aimed at retirees, anyone over the age of 18 may apply and can qualify as a pensionado in Panama. All that is required is a guaranteed pension income of $500 per month ($600 for a couple). It must be a pension from a government agency (e.g., Social Security, disability, Armed Forces, etc.) or a defined-benefit pension from a private company. An immediate, fixed annuity doesn’t qualify.
As a qualified pensionado/retiree, you are entitled to a one-time exemption from duties on the importation of household goods (up to $10,000) and an exemption every two years from duties on the importation or local purchase of a car (only sales tax and luxury tax would still apply).
In a capsule, Panama has two visas—the pensionado and rentista—that specifically target retirees. In addition, some retirees may qualify for economic self-sufficiency visas. Panama’s pensionado visa was modeled on that of Costa Rica, which implemented policies favorable to international retirees and drew large flows of foreign pensioners in the 1980s. (However, Costa Rica significantly scaled back the incentives associated with its pensionado visa). Applicants for a pensionado visa in Panama do not need to be of traditional “retirement age,” but they must be retired (no longer employed, at least in Panama) and receive government or private pensions of $500 per month, or $600 per month for a couple. The pensionado visa allows retirees to remain in the country indefinitely, although they are not eligible for citizenship with this visa type.
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What Are Panama’s Real Estate Taxes?
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•There is an annual Land Tax and an Improvements Tax
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•Land Tax is exempt for the first $30,000 of value. Amounts greater than $30,000 are taxed at approximately 2 percent of value. For example, on a lot worth $100,000 you will pay a yearly tax of $1,400 ($100,000 – $30,000 = $70,000 X 2 percent)
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•Improvements Tax is exempt for 20 years. After 20 years, the tax is approximately 2 percent of value. As of September 2007, the tax break will vary depending on the value of property as shown below: Under $100,000 – 15 years; $100,000 to $250,000 – 10 years; greater than $250,000 – 5 years
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•Tax benefit on improvements transfers from one owner to the next. For example, if you buy in 2008 a property that was built in 2000, you will still have a tax benefit of 12 years.
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Retirees who do not receive regular pensions may instead apply for Panama’s rentista visa. Rentista applicants must place an amount of money—now hovering around $225,000—in a five-year certificate of deposit at the National Bank of Panama in order to yield at least
