sitting on valuable real estate. Sales of reverted lands initially were sluggish. But as Panama began to reinvent itself in the years following the Canal turnover, an important economic tool was discovered: residential tourism. Promotions filtered into North America and Europe proclaiming the wonders of vacation spots on two different coasts with miles of available, affordable beachfront for sale.
The boom took hold in 2003, when the first serious buyers came on the scene, mainly as a result of rising property prices in Costa Rica. Speculation now is fueling demand and prices are on the rise. While Panama is poised to become what many call “the next Costa Rica,” its neighbor to the north was developed slowly over dozens of years on a smaller scale and by “word of mouth” of vacationers who turned into homebuyers. Panama’s second-home expansion is a more organized effort on a grander scale with big-time builders and huge government support and incentives. Panama is betting on the international second-home industry. The biggest factors are the increasing number of foreign visitors arriving to vacation and buy, and the expected Canal Zone expansion. An estimated 13,000 new homes are anticipated before 2015—a staggering number given a nation of three million inhabitants. The housing industry is expected to bring more than $15 billion in foreign investment and become one of the largest income generators in Panama.
According to the National Association of Realtors’ report titled Profile of Second Home Buyers, 2005, nearly 40 percent of all residential sales in the United States were for second homes (recreation and investment), up 10 percent from 2003. Fueling the demand are baby boomers, who are turning 50 at a rate of
13,000 every day, or one every seven seconds. According to the survey, the majority prefers to drive to their second home, yet others are not opposed to jumping on a plane to markets such as Panama and trading miles for less expensive real estate. Boomers crave adventure, much more so than previous generations, and don’t mind going the extra mile to find it. The United States Embassy in Panama estimates that more than 30,000 Americans are living in Panama, but no accurate figures are available for the actual number of second-home owners there. These numbers are expected to multiply in the coming years. The Canal expansion is expected to cost an estimated $6 billion and create thousands over the next decade—and a roaring real estate market. Investors in international realty claim it would be better to buy sooner than later.
Drilling deeper to understand migration
According to America’s Emigrants—U.S. Retirement Migration to Mexico and Panama, a 2006 study conducted by Washington, D.C.-based Migration Policy Institute (MPI), an independent, nonpartisan, nonprofit think tank dedicated to the study of the movement of people worldwide, the size of the U.S.-born senior population (those aged 55 or older) grew 136 percent in Panama between 1990 and 2000. At sites in Panama, real estate agents, developers, attorneys and insurance brokers pointed out repeatedly that this growth had continued locally in the post 2000 years, reaching what one called a “frenzy” in this country. Visa statistics from Panama, likely to capture only a subset of people who live there part-time or year-round, showed that the number of U.S. citizens obtaining pensioner visas more than tripled between 2003 and 2005.
A few key components of the MPI study are helpful in understanding the deeper motivations behind Panama’s popularity and the bigger picture of Americans’ interest in other countries.
Four significant trends were described in the subsection, “Why Is Retirement Abroad Important?” First and foremost, the large baby boom generation is on the cusp of retirement, meaning that the retirement-age U.S. population will grow at unprecedented rates, and its proportion to the economically active population will rise dramatically. As this demographic shift occurs, the retiree “market share” will grow. Business and government interest in this segment of the population will intensify in the US and abroad.
Second, the skyrocketing cost of medical and nursing care paired with increasing life expectancies have led to growing doubts that Medicare, Social Security, and private retirement plans will be sufficient for a decent retirement living for all but the most fortunate of retirees. According to a recent Gallup poll, 40 percent of U.S. residents are somewhat or very worried about not having enough money during retirement. These doubts have already begun to push some retirees to “shop around” for a more affordable spot to retire. Some of the retirees interviewed in the MPI study mentioned that covering their medical expenses in the United States or sustaining a comfortable lifestyle in the United States with only their retirement benefits and savings was not feasible, and they found moving abroad to be a solution to their economic quandaries.
Third, advances in communications technology and cheap direct transportation have lowered the social and economic costs of living abroad and have paved the way for retirees to look to other countries as alternatives. A lower cost of living in another country allows retirees to enjoy amenities that would be nearly impossible to afford in the United States, while communications technology and increasingly efficient air travel allow them to stay in touch with family and friends in the United States.
Finally, international retirement migration streams can affect the economies and communities of favored retirement destinations, sometimes profoundly so. Retirement abroad, much like tourism, can be a powerful form of direct foreign investment and thus contribute to development efforts in other countries. Retirees buy or rent homes. They provide employment for local workers, consume goods and services, and may attract greater investment and more foreign visitors to retirement areas.
While research on the economic impacts of U.S. retirees in Latin America remains quite sparse, research on interstate migration in the United States has found that such migratory streams play a large role in redistributing wealth among states. At the same time, some evidence suggests that retiree flows tend to inflate housing prices, which can push some native residents out of areas in which foreign retirees settle, the MPI study revealed.
Popular areas with potential return
Think of Panama, approximately the size of South Carolina, as a country shaped like an “S” on its side. In some locations, the sunrise is on the Pacific and the sunset is on the Caribbean Sea, causing confusion and disorientation (and lost wagers) for many visitors. At its narrowest point, only 30 miles separates the Caribbean Sea and the Pacific oceans. About half of the country’s population lives in Panama City, located on the west side of the country on the Gulf of Panama, with the remainder living in the interior areas. All international flights arrive at Tocumen International Airport, with domestic flights leaving from nearby Albrook Airport on puddle jumpers. Most domestic flights average about 60 minutes.
Roads are generally in good condition, with much of the highway from Panama City to David (about 50 miles from the Costa Rican border) divided into four-lanes. The Inter-american Highway traverses most of the country, but the road ends about 60 miles from the Colombian border. It takes approximately five hours to drive to the northwest Chiriqui province from Panama City and about six hours to Bocas del Toro in the northeast.
Panama City
Panama City is the only city in Central America with a true skyline. Parts of it have a first-world look and feel and its variety of buildings is impressive. It is a melting pot, reflecting the various cultures in its history, from Asian immigrants who labored to build the canal to Latin Americans who call Panama their second home. Thriving Muslim, Jewish and American communities live peacefully. The dozens of international bank headquarters make
