If you have decided to buy property in Panama then do plenty of research. This means seeing different areas of Panama to find out where you would most like to live. View as many houses as possible and try to get an idea of what prices are like. Once you have enough data you can start to work out the price per square meter which is the most useful guide to how much a property should cost.
The process of buying a house in Panama usually takes around 5-8 weeks assuming everything runs smoothly. Always use a trusted lawyer and get them to look over all the documents. Once you have come to an agreement on price, but before you sign anything, make these checks.
1. Check The Title Deeds
The first check you need to make is the person selling to you is the legal owner. If they are the legal owner then they will have a Title to the property confirming ownership. If the seller cannot provide this you can ask for the finica number. With this, your lawyer can search for the title.
You also need to obtain the certificado de registro from the public registry. This will confirm any liens against the property.
You should get the property surveyed as well. This should be done by a licensed surveyor and will confirm the dimensions of the property you will buy.
If the property you want to buy is a Rights of Possession (ROP) property the situation is slightly different. In these cases, the Panamanian government owns the title to the land. This is often the case for land in rural Panama. Buying this land comes with certain stipulations such as spending a certain amount of time on the land each year. ROP is a complex area and we recommend seeking out a specialist if you want to buy ROP owned land. This article will deal with titled lands only.
2. Arrange A Pre-Sale Agreement
Once you are satisfied the property being sold is above board, you will be asked to put a deposit down on the property and sign a pre-sales agreement. 10% is the standard amount requested for the down payment. The pre contract is legally binding and covers all details of the sales transaction. If either party pulls out of the deal financial compensation will be required. The contract will be in Spanish and you will need an approved translator to make you a copy in English.
3. Work Out Taxes
The first thing to consider when buying a titled property is your responsibility to pay property tax. This is an annual tax and you don’t get a reminder. It is on you to remember to pay each year
The Panamanian government takes 2% of sale value for a Title Tax. Usually, the seller pays the property transfer tax but it is not mandatory. Be sure to ask the seller. Purchases under $30,000 are exempt from property tax. Property transfer is also 2% of the sale value. Capital Gains Tax is either 3% of the sales value or 10% of the gain. You will pay the lower amount of these.
More on Taxes in Panama
4. Transfer The Title
The transfer of the title comes before payment, it is essential to make sure everything is above board. The Notary Public will deal with everything including typing up the new title with the buyer’s name on the property details. The buyer and seller both sign the new Title contract and then money is exchanged.
5. Transfer Of Funds
If you choose to pay in cash make sure the Notary is there to act as a witness. This is an accepted way of doing business. If you want to send money by a check or wire transfer. Have the Notary witness the transaction. You may like to use a lawyer to transfer the money. If you have trust in your lawyer this is an option. Another option is to set up an Escrow Account although not everyone in Panama is familiar with this process. After this, you register your property at the public registry. This last step completes the process of buying real estate in Panama.
The Panama Real Estate And Property Market
Image Source: iStock/Rodrigo Cuel
Unlike many, Panama’s real estate market did not collapse in the wake of the 2008 meltdown. Its economy also remained strong. Panama Canal revenues have surged, continuing to keep this country cash comfortable. In addition, Panama is enjoying growth in both its financial services and tourism sectors and has established itself as a top tourist shopping destination.
But if you come to purchase real estate in Panama leave all your ideas of how to buy behind and bring your wits with you. Remember, this is a different world, with a different legal system and one sometimes fraught with fraud and con men. The worst of the con men speak excellent English and will help you purchase things at attractive prices… things which may not even exist. Do not expect the legal system in Panama to help you; once your money is gone it is gone.
Start by investigating the whole area you are interested in. Speak to real estate people—all of them. Panama has no multiple listing service (MLS) and everyone and their sister sells real estate, but most are not licensed. If they are not licensed then there can be no accountability if things go wrong. Panama real estate is also allowed to have net listings, which means prices may vary on the same property from office to office.
This is often a big surprises for North Americans, who are accustomed to walking into a real estate agent’s office, detailing the specs for what they seek (two bedrooms, 2 ½ baths, US$200,000, in a popular school district, for example), then sitting back to watch as the agent types those details into his system to generate a series of listing sheets for every property currently available to suit.
In Panama, to get an idea of what’s available for sale anywhere in the country, you must meet with as many real estate agents operating in the area as possible. Not only do they not share listings, neither do they share commissions. Property listings are proprietary.
However, a particular piece of real estate might be listed with more than one agent. But this is not because the agents are sharing listings. It’s because the seller has listed the property separately, agent to agent, often at differing prices.
If You Find A Property In Panama Be Sure To Refer To This Simplified Check List:
1. Is The Property On Titled Or ROP Land?
ROP or Right of Possession is where a person or family has effectively homesteaded land/property in Panama. They have a right to possess it, and they can legally transfer the right, but the owner is the government. The issue is who has the right and who else in the family, or even a neighbor, is going to also claim the same right. If you buy the property can you obtain title? It is a risky business proposition. The government has a program to title ROP land, they want it all titled because titled land pays taxes, ROP land does not.
Titled land is registered at the Registro Publico, the public registry of Panama. All legal liens against titled property are also in this database. Before you do anything regarding property you should find an attorney, not the same attorney as the seller, and have them research the property. If you are fluent in Spanish you can do this part yourself.
