Panama Citizenship by Real Estate: Common Mistakes US and Canadian Investors Make

Understanding the Real Estate Market in Panama

When making a significant investment, a careful approach is needed, even more so if this investment is made abroad. If we make mistakes, Panama real estate investment can stop being an opportunity and become a nightmare. This is why at Mundo, we thought it would be interesting to talk about these topics and things that can go wrong if not considered in advance.

Current Trends in Panama's Real Estate

The Panama market is growing rapidly when it comes to construction, yet slowly and steadily when it comes to appreciation. Nevertheless, last year, price increases outpaced inflation, which is not bad news if we consider the hectic times we live in, and the increasing geopolitical and economic issues rising across the world. 

Without a doubt, Panama is still a good jurisdiction to place your bets when it comes to this fascinating market, with the perk of qualifying for various visa permits. 

Types of Properties Available

The above-mentioned boom is bringing construction and preparing the ground for lots of new developments, which translates into an ample pool of opportunities. An advantage that it's worth mentioning every time is that, when it comes to qualifying for residency, the projects don't have to be government-approved.

All the applicant needs to do is meet the requirements, which include a minimum investment of $300,000, coming from legal sources and from abroad. Mortgages or payment plans can be considered to cover the remaining sum. For instance, if a property is worth $400,000, the applicant must pay $300,000 in advance and finance the rest. 

Secondly, the country of the canal has a strong offer, including unbelievable quality, author design, and lower costs when compared with other world-class capitals. 

In a nutshell: Types of properties available in Panama 

• Beachfront projects that offer a supreme lifestyle, fast access to the beach, and are a short car ride away from Panama City
• Branded residences under the most exclusive hospitality brands offering the best of 2 worlds and a supreme lifestyle, both for family residence and short-term rental (still in the pre-sales stage)
• Units in iconic neighborhoods like Amador, which offer unique views of the Bridge of the Americas and the ships standing in line for the Panama Canal
• Energy-efficient complexes (one of them has an EDGE certification), which offer the opportunity of spending less and contribute to reducing global warming
• Apartments in elite areas close to reputable clinics, constituting great potential in the medical tourism area
• Studios, one-bedroom, two-bedroom apartments, and lock-offs (usually one bedroom plus a studio)
• Turnkey options so you can move in as soon as the apartment is ready and furnished
• Exquisite design across the social areas and inside the apartments
• Breathtaking views of the ocean, the city, or relevant landmarks (depending on the unit and location)
• Social areas with exclusive amenities ranging from a cinema to an observatory 
• The usual amenities like gym, playground for children, Skydeck, infinity pool, sauna, and co-working spaces

Key Mistakes to Avoid

Overlooking Legal Due Diligence

Large investments are a serious deal, and they should be treated as such. It is necessary to conduct thorough research and confirm whether the property is in good standing (without liens, debts, or pending payments). 

We strongly recommend that you contact the Mundo team so that we can show you the properties that we offer. Most of them are built by trusted partners and reliable developers. Nevertheless, if you choose to pursue the purchase on your own, you must find the help of a local lawyer whom you trust. 

Ignoring the Developer’s Track Record

Buying during the preconstruction stage facilitates lower prices but poses higher risks. Whether the developer will deliver the unit, whether they will deliver it on time, and whether they will deliver quality are all key questions.

Whatever developer you choose, make sure to research its history. If it's a new developer, make sure you have very good recommendations, and if it's not, check out what they have already delivered. Another important point is whether they deliver according to the stipulated schedule.

Misunderstanding Residency Benefits

There are several myths about Panama, especially when it comes to taxation. Since this is a country with a territorial system, many believe that coming here makes them tax-free.

Obtaining residency doesn’t get you immediate tax residency, as this requires other commitments like longer stays and actual activity in the country. Furthermore, once obtained, territorial taxation doesn't mean a total exemption, simply an exception to income derived abroad.

Underestimating Location and Infrastructure

Location is everything. The neighborhood or area can define your lifestyle and the type of short-term visitors that will stay in your apartment. If you want to focus on medical tourism, a beachfront property would be the wrong choice.

On the other hand, if you're focused on family escapades, an apartment by the beach and away from the hectic city might be the answer. The same goes for complexes near convention centers, the banking district, or entertainment spots like cinemas or shopping malls. 

Failing to Understand Tax and Ownership Structures

Without a question, tax is something that should be approached by a professional. In any country, taxes are complex, especially if you are from abroad. So, don't hesitate to get help. Still, it always helps if you read plenty and delve into the subject yourself. 

Properties are taxed, differentiating between the primary residence and secondary houses or apartments. All real estate (used as the primary residency) below $120,000 is exempt from taxation, while property from 120,001 to 700,000 pays 0.5%, and properties from $700,001.00 pay 0.7%. 

