Hats off to Panama

A stable dollar economy, flourishing tourism industry and low property prices has helped dub Panama as 'the next big thing'. Sarah Woods finds out

Just a decade or so ago Panama was one of the most misunderstood countries in Central America: a nation inextricably linked with a pock-faced military dictator who served a dubious tenure wrangling over a 'big ditch.' Few looked beyond the legacy of General Manuel Noriega and the contentious Panama Canal to discover Panama's extraordinary beauty. And so the isthmus endured the humiliation of being largely ignored by tourists in favour of neighbouring Costa Rica's gloss and glamour. Yet things have changed in Panama: it's a country very much 'on the up' and thanks to significant inward investment and a stable dollar economy it has seen its fortunes thrive. Visitor figures are soaring thanks to the vision of new president Martin Torrijos who in an inspired decision appointed a charismatic hip-swinging salsa star as Minister of Tourism. Ruben Blades' worldwide charm-offensive has put Panama well and truly on the map. His passionate campaigning has increased the profile of the isthmus to unprecedented levels and the Wall Street Journal, Conde Nast Traveller, National Geographic, New York Times and CNN Money magazine have each played a part in giving to Panama the international recognition it deserves.

Strategic terms
What amazes first-timers in Panama is its extraordinary beauty. Rousing vine-tangled jungles, fast-flowing rivers, alpine-peaks and palm-fringed islands encourage hyperbole. Offshore waters are rich in a rainbow of fish, dolphins and migrating whales and surround 10,000 plant species, 940 bird species and 125 unique species of wildlife. Prehistoric rainforests, golden beaches and mountains are dotted with waterfalls, hot springs and ancient carved rocks. Puma prowl and giant Harpy eagles roost just minutes from the capital's gleaming financial district - and at just 50 kilometres wide at its narrowest point, Panama's land mass is easily traversable in a day. "At just over 78,046 square kilometres Panama is barely the size of Ireland yet it has remarkable topographical diversity," explains local tour guide, Mario Bernal. "It's surrounded by more than 1,600 islands and has 480 rivers and is one of the most important squiggles of land on the planet in strategic terms. Since the US construction of the Canal in the early 20th century, Panama has created a freedom of transit that has truly revolutionised international trade." Indeed, in commercial and economic terms Panama is one of the most buoyant countries in Latin America with a per-capita income of $6,300.00 that is Central America's highest. In Panama City a Wall Street-style financial district comprises a dazzling mass of gleaming skyscrapers and capital crime rates are far lower than in many cities in America. Porches buzz along the Gran Via past air-cooled designer stores and showrooms, while dark-suited wheeler-dealer financiers and international city slickers give Panama's $12.3-billion GDP a boost in buildings that symbolise the prosperity of the nation.

"Panama forms the financial hub of the Latin American region," explains local economist Carlos Escobar. "Service industries dominate the economy and account for approximately 75 per cent of Panama's GNP while an exclusive right to use the US dollar as its par-value currency has given the economy increased clout. Many of Panama's neighbours are struggling economically. Yet with textiles, tobacco, construction, brewing, cement and agriculture as key industries - not to mention the lucrative Canal - Panama has a strong pecuniary backbone that has been strengthened by increased levels of international trade."

Tax incentives
As Panama's largest commercial partner the USA is an important trade ally and historic links that are a hangover from the era of American control of the Canal have seen a large number of US expatriate communities thrive. Tax incentives and investment opportunities have also encouraged a sizeable influx of foreign retirees and Modern Maturity (the world's biggest consumer magazine) has ranked Panama as: 'the fourth best retirement destination on the planet'.

Yet Panama's ethnicity is remarkably multi-cultural comprising a pleasing mishmash of birth-origins that are a legacy of its past. Large populations of Panamanians with Chinese and Caribbean ancestry stem from several hundred thousand migrant Canal workers. There are also those that had Spanish conquistadors as forefathers as well as Panama's seven indigenous Indian tribes. In the archipelago of Bocas del Toro more than 40 different nationalities live side by side in a community that has burgeoned due to increased numbers of second homeowners from Europe and North America.

