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Author: Klaus Happ
Attractive Rental Returns in Panama
Top investment locations are marked by a growing young population, economic momentum, increased purchasing power, the well-being of the people, good infrastructure and a developed transport network. Panama fulfils these criteria, thereby making it attractive to invest in the country. Where else can you acquire an apartment for 2500 US dollars per square metre within a modern, international metropolis with excellent conditions in a top location on the Pacific promenade? The above-mentioned factors coupled with Panama`s security appeal to many international companies and their staff. This, in turn, serves to create prosperity, purchasing power and a continual demand for real estate. Property investments in Panama City`s top locations realise around 7% per annum (2% in Frankfurt). Such returns are moreover achieved in US dollars, the world`s most important currency. Additional costs for buying in Panama (notaries, lawyers, estate agents and registration) are low at 1-2% of the purchase price. Similar costs in Frankfurt would be approximately 7.5%.
Real estate multiplier in international comparison
The “purchase/rental price ratio” (“multiplier”) compares buying prices to attainable rental incomes. The following rule applies: the higher the multiplier, the more expensive the property. In this way, we can look at both under and overvalued locations.
These figures do not only relate to top settings, but concern average downtown prices and thus differ from our above-mentioned figures for best locations. They do indeed provide a fine overview of profitability in single spots.
Rental yields
Panama is thus internationally an excellent investment location, not only because of its natural beauty, security and strong economic growth, but also because of its real estate figures. The comparatively high rental returns stem from:
- The demand from multinational companies for employee accommodation
- International business people who wish to profit from the economic growth
- Spanish workers who have few prospects in their own country
- Foreign retirees who have settled in Panama
- South Americans attracted by job opportunities
Such groups can be defined as those preferring to rent rather than buy.
Whether you decide on an investment in the UNESCO old town of Casco Viejo with all its incentives or on an apartment in Panama City along the Pacific promenade, the real estate market in Panama is truly exciting and profitable.
Source of graphs (www.numbeo.com, www.globalpropertyguide.com, own)
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. He offers advice on all aspects of living in Panama.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Expected real estate boom through Chinese investors
Following the onset of diplomatic relations with China some weeks ago, Panama is looking forward to closer economic cooperation and is indeed anticipating a new property boom. Up to now, the Chinese have scarcely appeared as real estate buyers in Panama, something in stark contrast to their worldwide investments in places like Canada, US, UK and Germany. Chinese people had previously received no tourist visas for Panama and didn`t therefore have the country in their sights regarding real estate. That has all changed however…
A great many workers from China and India came to Panama during the construction of the Panama Canal (1904-1914). Pressure from locals at the time subsequently led to the Chinese and Indians being refused tourist visas…a matter which stood until recently. Only work permits for multinational companies such as Huawei or China Construction were granted. Hardly any Chinese tourist groups or private investors were to be seen in Panama. Following new diplomatic relations and a consequent visa agreement, one can now expect the arrival of Chinese investors in the coming months. This will undoubtedly have a lasting impact on Panama`s real estate market and prices, just as in the world`s other countries. In the best locations one can currently buy top quality apartments (e.g. from internationally-renowned designer Philippe Starck) directly on the Pacific promenade for about 2500 US dollars per square metre and achieve a rental yield of 7%. Compared internationally, this is very cheap and will be discovered by Chinese investors who are globally used to quite different costs. And all that with US dollars, in one of the fastest growing countries in the world.
Link China`s property desire
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. He offers advice on all aspects of living in Panama.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Tax Agreement between Germany and Panama
As announced some days ago, Germany and Panama have signed a new tax agreement. This provides for an automatic exchange of tax and financial data from 2017 on. The agreement complies with the international standards of the OECD. Panama wishes to free itself from the reputation of the “Panama Papers” and this represents a further step in the right direction, following the OECD decision to remove Panama from its list of tax havens. With this, two important preconditions have been created for a pending double tax agreement between Germany and Panama.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. He offers advice on all aspects of living in Panama.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
OECD takes Panama off tax haven list
The OECD (Organisation for Economic Cooperation and Development) officially removed Panama from its international list of tax havens at the end of June 2017. The OECD explained this as being part of the good development and cooperation of Panama with regard to tax transparency and international relations. The country itself has signed numerous agreements with various nations over the last months (eg with Germany in June 2017) in terms of exchanging tax information. The OECD has furthermore given Panama its second-best rating status, that of “highly respectable”.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. He offers advice on all aspects of living in Panama.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Investment Incentives in Panama`s UNESCO Old Town
Panama`s parliament has approved a new tax relief law on investments in the beautiful old town which will come into effect immediately and last for ten years. This, of course, is extremely good news for our UNESCO old town project in which a building will be restored in order to generate a lasting rental income. In all, it means (according to our understanding…no liability, we offer no tax advice):
- 30 years no property tax on buildings and grounds
- 10 years no income tax on rental yields
- 5 years no sales tax
Such an investment is very sustainable since the number of buildings on the peninsula is limited to about 850 and is not extendable. In cooperation with a German developer who has a great deal of experience in old town restoration work, we plan to reconstruct a unique building with a view of both the ocean and skyline. We would similarly like to rent out the resulting shop premises and apartments, thus achieving a long-term rental income in addition to the increased value of the property.
