The Times They are a Changing for Panama Real Estate


Panama Real EstateIn the new century, Panama has established itself as a player in international real estate investment. The country’s economy continues to grow year on year. Foreign Direct Investment is still coming in. There are a variety of potential moneymaking real estate sectors. In short, Panama is more than holding its own during despite today’s global investment uncertainty.
 

However, prospective investors should be aware of some very important changes affecting real estate investments in Panama in 2009.

The basics are the same

Foreign investors have chosen to put money in Panama because:

The economy is strong. Panama has shown strong growth for the past five years (over 11% in 2007 and over 9% in 2008, 3.5% predicted this year).
Foreigners have the same rights to property and business as nationals.
Panama uses the U.S. Dollar for currency.
Tax breaks and exemptions are available.

These pillars may be adapted somewhat but the base for solid opportunities show no signs of change.

Enter Ricardo Martinelli

This year Panamanians elected Ricardo Martinelli, a self-made millionaire who owns businesses including supermarkets, banks and agricultural companies. Martinelli and his party hold the majority of seats in the National Assembly. This allows him to implement his reforms, three of which affect real estate investment.

The first reform focuses on reviewing development and concession agreements to make certain taxes are applied to all and—in a major change from before—they get paid (in order to get money for infrastructure and social improvement projects). This is not an idle goal; Martinelli has already temporarily shut down some major real estate development projects in the Amador Causeway and has taken on the merchants of the Colon Free Zone, which is Panama’s second largest moneymaker. Some of these actions have lead to payment schedules and increases, and some are still in the “But I’m innocent” stage.

Second, Martinelli has begun the process to change Rights of Possession (ROP) property into titled property. If and when this is completed, it will have a huge impact on buying real estate in Panama. Buying ROP has always been a riskier move, but some prime land could be obtained at bargain prices. Now the inverse is a possibility. It should be noted that the prospect of titling ROP is making some who have purchased ROP nervous.

Finally, a flat tax of 1% is being introduced on real estate. According to the La Prensa newspaper in July 2009, “Property tax would decrease from 2% to 1% for those who willingly update the value of their properties in the civil registry.... The 2% real estate property tax is .....




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