Panama Real Estate Investment: What International Buyers Need To Know

Panama is a popular destination for foreign investors seeking to diversify assets, generate rental income, or acquire a second citizenship in a stable country with a dollar-based market. 

In this article, we’ll explore the key aspects of a Panama real estate investment. We’ll take a look at the real estate market, examine foreign investors’ rights and residency options, and explain the real estate acquisition process for international buyers. 

Panama Real Estate Market Overview

Panama’s real estate market is experiencing steady growth, with foreign investments in the residential sector as the main driver. High demand for rental properties and steady price increases in certain areas help maintain foreign interest and sustain market growth.

Below is a breakdown of the Panama real estate market by numbers:

Metric	Value
Total real estate market size	$248.34 billion
Projected annual growth rate	3.7%
Residential real estate market size	$196.66 billion
Residential transaction value	$735.73 million
Residential real estate market, projected annual growth rate	4.37%

Can a Foreigner Buy Real Estate in Panama?

You can buy real estate in Panama as a non-citizen or a non-resident. The country doesn’t require you to have any special visa or permit, and you don’t even have to be physically present for most of the process; you can complete it remotely, through a local attorney. 

The only limitations you can come across as a foreign real estate investor in Panama include:

• A ban on purchasing land within 10 kilometers of Panama’s borders
• A restriction on purchasing insular properties unless they’re designated as areas for special development 

Apart from these exemptions, you’re awarded the same rights as a local investor. You will pay the same tax rate, have the option to rent and sell your property, and be able to pass it on to your heirs.

Is Real Estate in Panama a Good Investment?

Investing in real estate in Panama can be a good choice if it aligns with your financial goals. For example, with an average rental yield of 4%–5%, it’s only a moderately attractive market for investors seeking rental properties. 

On the other hand, investors looking to purchase a primary residence for their retirement years will find the country’s combination of affordable living, stability, and easy access to services very appealing. 

There are several reasons why investing in real estate in Panama might be a good choice in general:

• The country’s currency, the balboa, is pegged 1:1 to the U.S. dollar, reducing any risks related to currency exchange fluctuations
• Panama doesn’t tax any income you’ve made abroad
• It’s possible to purchase a wide variety of properties, from modern condos to old villas and beachfront properties
• Investing in Panama provides an eligibility path to becoming a naturalized citizen

Where To Invest in Panama Real Estate 

Choosing the right place to invest in real estate in Panama can affect the potential profitability of your investment. Not all areas experience the same demand for rentals or have the same property value appreciation. 

As a foreign investor, consider focusing on:

1. Real estate investment hot spots
2. Expat communities in Panama City

Real Estate Investment Hot Spots

Panama has multiple areas that can be deemed as property investment hotspots, both for living and for rentals. Outside of the capital, Panama City, areas of increased investment activity include:

• Boquete: The mountain town’s favorable climate, access to outdoor activities, and a generally slower pace of living make it a particularly popular destination for retirees. It’s also a good option for rental investment and property appreciation 
• Bocas del Toro: The archipelago is a favorite for hospitality investors. Even though the area has experienced some civil unrest recently, its blue water and marine life remain a massive tourism draw
• Coronado: A hub of the Panama Riviera, Coronado is a well-developed beach community favored by expats and locals. It’s popular for both rental investors and people looking to purchase a home in a gated community

Best Expat Communities in Panama City for Investment 

Acquiring a property in one of Panama City’s expat communities can be a good choice for both rental properties and primary residences. The three areas of special note include: 

1. Punta Pacifica: The area features both luxurious developments and aging buildings, making its performance on the rental market uneven. Nonetheless, it’s an area known for easy access to premium healthcare services, and it commands a high real estate price of $3,000 to $4,000 per square meter
2. San Francisco: The family-friendly neighborhood’s schools, shops, and restaurants make it a popular part of the city among expats and locals. It has a strong rental demand and an average real estate price ranging from $2,000 to $3,000 per square meter
3. Costa del Este: Panama City’s economic hub is a prime real estate destination where you can expect to find all the modern infrastructure needed for luxurious living and commercial activities. The average real estate price ranges from $2,500 to $3,500 per square meter

Costs of Investing in Real Estate in Panama

The following taxes apply to real estate investments and property in Panama: 

• Real estate transfer tax: 2% of the property’s registered value
• Notary fees: $125–$175 + stamp duty
• Primary residence tax: 0%–0.7% of registered value, depending on the value
• Non-primary residence property tax: 0%–1% of registered value, depending on the value

In Panama, you are only required to pay taxes on the income you’ve made inside the country. The country’s tax rates on personal income are as follows:

Income	Tax Rate
Up to $11,000	0%
$11,000–$50,000	15%
$50,000+	25%

Corporations pay a flat corporate income tax rate of 25%.

