properties and estates to match any taste or budget, from an affordable view condo ($100,000 in 2007) in downtown Panama City to multimillion-dollar homes on the beach.
All properties have one common denominator: they can be purchased at a fraction of the cost you would expect to pay in the U.S. The cost often is the prime reason for rationalizing a Panama purchase, however, the ultimate decision to buy is bolstered by the stable government, a dollar-based economy, impressive government incentives, friendly Panamanians who are accepting of Americans, the low cost of living, a lack of natural disasters such as hurricanes and a country that truly offers (along with Costa Rica) the most “U.S. style living” in Central America.
Paul McBride, chairman of the real estate committee for the American Chamber of Commerce in Panama (www.panamcham.com), was educated at the University of CaliforniaBerkeley and then spent 12 years in Alaska. He first visited Panama more than a decade ago and immediately fell in love with the country because it reminded him of a “tropical Alaska” with beautiful coastal mountains, fertile waters teeming with fish, abundant wildlife and lush rain forests … and better weather.
“Having witnessed Alaska blossom during my stay there, I immediately saw that Panama had the same, if not more, potential,’’ McBride said. “More than anything, it was the business opportunities that intrigued me most about the country.’’
McBride is now director of Prima Panama, a research and marketing company that helps investors and consumers better understand the nuances of buying and living in the country. The company completed an extensive survey of its members to determine their motivations, attitudes and preferences detailing the process of considering Panama as a place to buy or invest. He is also part-owner of a tour company, Panama Travel Experts (www.panamatravelexperts.com).
“The overwhelming majority of people looking for real estate in Panama have one primary motivating factor—the low cost of living here,’’ McBride said. “This motivation transcends all economic and demographic categories. Everyone is seeking a less expensive place to buy and to live. Fortunately, Panama does truly offer a much lower cost of living and the quality of life is as high as I’ve ever experienced. Although real estate prices have risen significantly over the past two years, they are still a bargain compared to the U.S. or Canada. When you combine the cost of living, the great lifestyle, a U.S. dollar-based economy, a stable government, low crime rates and fabulous weather, you have a country that offers a lot to North Americans seeking an alternative to their home country.’’
According to Prima Panama’s research, the motivations vary for North Americans buying in Panama. The survey revealed that the market can be divided into three groups: primary residents, second-home buyers and investors. Each category has different objectives and, curiously, each category buys in different areas of the country. For example, primary residents tend to cluster in the mountain areas near the border of Costa Rica, where the climate is mild and larger numbers of foreigners reside. Second-home buyers generally look to the beach areas, where they can get an oceanfront condo with rental potential. Investors concentrate almost exclusively in Panama City where an unprecedented construction boom is under way.
“If I were to give any single piece of advice to someone looking to buy or invest in Panama, it would be to remind them that Panama is a developing country and it’s not just the U.S. or Canada in the tropics,’’ McBride said. “Things do not operate the same way here as they do in the U.S. and Canada and you can’t expect the same safeguards as you have in those countries. I often tell people that Panama has one of the highest levels of personal freedom in the world. However, with that freedom comes personal responsibility. If you do something stupid, don’t expect anyone to bail you out.
“We believe that if provided enough information, most people will make a rational and informed decision. However, information can be a precious commodity in Panama and it’s up to the individual to seek out as much as possible before they make their decision. The advice, then, is to do your research, trust but verify and be prepared to take life slowly. But in the end, isn’t the slow pace of life what we’re really after?’’
History of the second-home market in Panama
Although Panama is just emerging as an international second-home destination, the country has always had a market with a foreign presence. After the failure of the French to build the Canal, the Americans stepped in and finished the project in an astonishingly short period of time. From 1908 to 1999, the U.S. military administered the Canal Zone, which cut right across the middle of the country. It was a controversial territory in the eyes of many Panamanians, who were prohibited from entering the Canal Zone because it was deemed a U.S. sovereign territory.
Thousands of soldiers and workers who were stationed in the Canal Zone spawned a U.S. lifestyle in the region, and they easily mixed with locals. The Americans who grew up there, called “zonians,” did not even need a passport to enter into the zone from the United States. Zonians who returned to the mainland U.S. often grew homesick for the Canal Zone because it offered a lifestyle unlike anywhere in the States. A beautiful tropical climate, stunning scenery, friendly locals and a low cost of living were just some of the magnetic factors.
Other than for the select individuals who were exposed to the Canal Zone, Panama was never considered to be a second-home destination. The country was seen merely as a port of call where cruise ships carried curious passengers eager to see how the passage between two great oceans with a difference in height was engineered. Rarely did passengers even leave the decks of the huge vessels that squeezed through the narrow passage. While military personnel often darted away to enjoy a weekend of nightlife in Panama City, only the most adventurous of people ventured to the beaches or interior for a vacation.
In 1977, the Torrijos/Carter accord (signed by President Jimmy Carter and Panamanian leader General Omar Torrijos) initiated the process that would relinquish control of the Canal Zone to Panama. Under the terms of the agreement, the U.S. would give control of the Canal Zone to Panama in 1979 and give complete authority over the operation of the Canal and former U.S. military bases effective December 31, 1999. The treaty also stated that U.S. military intervention in Panama would be justified if free transit through the Canal was ever threatened.
During this period, several incidents produced a doom-and-gloom picture of Panama. The United States military intervened in 1989 to overthrow the military dictatorship of Manuel Noriega, who was accused of narcotics trafficking and endangering U.S. citizens and interests. Noriega, who was removed and jailed in Miami, had a profound impact in creating a negative image of Panama. As the 1999 handover date loomed, uncertainty revolved around whether or not Panama would be able to rise to the challenge of securely managing the Canal. Economic questions surfaced, including how much would a mass exodus of United States citizens depress the real estate market?
More than 10,000 U.S. troops had been stationed in Panama through the mid-1990s. (Troop presence was highest during World War II, when about 65,000 U.S. military personnel were based in the country.) The Canal, and the adjacent Colon Free Zone, generate major economic activity and draw businesses from around the globe. The Free Zone, which began operation in 1948, is the second-largest free-trade area in the world. Companies located within the walled zone area may import goods free from duties and they pay very low taxes. Companies also obtain favorable immigration benefits for executives and other employees.
When the Canal was peacefully turned over in late 1999, Panama began to actively market its so-called