As for secondary residencies or commercial real estate, the first 30,000 dollars are exempt, then the rate increases from 30,001 to 250,000 (0.6%), from 250,001 to 500,000 (0.8%), and over 500,000 (1%). 

*Note: this graph is prepared without considering possible exemptions, incentives, or the particularities of each case. Also, this graph may contain mistakes or outdated information; therefore, it should not be taken as financial advice. 

Disclaimer: this article presents a general overview of Panama real estate; the information may be inaccurate or outdated at the time of reading. This article doesn't constitute legal advice. 

Risks and Scams in Panama Real Estate

Common Scams Targeting Foreign Buyers

Unfortunately, crooks can be found anywhere in the world, and Panama is no exception. A common trick to scam foreigners is through language. Since the documentation is in Spanish, you will need a reliable lawyer who will help you check out all the certificates and contracts. They can also help you read the fine print in the sales and purchase agreement.

How to Verify Seller and Ownership

For titled properties, the public registry is the place you go to confirm who the legal owners are and whether the apartment/house/land has any liens or encumbrances.

For Right of Possession Ownership, a.k.a, concessioned lands, ownership should be verified through municipal records or with the local authorities. 

Send your enquiry

Due Diligence Practices

Importance of Structural Inspections

What looks beautiful from the outside may have serious flaws on the inside. This is why, for resale homes, it is highly advisable to consult with architects who check out the core structure.

Confirming Property Boundaries

Land boundaries are not always clearly defined with a fence or physical separation. This is particularly so in rural areas. It’s vital to confirm property boundaries both in the municipal records and by talking to the residents. 

Detecting Hidden Defects

A house with defects can cost you money in the long term as it may need repairing or refurbishment. Besides, these types of defects are far from ideal if you're trying to provide luxury stays. If there are such defects, it's better to know about them in advance, and, in any case, renegotiate the price.

Resale vs new or pre-construction (by developer) 

Choosing a new property or one in the preconstruction stage may save you a lot of the trouble described above. Naturally, new properties can still have defects, but at least you can check out recent constructions by the same developer for the sake of comparison. The same can be said about preconstruction. We've recently published an article about the topic and prepared the following graph.

Insider Tips from Experienced Buyers

Lessons Learned from Foreign Buyers: get to know the area

We live in hectic times, but whatever time you can make to visit the area in person is time well spent. No brochure, video, or even virtual tour can replace the in-person experience. 

Go to the neighborhood you're interested in, have a coffee, see how it is at different times of the day. Is it quiet at night, or is it bustling until late in the evening? Would you like to walk your dog late in the evening in solitude, or do you feel safer surrounded by people?

Are there supermarkets and grocery stores nearby, and at what time do they close? How about schools? Are they close enough for your teenage kids to walk there, and is the area safe for them?

None of these factors can be grasped from a brochure, and your realtor, even with the best intentions, won't fully understand your personal tastes or needs. 

Ask about the available projects

Local Practices to Consider: talk to the people

We understand that the language barrier can be an issue here, but for those who speak a little Spanish, the following can be a useful tip. By talking to the people, you can find out details that your realtor won’t tell you, like water pressure issues or frequent power cuts. 

Research with your eyes to the future

One key indicator of property appreciation is the emergence of infrastructure (offices, stores, schools, restaurants). This creates job positions and hence the need for people to commute. Eventually, this will translate into enhanced routes and the appearance of public transportation; ergo, your property’s price will increase.

For a quick example, we can see what's going on today in Panama Pacifico, a suburban area that is experiencing major growth thanks to urbanization plans and the construction of a new metro line. 

Resources and Contacts

Recommended Lawyers and Real Estate Agents

We work closely with a long-standing development company that has been building outstanding complexes for 40 years in the Central American capital. Nevertheless, it is our policy not to share details, except during personal and formal consultations. 

Our team can help, so it is necessary that you contact us and that we make our connection formal. Furthermore, our experts will be able to give you case-by-case advice and updated information.

Useful Government Contacts

The reader can go to Panama’s official sites; however, most of them are only in Spanish. Anyway, the most useful contacts are probably related to residency, a process that needs to be done through a local lawyer, and this is mandatory. 

Conclusion and Next Steps

To sum up, Panama real estate is an outstanding sector if you have a careful and clever approach to it. It can offer you the lifestyle of your dreams along with residency and return on investment opportunities. 

With the help of a professional, and particularly the Mundo team, the process can be carried out safely and smartly. 

Ready to Invest in Panama Real Estate?

If you're ready, contact our team right now. Our publication is about topics for the international investor and global businessperson. As such, it reflects the services that our team can provide. Check out our blog page and choose your favorite topic or service of interest, then book a consultation to obtain tailored advice and further details. 

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