Retiring?  Invest in Panama
A small Central American nation experiences a heady boom in real estate and construction

By Carlos Guillermo Coronado Paiz

Baby boomers seeking more value for their money have discovered a paradise for retirement—in Panama.  This small nation, nestled between its two giant cousins North and South America, boasts sites of breathtaking beauty and lush landscapes, but it also has something else to warm the hearts of investment seekers: strong economic conditions and a stable political climate, both positive indicators for investment in real estate, especially for American and European retirees looking for their own little bit of nirvana.

These international retirees are locking on to a phenomenon known as residential tourism—real estate designed and built exclusively for leisure, including, now, retirement.  And retirees are signing up: they’re buying homes all over Central America.  This works well for Panama’s booming construction sector, the main engine of the country’s economic growth: demand for second or retirement homes fuels the demand for construction, which in turn ensures a strong and healthy economy.  Panama currently enjoys the highest Gross Domestic Product (GDP) growth it’s had in the last 14 years. This is the reason business leaders and the media alike call Panama the Singapore of Latin America. The strength of Panama’s attraction is based on the government’s social and economic development reforms and Foreign Direct Investment (FDI), which is helping establish the economic conditions that enable the private sector to actively participate in the country’s growth: use of the dollar as an accepted currency, free trade agreements, tax incentives and overall political stability.

According to the Engineering News Record (ENR), the Panamanian government estimates that building construction represents a full fifth of the country’s GDP.  In addition, construction has fueled an overall growth in mortgage lending. The nation’s banks total mortgage portfolio has grown at a compounded annual growth rate (CAGR) of 6.32 percent from 2003 to 2005, according to data from Panama’s Bank Superintendency, the regulatory agency for the banking sector.  In addition, public spending on road construction, street repairs, and improvement of public transportation increased 35 percent from 2005 to 2006; the purpose was to strengthen the infrastructure required to support this construction boom.

Panama: a magnet for foreign retirees

According to ABC News, approximately 95 percent of foreign retirees in Panama come from the U.S., while the remaining 5 percent splits between Canadians and Europeans. The latter are mainly French, Italian, and Spanish.  According to the Miami Herald, visas issued to U.S. citizens represent two thirds of foreign resident visas issued in Panama in recent years, with at least 1,379 Americans moving to the country since 2003.
Panama offers more than just pleasant scenery for prospective home buyers from overseas.  Real estate prices are much lower here, while the quality of the kind of life retirees are looking for is comparable to, if not higher, in many cases, than that in their own countries.  For instance, a prospective home owner would pay approximately $7,000 per square meter (10.8 square feet) for a condominium in Spain, but may acquire the same kind of property in Panama for three or four times less.

According to Actualidad Inmobiliaria, approximately 3,500 U.S. professionals are expected to move to Panama in the next eight years.  This estimate seems conservative, given that 78 million Americans are expected to retire in the next ten years.  These are professionals with a minimum of $500 of monthly income, according to the Financial Times; however, the actual spending capacity of retirees living in Panama ranges from $1,200 to $2,500 per square meter of housing.

A survey conducted by the Prima Real Estate Promotion Company cites no fewer than 107 residential building projects comprising 2.3 million square meters (25 million square feet) overall and collectively valued at $3.2 billion that are currently under development in Panama City.  According to the Miami Herald, the average price of a new condominium in the city is approximately $290,000.  Donald Trump, one of the world’s highest profile real estate investors, is pre-selling condominium units at prices ranging from $400,000 to $8.7 million.

Choices abound

In Panama, foreign retirees can find the place that best suits their preferences. The possibilities are vast:
Most available apartments are located primarily in the Panama City metropolitan area (which takes up approximately 45 percent of country’s territory): 7.48 percent is based in Avenida Balboa, 15.89 percent in Costa del Este and 21.5 percent in Punta Pacífica.  Avenida Balboa is a 6.5-kilometer (4-mile) street that has direct access to the Pacific Ocean; it also happens to be one of the main financial centers of the city. Commercial, banking, hotel, real estate, food and other industries are flourishing in Avenida Balboa.  Costa del Este is perhaps the most unique urban area: a large industrial park, a sparsely populated residential area, and several gated communities distinguish this area from other parts of town. Punta Pacifica not only differentiates itself by the physical beauty and technological superiority of its residential projects, but also by the great institutions based in the area.  For example, Johns Hopkins Hospital, one of the most renowned medical establishments in the U.S., has now an affiliated hospital in Punta Pacifica.

