The Panama City Sales And Rental Market

Name Your Own Price In These Crisis Markets

Oct. 9, 2009
Panama City, Panama

PLUS:

Surfing Haven, Too?...
Square Sea Bass And Other Signs Of The Drug Trade South Of The Rio Grande...

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Dear Live and Invest Overseas Reader,

"I'm not ready to retire yet but plan to in five years. I've decided Panama is the place, and I'm considering buying something in Panama City that could generate rental income between now and when I take up residence myself.

"Do you think this is a good idea? Could there be a reasonable cash flow from the rental income to make this a viable investment?"

-- Nizar M., United States

Yes...and yes.

When we moved to Panama City 15 months ago, the sales market already had begun to cool, but the rentals market was bubbling over. Three apartments were spirited away from me by other renters quicker on the draw with their checkbooks before I learned to take the real estate agent's advice about making a decision on the spot more seriously.

This market-at-a-boil can't continue long, I reported at the time, and, indeed, the Panama City rentals market has settled in the year-plus since.

Settled but not crashed, as some have been predicting. And I don't believe it will. I'm confidently bullish on this market long term.

If you, like the reader whose question I share above, are planning to retire to this town sometime down the road, this is your chance to buy a retirement pad of your own on a dip. If you're an investor looking for a place to place some capital, I say again, this is a market with a bright future. Capital appreciation won't come at the rate Panama City apartment owners have enjoyed over the past half-dozen years, but it will come. And, meantime, you could enjoy rental yields of 8%+ per year. We've been yielding better than 12% net per year on the downtown apartment we bought three years ago and have just renewed our tenant's lease for another 12 months.

Other former bubble markets worldwide have imploded. Why not the Panama City market?

Here's why:

This market was not made by Americans, at least not 100%. This market was also made by Venezuelans, Colombians, and other Latino investors looking for safe haven for their capital. Panama continues to offer this, certainly relative to other regional options. Meantime, the Venezuelans are more keen than ever to move whatever assets they have out of Venezuela...

Panama City is not only a safe haven for worried investors from less free markets, it's also the top doing-business haven in this part of the world. Big international firms (Dell, 3M, Caterpillar) have targeted this country, especially its new Panama Pacifico international business park under construction at the former Howard Air Force Base. One mega-group is in the process right now of scouting rental apartments for hundreds of its executives to be relocated here over the coming year. The group has asked that their name be kept out of the press, because they're already struggling to get decent deals. They can't source the rental inventory they need, and landlords in this town are realizing their upper hand...

Panama's own infrastructure improvement projects are requiring a big and ongoing influx of foreign labor...and they all need a place to sleep. The Panama Canal expansion project is well under way and will continue to fuel the country's economy and rental market...and new President Martinelli seems serious about his plan for a Panama City metro system. If that project proceeds, it'll mean even more outside labor in search of a place to lay their heads at night...

I don't mean to pretend that Panama has been completely unaffected by the global financial meltdown, but the effects have been marginal and, from where I sit, welcome. The Panama City market, especially, both for sales and rentals, was running on overdrive. It's settled down now, creating a window of opportunity for both the retiree and the investor.

The better acquainted I become with this country, the more convinced I am that this is the place to be (as a retiree, an investor, and an entrepreneur) for the coming decade.

Here's your chance to buy your way in on the dip.

Kathleen Peddicord

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TODAY:

Retirement, investment, business, banking, tax, offshore...and surfing haven?

Panama has decided it'd like to promote itself an international surfing spot. Panama Tourism Authority Director Salomón Shamah explains, "Surfing not only generates a lot of international attention, but it also drives tourists. And surfers are high-quality tourists, aware of the environment."

Copa Airlines, therefore, has launched a special program for surfers flying to Panama from some locations in the States, Brazil, Costa Rica, and Puerto Rico. Surfers can now bring two surfboards with them free.

MAILBAG:

"We read you several years ago, Kathleen, and are happy to have found you again and to be back in the loop.

"We have always planned to retire to San Miguel de Allende, Mexico, but have had to postpone for a couple of years because 40% of our investments was lost with the Wall Street Crash. The continuous bad news about kidnappings and drug killings in this country is also causing us concern.

"You are now recommending Panama as one of the best places for retirement. Could you give us an update on how Panama is involved in drug trafficking? It is on the major road route from South American through to the United States, and several stories I have read state that Panama is already suffering from violence caused by drug trafficking.

"Any updates on this?"

-- Renee J., United States

Panama is a part of the drug lane from Latin America to the United States and Europe. Square sea bass (as the bricks of cocaine are called locally) wash up onshore in particular parts of the country regularly. And most of the serious crime in Panama is related to this drug trafficking.

This is a reality about Panama, but it is not a concern for the average retiree or resident. The drug trade has no impact on day-to-day life for non-drug users or traffickers. As our in-country Editor Rebecca Tyre, who has been living here for more than four years, explains, "If I weren't addicted to the local Spanish news, I wouldn't be aware that any of this was going on."