"Those new to Panama are always amazed by its extraordinary cultural make-up," admits Tammy Lui, a British businesswoman from Southampton who bought a property in Panama City in 2002. "You'll hear a variety of accents wherever you are, be it the chic cafés of cosmopolitan Panama City and the valley communities in Boquete to the rhythmic calypso culture of Bocas del Toro."

A slither of mainland
Geographically and administratively, Panama is divided into nine provinces. Chiriquí and Bocas del Toro border Costa Rica; Veraguas, Herrera and Los Santos form the interior regions; while Coclé and Colón edge the province of Panama; and Darién in the east forms a boundary with Colombia. Kuna Yala (formerly Comarca de San Blas) is a self-governing territory of Kuna Indians that occupies a slither of mainland and an archipelago on the Caribbean coastline above Panama and Darién.

Prime property hotspots include the Bocas del Toro archipelago on the Caribbean and the highland town of Boquete where boom-time has been led by demand from American and European buyers. Elsewhere the Pacific Coast, a favoured destination with Panama's affluent second-homers, has attracted recent Japanese interest. China, with whom Panama maintains excellent relations, is also tipped as a likely future market.

A significant number of the country's pinprick islands are now under private ownership. Prices have soared since the TV reality series 'Survivor' inspired buyers to snap up their own deserted castaway isle. Until 2004, American real estate agents dominated the overseas property market in Panama. However when UK publisher Bradt Travel Guides (www.bradtguides.com) launched the first British guide to Panama in 2005, it aroused the curiosity of the UK media. When two months later UK developer Harlequin Property announced a high-profile Panamanian project, it is fair to say that an Anglo-Panama relationship was well and truly cemented.

"I'm proud to bring Panama to the attention of UK property agents," admits Dave Ames, Harlequin Property's marketing manager. "It's a country that offers a wealth of opportunity and we've been delighted with the support we've received from the Panamanian government in relation to The Parks development."

Indeed it was Ruben Blades himself that confirmed Harlequin Property would receive government endorsement, awarding it IPAT (Panamanian Tourist Board) accreditation 12 months sooner than expected. The Parks is just 21 miles from the heart of the Gucci stores and salsa bars in the metropolis of Panama yet boasts a spectacular location in lush, green countryside just seven miles from Gorgona Beach.

"It's well served by Panama's Tocumen International Airport by direct flights with Latin America. There are also excellent links with the UK via the USA in a journey that's comparable to the Caribbean," explains Ames. "The project is also just five miles from the Pan-American Highway, which begins at America's Tex-Mex border and stretches from one end of Panama to the other."

Moratorium on property tax
So far, editorial coverage in The Express, Homes Overseas and Homes Worldwide has seen interest in The Parks exceed expectation and low price tags have captured the imagination of UK consumers looking for a good dollar deal. Vacant plots are priced from £15,000 with build costs from £32,000 for quarter acre of land in a gated community complete with all utilities and a 24-hour concierge. Harlequin Property is offering 12 different styles of houses and apartments that peak at just over £200,000 for four bed/five bath and is working with Seven Seas, one of the biggest construction companies in Panama.

"UK agent's that work with us are either selling individual properties or taking on a square mile of land for their own development with the flexibility of using our builder or their own," Ames explains. "We've the option to take on forty square miles in total so the opportunities are endless. Agents can also bank on earnable commissions of up to 10 per cent."

Although building costs in Panama have risen in the last four or five years prices remain low in comparison with the UK and America. Harlequin Property is quoting $575 per square metre for a detached property at The Parks and is predicting rental returns of $1,000-$1,500 per month. Purchasers will be exempt from Capital Gains Tax for 20 years and after an initial £1,000 deposit will need to pay £5,000 reservation within 14 days and subsequent fees of $450 (deeds), $300 (lawyer), $150 (fees) and two per cent stamp duty plus the balance of payment. One hundred per cent finance options are available on properties at The Parks, which benefit from Panama's moratorium on property tax for 20 years.