All titled land is taxed in Panama, except for land under condominiums, there’s no exemption. To help keep land values below the taxable threshold many sellers transfer the property to a corporation and then sell the corporation. The value of the corporation might increase but the land value does not.
2. How Is The Property Owned In Panama, By A Person Or As A Corporation?
Many parcels of titled land are corporate property. People sell the corporation, not the land. This device avoids revaluation of the property to market value.
3. Is Title Clear Or Are There Liens In Panama?
People have gone through the entire process of acquisition only to discover a lien was on file. Any legal lien must be recorded in the Registro Publico, another reason for having complete research done by a lawyer.
4. Is The Person Claiming To Own The Property The Owner?
This one seems obvious but once again it’s not uncommon to hear of people who have bought property here based on the word of another expat; big mistake. Do not purchase anything before your lawyer carries out an investigation of title.
Untitled land must be owned by a Panamanian for at least two years before it can be owned by a foreigner. After this period it can be titled and resold. Foreigners cannot own within 10 kilometers of international borders. All Panamanian beaches and waters are public land and cannot be bought or sold. Foreigners cannot own within 10 meters of the Atlantic Ocean or within 22 meters of the Pacific Ocean (from the high-tide line). Special permits are needed in cases of some types of waterfront construction. Rights of possession are common in some parts of Panama. While this is not the same as title, it can be converted to title in some cases. To do this, you need the help of an attorney familiar with the process.
Real Estate Taxes In Panama
Property tax is applied to the combined value of the property and the land. Properties valued under $30,000 do not pay any property tax.
- $30,000 to $50,000 pay 1.75%
- $50,000 to $75,000 pay 1.95%
- $75,000 upwards pay 2.1%
Another charge is a 2% property title transfer tax. The 2% is calculated from the price the purchase price. In addition, you must pay a 3% capital gains tax to be paid. In Panama, the seller is usually responsible for paying the both of these taxes although be sure to get clarification beforehand. Closing costs are usually around 2% of the purchase price and both the buyer and seller will each be expected to pay their own costs.
Image Source: iStock/hanohiki
El Cangrejo, Panama City
Panama City is a diverse area and property prices vary considerably. One thing is constant. Prices have been steadily increasing over the past decade. El Cangrejo is a comfortable, middle of the road destination ideal for expats. Here you have all the benefits of city living, restaurants, bars shops, public transport links etc. but without the price tag of some areas. El Cangrejo also offer plenty of different places to rent in.
Monthly Budget For Living (renting) in El Cangrejo: US$ 2,115 and if you own real estate $1,500
Boquete is a district in the West of Panama. It is the mountainous part of Panama and Panama´s most famous expat location. Most Panamanians in this area speak at least a little English and some are completely bilingual. Real Estate in Boquete is the second highest in Panama. Due to the number of expats who move here most find they can sell their property easily if they need to.
Monthly Budget For Living In Boquete: Renting will cost US$1,800 if you own real estate $1,300
El Valle De Anton
El Valle de Anton
El Valle De Anton is located near to an extinct volcano, about 90 minutes’ drive from Panama City. The region is cool and quiet with an abundance of plants and butterflies. The way of life is based on markets and fresh local produce. The prices for local produce are a world away from what you will pay in Panama City.
Providing you have a car, El Valle De Anton is close enough to Coronado and also Panama City for you to have relatively easy access to amenities.
Monthly Budget For Living in El Valle: Renting, US$1,550 and if you own real estate $1,000
For many, Las Tablas is famous for being home to the biggest Carnival in Panama. However, the Carnival experience does not give a reflection of what life is like here for the rest of the year. Las Tablas is about a 3 hour drive from Panama City and has some of the best beaches on the West Coast of Panama. Real Estate here is far cheaper than other along the coast near to Panama City and Las Tablas has a thriving community with an established way of life.
Las Tablas has become popular with retirees and wealthy Panamanians looking to get away from the more crowded city beach areas.
Monthly Budget For Living in Las Tablas: Renting, US$1,1150 and if you own real estate $900
Located on the South East tip of the Azuero Peninsula, Pedasi has some of the best beaches on Panama’s Pacific coast. The center is a village with a sleepy pace of life. Pedasi is famous for having some of the best surfing and fishing in Panama. It’s out of the way location means it is not overrun with tourists but expat numbers are steadily growing. Price of real estate and cost of living here are both low which makes it an appealing destination.
Pedasi is the to live if you are looking for authentic Panama and somewhere away from the hectic pace of city life.
Monthly Budget For Living In Pedasi: Renting, US$1,400 and if you own real estate $1,050
The Panama City Beaches Area
The Panama City Beaches Area of Panama is about an hour away from Panama City and was the first area in Panama specifically designed for tourists. A strong infrastructure is in place here with everything an expat could want. Coronado is equally popular with expats and local Panamanians so you will always feel connected to the local culture. If you choose to purchase real estate here beware you may need a 4×4 vehicle for some of the locations. Coronado is designated as a private community and the government are not responsible for road maintenance. As a result, some parts of Coronado are almost impossible to access with a standard car.
Monthly Budget For Living In Coronado: Renting US$2,500 and if own you real estate $1,200
Renting In Panama
Renting in Panama is easier than in a lot of other Central American locations. Regulations are in place to protect the renter and providing you get a valid contract you should be okay. An attorney will be able to check the validity of a contract. