Panama Real Estate Archives | Panama Relocation Tours

Last Updated Jun 27, 2020 - by Jackie Lange

Panama Real Estate Post-Covid

Because of the Covid virus Panama’s real estate market took a nose dive. Real estate offices have been closed.. some may never open again. Most notary offices have been closed so you can’t go to a closing. Many contacts were cancelled too. Rentals sat vacant because Panama’s borders were closed and the quarantine prevented anyone from being away from their house for more than 2 hours to buy groceries. So, what’s the future of Panama’s real estate once Panama opens their borders again?

The basic principal of supply and demand indicate that Panama will have much more supply than demand for the next 3-5 years. To make matters worse, in 2020 there has been a big increase in properties and businesses for sale which will add to the already overloaded supply.

For this report about the future of real estate in Panama, I consulted with trusted real estate agents, the biggest developers in Panama and researched what the Panama’s association of real estate agents have to say. I’m also drawing on my 30 years of experience as a real estate investor who monitors real estate trends in Panama and in the United States.

RENT FIRST

Let me state up front that we at Panama Relocation Tours encourages you to rent for at least 6-12 months before you consider buying any property in Panama. Twelve months will give you time to make sure you like living in Panama. Twelve months will give you time to experience both the rainy and the dry season which can be dramatically different in some areas. Twelve months will give you more time to understand the “right” price for houses versus overpaying. In twelve months, you’ll know if you’ve picked the right area or if you need to keep looking at other locations or elevations in Panama.

It is easy to buy in Panama but it could take many years to sell. So, you should not rush to buy something regardless of how good you’ve been told the price might be.

WHY DOES IT TAKE SO LONG TO SELL A HOUSE IN PANAMA?

There are a lot of reasons that it takes many years, sometimes 5+ years, to sell a property in Panama. Most people selling real estate, including real estate agents, in Panama have no previous experience in real estate so they don’t know how to do marketing. We do not have a widely used MLS (multiple listing service) in Panama so it is very hard to determine the right price to list a house at and most sellers/agents start at a price that is WAY too high. Beware that some foreigners selling or renting real estate do not have a work permit so they are working illegally in Panama. Always ask to see their work permit.

Another obstacle is financing. Financing is available at banks but they will require 20-30% down and it could take months for the financing to be approved. Banks will require that you get a life insurance policy naming them as beneficiary just in case you die before paying off the loan. And banks loans must be paid off when you turn 70 which prevents many retirees from getting financing. You will probably not be able to get fixed rate financing.

Some developers offer short term, less than 5 year, financing for new construction.

The other reason it takes a long time to sell is because there is a mismatch between the price point that most buyers are looking for and the price of the inventory that is available for sale. Ninety-seven percent of the people who come on a Panama Relocation Tour are looking for homes under $200,000. But much of the inventory of homes for sale are prices at $250,000 or more. There are not enough buyers in the higher price points so it takes much longer for those properties to sell. Properties in good condition priced under $200,000 tend to sell quickly if they are in a good location.

GROWING INVENTORY = LOWER PRICES

During the 2008/2009 real estate crash, Panama saw far less drop in prices than other countries. But the Covid-19 impact is different. The borders of Panama have been closed so no foreigner buyers could come in. Even people already living in Panama cannot buy houses yet because real estate offices have been closed since mid-March and the notary offices, where you would go for a closing, have mostly been closed too. According to the Panama’s Association of Real Estate, sales are down 90% in Panama at least.

Construction projects were stopped during the quarantine too.

The president of the Association of Real Estate (Acobir), Frank Morrice Arias, stressed that, “in addition to this (covid-19), previously, they had already been facing a market hit due to the decrease in prices in the last four to five years.”

Prices in many areas in Panama were going down before the Covid-19 virus. And now, with even more inventory, we anticipate that prices will need to go down more if a seller really wants to sell.

Morris announced that, “in the residential sector, it will take about three to four years to absorb all the inventory they have and it will be necessary to carry out strategies to mitigate the situation; In the case of an office commercial, where for several years they had excess inventory, it will take five to seven years to recover.”

Elisa Suarez, executive director of the National Council of Housing Developers (Convivienda), explained that “… We are going to face a market where the demand will be quite contracted and where the supply will definitely have to be restructured. This leaves me to think that there is definitely a tendency for prices to fall in order to leave the inventory that we have so far.”
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Last Updated Jun 22, 2020 - by Jackie Lange

Panama Cost of Living in 2019

What does it cost to live in Panama? That’s the question I get asked most often. The answer is… it depends on where you live and how you live.

Some areas of Panama are much more affordable than others. If you live near Coronado or Panama City, your cost of living could be more than where you live now. But if you live in other areas in Panama your cost of living could be substantially less than where you live now.

I live in the highlands of Panama in Boquete. It’s not the most affordable place to live in Panama, but it is much more affordable than living in Texas where I moved from. Other places in Panama are even more affordable than Boquete.

I’ve been tracking my living expenses ever since I moved to Boquete so I thought I’d share them to give you a realistic picture of what it costs to live in Boquete in 2019. Keep in mind that I live a modest lifestyle. My house is about 1000sf on a large property with a lot of flowers and a vegetable garden. I don’t try to keep up with the Joneses.