Donald Trump’s Ice Tower, the 104-floor colossus that was to be Latin America’s tallest building and the 9th tallest in the world, is currently on hold pending considerations of a possible redesign and a formal review of safety regulations.  Other high-rise residential projects in this area include Aquamare, Vitri, Ocean I and Ocean II, and “Los Faros de Panamá,” a three-tower complex belonging to the Spanish firm Grupo Mall.  Touted as another outstanding engineering project, Los Faros is certainly giving Panama and the rest of the world something to look forward to when it opens in 2009. 

Away from the metropolitan district, amazing residential communities are located in the Chiriquí Province.  Here, Volcán Baru, a 3,456-meter (11,340-foot) volcano, Boquete, and Cerro Punta are attractive options for retirees’ most exacting tastes. Chiriquí highlands offer beautiful peaks, streams, orchards, and farms that resemble European countrysides.  Boquete lures with its cloud rainforest and Valle Escondido, one of its most breathtaking areas, already in high demand by foreigners.

On the Pacific Coast side, the primary residential beach areas are Chame, Coronado (here at the Coronado Golf Club, a beach site goes for an average of $225 per square meter), Punta Barco, San Carlos, Gorgon, Playa Blanca, Pedasi, Playa Arenal, Punta Mala, and Playa Venao.  Bocas del Toro and its beautiful islands crown the Caribbean beaches of Panama.

A stage is set for retiree investment

According to Country Watch, a strong economic recovery has been underway in Panama since 2003.  The government’s strong macroeconomic management is leading to economic growth, low inflation, declining unemployment, and healthier public finances. 

At a robust 8.1 percent, Panama’s 2006 real GDP growth for 2006 is the highest in the past 14 years.  The Economist Intelligence Unit (EIU) anticipates a 6.3 percent growth in GDP for 2007 – 2008.  Low inflation is attributed to Panama’s dollar economy.  Inflation was 2.2 percent in 2006, which represents a Year-on-Year (YoY) reduction of 35.92 percent (2006/2005). Furthermore, EIU expects inflation to diminish to 1.6 percent by the end of 2007, falling to 1.4 percent by the end of 2008.  Unemployment fell to 12.24 percent on a YoY basis (2006/2005).  The government’s strategy, formally titled “Objetivos y Metas del Gobierno de Patria Nueva 2004 – 2009,” enforces the expected increase in foreign investment inflows.  Part of this strategy is the increase of private sector concessions for public infrastructure works, as the federal budget is not sufficient to carry the fiscal burden entirely.

Panama has commercial agreements with Taiwan, El Salvador, and Singapore, and has also signed a free trade agreement with the United Sates and Honduras.  Development of infrastructure, waste disposal programs, and pollution controls are currently being worked out by the government; a $5.2 billion budget for the Panama Canal’s expansion has been recently approved by referendum, which in turn would boost Foreign Direct Investment (FDI) in the next few years.

According to the Economic News Record (ENR), Contraloría General de la República reported that FDI increased 150 percent in 2006 over 2005.  The National Real Estate Investor reports that U.S. investment in Panama increased by 20 percent from 2001 to 2004 (from $5 to $6 billion, respectively; the 2004 figure represents the last available data).  Private investment in infrastructure reached $1.1 billion in 2006, while public investment accounted for $450 million. Moody’s researchers recently predicted returns on real estate investment of 72 percent over the next five years.

The place to be

Panama’s efforts have been rewarded by worldwide recognition: Condé Nast Traveler has touted Panama as the top Latin American country to have a second home; Pinkerton’s Intelligence Agency has given Panama the highest tourist security grade; and International Living ranked Panama first in its 2005 Global Retirement Index. 
The Panamanian government has also put in place significant incentives to attract retirees: it has twice renewed a tax incentive program granting a 20-year property-tax exemption for new apartment buyers.  As Latin America’s financial and transportation hub, Panama is an ideal base for foreign retirees, offering more than one hundred international banks and direct flights to and from major U.S. cities.
The outlook for Panama as the world’s number one retirement destination seems very promising indeed.  After all, why spend your hard-earned life’s savings anywhere but heaven itself? 

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