Panama is undergoing a period of unprecedented growth at the moment. A huge canal extension program is under way, as well as high levels of construction within Panama City and its surrounds. Real estate in Panama has seen growth of 25% per annum in terms of underlying prices over the last couple of years, and apartment rentals in Panama City can bring in yields of up to 11%.
It is not “ramping” the market to say that property in Panama is “hot” right now therefore, and it is certainly attracting a lot of British investors who are looking for good investment returns in otherwise pretty dire times! Property Frontiers have just named Panama their top property investment pick for 2009 – so if you too are considering buying an investment property in Panama or a home to retire to, how do you go about it?
In this article we cover how exactly to buy a property in Panama – giving you all the background information and practical knowhow you need to make an entry into this emerging market of strong potential.
The good news is, there are no legal restrictions for foreigners buying property in Panama; what’s more, overseas buyers have the same legal rights and protections as Panamanians. You can also buy property in Panama through a Panamanian corporation if you want to. Buying a property through a corporation is considered by many to be a wise move, as it protects your property from any frivolous legal claims within Panama and will also protect you from asset seizure in your home country should litigation be brought against you personally for some reason. Whether you choose the corporation route or not is very much a personal choice.
There are two forms of holding property in Panama, either as “titled property” or as “right of possession” property. With titled property you own the property outright and can do things such as raise financing against the property. With “right of possession” property you own the right to use the property, the property will not be registered in the Land Registry Office and a lot more care needs to be taken if anyone decides to buy this sort of real estate. It is generally recommended that foreign buyers purchase titled property only – and we support this advice.
Buying titled property in Panama is very straightforward. Once you have located the property you wish to purchase and have negotiated a price with the owners you can start your “due diligence” search – just as you might if buying in the UK. Note, it is always worthwhile negotiating on price directly with the owners in order to ensure that your property broker is not increasing the price of the property in order to pocket the difference as well as his commission – this is quite common practice in Panama!
The Public Registry Office maintains a list of all properties in Panama, so due diligence checks on properties can be carried out easily through these channels. The due diligence process will check the current state of the property with regard to any mortgages held against the title, whether there are any liens against the property, unpaid taxes or any other form of encumbrance. All checks should always be carried out by a registered lawyer!
Once “due diligence” checks have been carried out and your lawyer has advised you that the transaction can go ahead, you need to have a “promise to purchase agreement” drawn up. This document is registered in the Public Registry Office and details the sale, what is being bought, by whom, for how much and how payments are to be made and when. A deposit is usually paid at this time of around 10-20% of the value of the property in Panama.
Once all checks have been completed and any financing is in place, the “purchase and sale agreement” is drawn up. Usually at this point all fees and commissions are paid, and the balance of payment is paid into an escrow account to be transferred to the owner when the property transfer is registered in the Public Registry Office. It is at this point that the property legally becomes yours.
