With our real estate market report Panama City 2021 / 2022 we want to give you an overview of the development of real estate in Panama City and what moves the real estate prices in Panama City. As in previous years, we focus only on the prime locations in Panama City, because we have been active in purchasing and property management here ourselves for years and have the corresponding experience. In addition, we also report on real estate in Coronados beach area.
Let’s start by taking a look at Panama’s economy. Like everywhere else in the world, the Corona crisis has left its impact on the economy and also on the real estate market in Panama. After Panama’s economic growth fell by 17% in 2020, there was a recovery of around 10% in 2021, according to the World Bank. This growth should continue in 2022 with 7.8%. This makes Panama the fastest growing economy in Central and South America in 2021 and 2022, according to the World Bank (info link). The unemployment rate in Panama had skyrocketed to 18% in 2020 and should fall below 10% in 2022, but is still at a high level. Panama’s main source of revenue, the Panama Canal, had another record year in 2021. Revenues were 8.7% above 2020 and even 10% above the pre-Corona year of 2019. Together with Panama’s copper mine, these two sectors in particular have contributed to the stabilisation of Panama’s economy.
From our point of view, the prime locations in Panama City are the old town Casco Viejo, Avenida Balboa, Punta Pacifica and Costa del Este. In addition, of course, the Ocean Reef Islands (photo above), which occupy a special position and on which we will report.
As in the Real Estate Market Report 2020 / 2021, rents in prime locations in Panama City had fallen by 10-15% due to Corona. With the recovery of the economy, the easing of the Corona restrictions and the continued arrival of large multinationals, rental demand in Panama City’s prime locations has increased again and vacancy rates have declined. The largest property management company in Panama City reported vacancy rates in some of its buildings of 15-20% in 2020. This has now dropped to around 5%, it said. Rental bargains in the good buildings are almost non-existent and accordingly rents are moving back towards pre-crisis levels.
Rents have recovered fastest in Costa del Este. Here, the demand for rent is highest due to the many large corporations that often have their headquarters here and their employees. However, there are still many vacant building plots here, which will mean further supply and thus competition for properties in the future. We also see a recovery in rental prices in Avenida Balboa (only 3-4 vacant building plots left) and in Punta Pacifica’s good buildings. Be sure to buy your Panama City flat in the front row on the Pacific, have unobstructed sea views and furnish your flats attractively to stand out from the competition. Today, rental prices in Panama City in the locations and qualities mentioned are around 12 – 14 USD per square metre. The highest rental demand is currently experienced by 2-bedroom apartments, as the second bedroom can also be used as a home office in Corona times.
Choose a good property manager who will take care of your interests in the long term and keep the tenant happy. A good property manager usually charges 10% of the monthly rent. We offer our clients such a property management in Panama City (info link).
A good indicator for an improving rental market is also that many tours of relocation providers in Panama City are currently fully booked. Furthermore, the situation in many other Latin American countries has worsened considerably in recent months. The Corona crisis and left-leaning elections were often the trigger in many countries (Chile, Peru, Colombia, among others). It is currently observed that very wealthy people, e.g. from Peru, are looking for investment and residence in Panama. Both have a positive influence on the real estate market in Panama.
Property prices for residential flats in Panama City in the above-mentioned locations of Avenida Balboa, Punta Pacifica and Costa del Este are still 10 – 15% below the pre-crisis level, depending on location and quality, but have recovered from the interim low prices. Purchase prices here are currently around 2,300 – 2,500 USD per square metre. In Punta Pacifica, some are higher.
The following drone video of Avenida Balboa gives a good impression of the waterfront street in Panama City.
Casco Viejo in Panama City (info link) is a niche within a niche. Panama is a niche in Latin America, and Casco is a niche within Panama City. As a historic UNESCO site, it behaves somewhat differently from a modern city and is more similar to other UNESCO World Heritage Cities. One of the main differences is the limited number of buildings, with around 850 buildings located on a peninsula just in front of the city skyline. For those looking for long-term value, Casco Viejo has always been an interesting market: a walkable neighbourhood by the sea, in an urban setting with many cultural attractions.
Currently, there are new building developments, especially around Plaza Santa Ana. New residential buildings are being restored here, but also commercial areas. In 2021, Panama’s Fashion Week and Panama’s Film Festival (IFF) were held in Santa Ana for the first time. Santa Ana is the less developed part of the old town, where many developers have secured plots and prices are even cheaper than in the already more developed part of the old town of San Felipe. We started construction work on our restoration project at Plaza Santa Ana in September and are looking into new projects with our local partners.