HOUSING

Housing is usually your biggest expense, but it does not have to be in Panama.

In Boquete, like all other places, your cost of living will depend on your lifestyle choices. If you want to live in Valle Escondido or any of the other gated community, your costs will be much higher than other areas.

You can rent a house for $200 a month or spend $4000 a month.

Boquete has a huge variety of rental prices, like most areas in Panama. Only you can determine if the price you are willing to pay is in an area you like. You probably will not need to spend as much as you think for a house you really like.

During the tour, we sometimes visit with a couple who lives in a fantastic furnished 2 bedroom on one acre with the Pacific Ocean right out their front yard – all for only $400 a month. See it in the photo to the right. We also see fancy high rise Ocean front condos which rent for $1200 to $1800 a month. There’s something for everyone, in every budget, in Panama.

Affordable living is available in Panama if you know where to look! (we show you where during a Panama Relocation Tour)

I recommend that you rent for at least 6-12 months before you buy anything. That’s the only way you can really get to know an area.

Many people make the decision to only rent when they move offshore. Renting gives you a lot more flexibility. Rent is so affordable, it really does not make a lot of sense to buy. In Panama, it is easy to buy but it could take many years to sell. The other big advantage of renting is that you can easily move to a different location in Panama if you don’t like the weather or the neighbors where you are.

When I moved to Panama, I paid $600 per month rent for a fully furnished 2-bedroom, 1.5 bath house on an acre with 100 banana plants, coffee plants, exotic flowers and a spectacular view. I could pay more.. but why? I had everything I need at an affordable price.

After living in Panama a few years, I purchased the house for $120,000 so I don’t have a rent payment anymore. And I don’t have any property taxes – every! My house insurance is less than $200 a year.

Now ten years later, that same furnished house would rent for $695 to $795 today including includes all utilities.

FOOD

You can eat at a Panamanian style restaurant for $4 – $5 per person. It’s hardly worth it to cook at home with those prices. Most high-end or expat-owned restaurants have prices similar to North America though. In some areas in Panama, you’re only choice is a Panamanian style restaurant.

I buy most produce at the Mercado (farmers market) or grow my own in my greenhouse. Produce prices are much cheaper than the United States and the quality is better too. For example, I recently bought 2 large sweet pineapples for $1.50. You can buy 4 Hass avocado for $2. I can buy 50 pounds of carrots for $6 or 100 oranges for $4.

Bananas are free… I get them on my property.

In 2019, I spent an average of $400 per month on food including eating out. Some of this expense is for cat food.

PHONE

I only use a cell phone in Panama. My data/talk plan is $32 a month. This is a huge savings over what I paid in Texas. With my Panama cell phone, I can make international calls at no additional costs!

I use Skype to make calls to friends and family all over the world at $0 expense. I have a dedicated Skype number so anyone call dial that number and it rings at my house in Panama. I pay $50 a year for my dedicated Skype phone number.

SHIPPING AND POSTAGE

Panama does not have mail delivery service to your house. I use a mail forwarding company in Boquete to get mail delivered from the United States to Panama. It’s expensive at about $3 a pound to get Amazon orders delivered so I try to buy everything I need in Panama to save money. There are in-country courier services available too.

MEDICAL

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Last Updated Feb 10, 2020 - by Jackie Lange

Beware of NET Listings in Panama

In Panama, some things are done in a different way than you are familiar with. A good example are real estate sales and rental listings. In Panama, it’s common to see the same house listed at several different prices with different agents. Sometimes the “spread” can be as much as $100,000 difference for the same house!

In North America, most houses for sale are listed as an exclusive listing. This means that one real estate office as the exclusive right to market the property. If that same office finds a buyer, they will typically make about a 6% commission. If an agent from a different office produces a qualified buyer, the “listing” agent will usually agree to split the 6% commission. In North America, a real estate agent has a fiduciary responsibility to the seller/buyer so all the dealings for the transaction are revealed “on top of the table.”

There are some exclusive listings in Panama too. But most listings are NOT exclusive. Instead, the seller has agreed to pay a commission to whoever produces a qualified buyer. This is why you will see the same house listed with several different office and at different prices. A typical commission in Panama is 5-6% of the sales price.

But sometimes, the seller has told the agent(s) that they need to NET a certain amount at closing and anything the agent can sell it for over that amount will be there profit. This is called a net listing. Net listings are illegal in most of North America, but it is business as usual in Panama. Here’s an example:

Joe and Mary need to walk away with $150,000 on the sale of their property. Real estate agent Sue advertises it for $220,000 – with room for negotiations, she’s hoping it will sell for $200,000 so she can walk away with a $50,000 commission versus the $12,000 commission she would have earned at 6%.

Maybe $200,000 is the right price for the house. But perhaps $150,000 is the right price. It’s hard to know in Panama because there is not a reliable MLS system to show comps of recent sales in the area. We do have an MLS system but most agents don’t use it and that’s why it’s not reliable.

Last year, I had breakfast with the broker for a local real estate office. He was bragging about how me made $600,000 profit on a NET listing near Boquete.

HOW WIDESPREAD IS THE PROBLEM? [Read more…]