How To Buy Real Estate in Panama as an Expat

As a foreign real estate investor in Panama, you can make the investment in one of three ways:

1. In your own name
2. Through a Panamanian company that you own
3. Through a Private Interest Foundation (PIF)

Each choice has implications you should carefully consider:

Method of Purchase	Pros	Cons	Use Case
In your own name	No additional set-up costs like the ones present when using a company or a PIF	Inheritance is more complicated due to probate requirements	Purchasing a personal residence that’s not intended for producing income
Through a company	Easier transfer of ownership, as it only requires the purchase of company shares	Set-up and ongoing expenses	Investment in rentals
Through a PIF	More control over inheritance by naming successors and conditions for the succession	Set-up and ongoing expenses	Estate planning and wealth preservation

Other things you should know as an expat real estate investor include:

• It’s highly recommended that you hire a local attorney when making a real estate investment in Panama to help with due diligence and review contracts
• Before making the final payment, you will have to sign a Promise to Purchase agreement and place a deposit of a negotiable value
• Panama recognizes titled land and right of possession; the latter might be cheaper, but it also carries legal uncertainties and potential issues when reselling

If you plan to use the investment in a Panama property to apply for residence in the country, it’s crucial to ensure that the value of the property meets the residence program’s requirements.

Panama Residence Programs for Real Estate Investors

Real estate investment in Panama is a common way to secure temporary or permanent residence in the country. Getting residency is also important if you want to become a citizen; since Panama doesn’t have a citizenship-by-investment program, the residency-to-citizenship pathway is the only method of obtaining the country’s passport. 

Three major programs allow you to become a resident in Panama by investing in real estate:

1. Friendly Nations Visa
2. Qualified Investor Visa
3. Economic Solvency Visa

Friendly Nations Visa

The Friendly Nations Visa allows you to apply for a two-year Provisional Residence Permit. To be eligible as a real estate investor, you have to meet the following criteria:

• Being a citizen of a friendly country, which includes most European and South American countries, the whole of North America, and some countries in the Asia-Pacific and Africa
• Purchasing a property in Panama with a minimal registered value of $200,000

If you’re purchasing the property for residency under this program, you can finance it with a loan from a local bank. Once the two years have passed, you will be eligible to apply for permanent residence. 

Qualified Investor Visa

The Qualified Investor Visa, also called the Red Carpet Visa, is a program designed to fast-track applicants who want to invest a larger sum in Panama. As a real estate investor, you can be eligible for the program if you:

• Purchase the property with a minimal registered value of $300,000
• Pay at least $300,000 of the property’s value from your funds; the rest you can secure from a local bank

Under the program, you’re awarded permanent residence without having to hold a Provisional Residence Permit for two years.

Economic Solvency Visa

Under the Economic Solvency Visa program, you have to make an investment of $300,000 in Panama, which you can do via any of the following:

• Investing in real estate with a minimal value of $300,000
• Making a deposit in a local bank and purchasing real estate with a combined value of at least $300,000

If eligible, you can get the two-year Provisional Residence Permit and apply for permanent residence once it expires.

Factors To Consider When Investing in Panama Real Estate for Residency

Investing in real estate is one of the least demanding ways to meet the requirements for Panama residency. Even though the process is fairly simple, there are still some additional demands and considerations you should make when applying: 

• Proof of value: When applying for residency, you have to provide proof of the value of the property, as well as proof of ownership
• Residency holding period: If you invested in real estate as part of a residency program, you must plan to maintain your investment for the duration of the residency
• Financing options availability: Panama’s banks might offer financing, but as a foreign investor, you may face higher interest rates and stricter terms

Even without using it for immigration, real estate investment is a significant commitment and should be preceded by careful planning. The added complexity of residency requirements and procedures makes consulting with specialists like Nomad Capitalist invaluable.

Let Nomad Capitalist Create Your Panama Real Estate Investment Strategy

Nomad Capitalist is an international advisory company that provides its clients with asset protection, tax optimization, and foreign residency consulting services. We routinely help our clients determine whether investing in real estate abroad is the right decision for their long-term financial and lifestyle objectives. 

Whether you’re looking for a way to offshore some of your assets, acquire residency, or obtain a second passport, our team can devise a strategic Action Plan and execute it efficiently. 

After having an introductory call with you, which will help us determine whether we are a good match, we will:

1. Schedule a 45-minute onboarding call with you to get a deeper understanding of your circumstances and needs
2. Create an Action Plan specific to your situation and present it to you
3. Implement the Plan over the course of 12 months
4. Provide lifelong support with updates and answers

Our team will ensure that your investment is structured in a way that protects your wealth from unnecessary tax burdens. Contact us now for unparalleled guidance and expertise.