San Felipe is about to enter a new phase. The Sofitel with 159 rooms and the Hyatt with a similar number of rooms will open here in 2022. The old town and its real estate market have always been very dependent on tourism. This came to a standstill due to the Corona crisis and is just now recovering. The planned connecting road between the new cruise terminal and the new exhibition centre into the old town should give the property market in Casco Viejo a new boost. On the residential side, there are also new projects in San Felipe that are moving into the luxury segment. Prices for the new projects range from USD 4,500 – 6,000 per square metre, depending on the location. Good existing properties can be bought for around 3,000 – 3,500 USD per square metre.
If you buy in the old town in Panama City, you should pay attention to the location. The old town can be very noisy due to street noise and bars. Parking spaces are in short supply. Furthermore, when buying existing real estate, you should make a very careful technical inspection of the construction quality. After all, we are talking about old properties in an old town. Prices and rents have come down due to the Corona crisis, which had risen constantly in previous years. If one believes in the advantages of such a UNSECO old town with naturally limited inventory, you should find very interesting investment opportunities here in the long term.
Ocean Reef Islands (info link) takes a special position due to its exceptional location, quality and prices. You will probably not find a comparable project in all of Latin America. On Island 2, the construction development is progressing very well and the sale of the flats in the different apartment buildings is much faster than expected. These are international buyers and often investors are buying for the second time on Ocean Reef because they are satisfied with their inventory. We have assisted various investors with their purchases in different projects on Ocean Reef. Sales prices have steadily increased over the last two years and are currently around USD 6,000 per square metre. Since there are not many available building plots left and no more islands may be built, prices should probably continue to rise due to the limited supply. Please feel free to contact us if you are interested.
Properties in Coronado or the beach area of Coronado (Info – Link) are still popular. Due to the closeness to Panama City and the good infrastructure, the area is a popular destination for tenants, tourists and buyers. However, due to the Corona crisis, rental demand from foreign tourists has dropped sharply, which often represented a larger part of the income. This is also recovering in the current tourist season, but is far from being back to pre-crisis levels. The majority of tenants currently come from Panama City and spend their weekends or parts of their annual holidays here. The advantage is that AirBnB rentals are allowed here, unlike in Panama City, which allows you to use the property partly yourself while it produces additional income. With significantly more effort (short-term rental), one can achieve similar rental income as with a comparable long-term rental in Panama City. Long-term rentals are more difficult in Coronado. The purchase prices in the best residential areas have fallen by approx. 10-20% compared to the pre-Corona level due to the crisis. Here you can currently find very attractive offers for approx. 2,000 – 2,200 USD per square meter.
In general, a recovering tourism sector is positive for the entire real estate market in Panama. Both for holiday rentals and for the buyer’s market. In the past, many tourists got to know the uniqueness of Panama during their holidays and were then interested in buying real estate. A few weeks ago the new cruise terminal as well as the new convention centre opened in Panama City and brought new people to Panama. Let’s hope that this development continues.
In August 2021, the popular Friendly Nations visa was changed. Until then, it was possible to obtain a second residence in Panama with little financial effort and a few documents. Now, an investment of at least USD 200,000 is required to obtain a residence permit in Panama. What impact does this have on real estate prices in Panama? With the old regulation a large number of foreigners had been given the opportunity to settle in Panama. Most of them will not have made major investments in Panama and will not live in Panama constantly. Some of them will have stimulated the rental market and possibly bought a property later. The new regulation attracts a much smaller number of foreigners who are able to apply for residence in Panama. However, they directly invest at least USD 200,000 in the real estate market in Panama. Which variant will have the better impact on real estate prices in Panama is difficult to say at the moment. In addition to the investor visa, there is still the pensioner visa in Panama (overview of visa types).
While in most parts of the world you find an overheated and very expensive real estate market, in Panama you can still buy property at a reasonable price if you compare the purchase price with the rental income. With rents currently in a recovery phase, purchase prices should probably follow the rising rents. This has happened before in 2020 / 2021 when rents started to fall (info link to Prices follow rents).
We are happy to help you find your suitable property in Panama.
Klaus Happ’s company “FRAPAN-Invest” advises investors who want to invest in real estate in Panama. He offers advice on the subject of “emigrating to Panama“. Furthermore, he supports companies that want to become entrepreneurially active in Panama.