"A number of tax benefits are enticing second-home purchasers to Panama," explains Ames. "Panama's 'pensionado' is the best retiree incentive programme in the world and foreigners have the same rights as Panamanians when it comes to owning property. Household goods can be shipped in tax-free and new cars can be brought into the country every 24-months free of tax for personal use. There are also no taxes on foreign earned income for those that retire in Panama." The Parks is due for completion in 2008 and is one of almost twenty developments currently underway. Magazines such as CNN Money, Escape Artist and Offshore Real Estate Quarterly have each made Panama's property market a regular feature, tipping Valle Escondido in Boquete, Big Creek Village on Isla Colon, Sol Marina in Panama City and Costa Blanca Villas in Fallaron as good for potential investment.

The exoticism of a hidden valley
Valle Escondido is a resort development of villas and condominiums with reclaimed Spanish roof tiles and large windows and gypsum ceilings. Recreation facilities include Quebrada Grande (Big Creek) nine hole executive golf course, horse riding, hiking, sport fishing, rafting and kayaking. A third phase of construction, Vista Golf III, is currently underway and this 16-unit complex is due for completion by early 2006, priced from early $200,000's. "Sales have exceeded all expectations," admits the man behind Valle Escondido, American developer Sam Taliaferro. "I believe this is because the community offers the exoticism of a hidden valley where like-minded individuals can gather. Ever since Boquete was ranked 'No 1 foreign retirement destination in the western hemisphere' by the American Association of Retirement Persons in 2002 we've outsold each phase - Panama has so much to offer buyer investors."

Working practices
It is a similar story at Costa Blanca villas where property buyers are eligible for Decameron Beach Club membership. This includes an à la carte pick-and-choose program of activities that includes live shows, fine dining and water sports. Eight restaurants and half a dozen beach bars serve Italian, Thai, Japanese and Tex-Mex food all day while an on-site travel agent, nightclub, kindergarten, golf course and tennis courts cater for all the family. A two-bedroom townhouse on the resort costs as little as $140,000. Sales have been brisk with lots of interest from European investors keen to reap the rewards of eight per cent annual returns.

"This development has set a new standard in workmanship on the Pacific Coast," explains real estate sales manager Ricky Yohros. "Buyers range from domestic investors to overseas purchasers and almost every property sold has been registered into our rental management programme. This is one of Panama's most popular beach resorts and its popularity ensures a healthy rate of annual return for investors.

So, what about the age-old question when exploring new real estate markets - is it safe? Yes, says Latin American real estate journalist Lorena Castillo. She cites Panama's fondness for bureaucracy and meticulous red tape as good protection for foreign buyers. She also says UK agents that sell Panama will find working practices efficient and in line with international standards.

"As with any new market it is important for everyone to remain sensible," she explains. "Choose a reputable agent, pick a trusted developer and engage an English-speaking lawyer. It's also important to understand that Panama has two types of property - 'titled' and 'rights of possession' (ROP) - but other than that it is remarkably straightforward."

Why Panama?
  • Population 3.1-million
  • Population per square km: 38.4
  • Population growth: 1.5%
  • GNI per capita $6,300
  • GDP $12.3-billion
  • Low cost of living in US dollar economy
  • Excellent infrastructure country-wide
  • Foreigners can own property in Panama with few restrictions.
  • Stable government and economy
  • Superb flight scheduling linking to the US and Latin America
  • A 20-year moratorium on property taxes for all new construction
  • Programme of foreign investment incentives
  • Optimistic business climate and rising tourism
  • Year-round mild climate (25-30°Cdegrees)
  • British Cable & Wireless telephone system
  • Over 500 rivers and 1,600 islands country-wide
  • Thriving indigenous Indian communities
  • Over 900 species of birds and 40 conservation areas
  • Extraordinary wildlife, including puma, manatees and turtles
  • Strong conservation and eco-tourism drive
  • Mix of Latino, Caribbean and Indian cultures
  • Increased number of US and European expatriates
Source: OPP