This video gives you a small impression of the UNESCO old town: Casco-Video
Investors and the government have been reconstructing the historic colonial buildings for some years now. Although there is still much to be done, restoration has led to desirable hotels, bars and restaurants being situated close to the presidential palace, museums and galleries. The trendy district of Panama has thus arisen. The old town (originally formed in 1673) is now the second most popular tourist destination after the Canal. At the same time, many expats from international companies and young people from the upper-middle class are looking for rental accommodation here, in order to experience Latinamerican flair at first hand.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. He offers advice on all aspects of living in Panama.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Panama`s currency is the US dollar
One of Panama`s advantages as an investment location is the US dollar.
The dollar has been Panama`s official currency since 1904, meaning that the nation cannot simply switch on a money printing machine like most other countries. Soaring inflation cannot affect Panama as it has done in so many other places in the past. Even the International Monetary Fund has praised Panama for the stability of its banking system. The country`s markets were spared from the 2008 financial crisis. Panama does not possess a national bank in itself, as the banks are all self-responsible and an “emergency central bank” is not required.
Following the rise of the dollar in the last years, I am often asked why real estate investments in Panama are not that expensive. In principle, the development of a currency does of course have an important influence on the profitability of an investment. In terms of real estate in Panama, one should bear in mind that a powerful dollar simultaneously brings cheaper properties. This is because investors are always somewhat more reserved when purchasing dollar-based real estate if the currency is strong. A weaker dollar, on the other hand, brings about a greater demand for property and rising prices as a result. The connection is similar to acquiring gold in US dollars. Ultimately, no one can predict the future development of currencies. The dollar, however, certainly makes for a broader diversification to your portfolio and contributes to a reduction in risk.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. He offers advice on all aspects of living in Panama.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Highest GDP per head in Latin America
Panama`s economy has been growing at an average rate of 8.5% per annum since 2002. The International Monetary Fund predicts an average annual growth of 6% over the next four years. Due to its sustainable and strong economic development, Panama will show the highest GDP per head (economic performance per inhabitant) in Middle and South America come 2018. It will displace Chile as the leading nation.
(Source: La Tercera/IMF).
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. He offers advice on all aspects of living in Panama.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama
Chinese Investors have arrived in Panama
Panama`s economy has always been hallmarked by foreign investors. This began with the US construction of the Panama Canal in 1903 and continued over the years through infrastructure funding, capital deposits and real estate investments from the USA, Canada and South America. Europeans have only recently begun to arrive, and that in small numbers. In the past, investors from China and the Arab world were hardly represented at all. That is presently changing as China has now discovered Panama. Investments in their billions and Chinese companies and investors alike are now on the way. Here you can read more about the ongoing changes that Chinese interest brings.
Chinese groups were already involved in some Panama infrastructure projects during the last few years. Yet new developments between both nations are of a more significant and extensive size, and will have massive effects on Panama`s economy. The Chinese telecommunications giant Huawei and the world`s largest building firm China Construction both opened head offices for Middle and South America in Panama at the end of 2015. Chinese companies have currently approved projects to the tune of 2 billion US dollars. This is immense for a small country like Panama. Chinese businesses will establish a new container port on the Canal (900 million USD), a thermoelectric power station (also 900 million) and the most state-of-the-art conference centre in Middle America (200 million).
Yet the biggest bombshell came just two weeks ago. Panama took up diplomatic relations with China and simultaneously ended them with Taiwan. China is a more significant economic partner for Panama. It represents the largest trading partner in Panama`s free trade zone (number two in the world after Hong Kong) and the country which uses the Canal the second most.
Where does Chinese interest in Panama come from?
In Latin America, China has made plans for trade deals worth 500 billion and direct investments worth 250 billion over a 5 year period (2015-2019). It would accordingly like to use Panama as a trade and logistics centre. In the meantime, China is financing more infrastructure investments in Latin America than the World Bank. So too, since Panama`s currency is the US dollar, China`s requirement for dollar investments is satisfied.
Such a development between the two countries is not only positive for Panama`s economy (GDP growth since 2002: 8.5% per annum), it will also influence real estate prices. Workers and employees will come to Panama thanks to the big companies and new projects. Furthermore, Chinese investors will be in a position to see that there are not many places in the world offering best-located apartments on the Pacific promenade for 2500 USD per square metre and a 7% rental yield per year. And all that in a democratic, emerging country with the US dollar as its currency.
FRAPAN-Invest
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. He offers advice on all aspects of living in Panama.
The real estate market in Panama is internationally one of the most interesting for investments. We would like to be your trusted local partner and assist you with the initial purchase. Additionally, we can take care of your real estate in Panama in a sustainable way.
Profitable, safe and beautiful:
Investments in Panama