Seven Reasons to Invest in Panama in 2013

While 2012 was a banner year for Panama and it's real estate market, experts are predicting 2013 will be even better.  Here are our seven reasons to invest in Panama in 2013.

1. Business growth 

Panama is very pro business, and has enacted tax breaks and broad economic initiatives to incentivize companies to relocate.  Multinational companies have been setting up shop in Panama since 2007, and we expect that trend to continue as the Panama Pacifico region heats up and work starts on the new free trade zone in the Pacific. 

Why are these companies coming?  Because Panama enjoys a geographic position that allows efficient access to major markets in North America, South America, and Europe.  Companies like Proctor & Gamble have consolidated the majority of their Latin American presence to Panama because it makes financial sense to base, for example, salesmen who call on Mexico and Colombia in a centrally located country like Panama.  For the same reason, Caterpillar is building their regional training headquarters here, the same headquarters where they plan to fly in distributors from all over the world to train them on new equipment. 

What are the real estate implications? Executive relocations mean furnished rental demand and increased home sales in certain sectors of Panama City.  The mining sector is also starting to ramp up production in several key areas outside of Panama City, and demand for suitable housing has spiked. 

2. A strong economy 

Consistent gross domestic product increases, low unemployment, and banks with high levels of liquidity.  Panama was hit by the 2007-2010 global slow down, and Panama real estate prices came down by as much as 25%.  However the majority of Panama’s workforce is employed and will continue to be employed by private sector growth and a long pipeline of current and future government projects.

3. Demographics 

Panama, as opposed to Costa Rica for example, appeals to a wide range of demographics.  From retiring baby boomers to young tech expats to families looking for a better life, the allure of Panama is real.  Families moving from countries like Brazil, Colombia, and the UK are drawn to Panama for its comparatively affordable lifestyle, excellent private school system, and it’s relatively safe urban center, Panama City. 

Major shifts in the demographics of a nation can have a large impact on real estate trends for several decades. Just look at what’s happened in Miami with the Brazilians.  It’s the same thing that happened and is still happening in Panama with the massive influx of Venezuelans, some of whom have been here for more than 10 years.

What are the real estate implications?  The demographics driving Panama’s growth are not just coming from one source (like retirees), but multiple sources, meaning a shift (either a reduction or an increase) in demand from any single one of these countries will not affect the market drastically.  Furthermore, many Asian and European countries are just starting to discover Panama. 

4. The Government 

Consistently investing in new infrastructure to make the city more attractive and more livable, fast tracking pro-business laws and policies, including free trade agreements, tax incentives, and government sponsored initiatives in sectors like energy and agriculture.  These are items that have been on the current administration’s desk now for several years and projects are most definitely moving forward. The Panama Canal is producing over $1 billion dollars in revenue and the expanded canal is predicted to generate twice the traffic as the current canal.   That means an additional $2B in canal revenues alone which can be reinvested into projects that benefit Panama’s residents.  By 2015, Panama will have a world class infrastructure system of roads and mass transit, meaning new funds can be used for new projects.  The current administration is pro-growth and pro-business and the administration to follow, much the same as the one that preceded it, will likely be the same. 

Real Estate Implications:  A stable and fiscally sound government that continues to reinvest in infrastructure to create more jobs and a more attractive and livable country will have a compound effect of bringing more business, more immigration, and more demand for real estate. Waves of immigrants flocking to new projects mean increased demand.

5. Liquidity 

Panama's banks are flush with cash.  Panama continues to be an economy with high cash reserves.  Panama’s banks are traditionally very conservative and were not hit by the credit derivatives market. 

Real Estate Implications: banks are still writing mortgages, meaning there is ample credit for buyers.

6. International Banking

Panama is caving in to OECD laws and becoming a recognized international player in the world economy.

7. Increasing diversity

Panama has always been a melting pot of cultures, but now, more than ever, diversity is lending itself to the social landscape. As immigration and working laws are relaxed, we expect an influx of immigrants from countries discovering Panama as well as a second wave from the US, Spain, and Colombia seeking gainful employment and a stake in what may end up being the world’s “golden boy” economy for 2013.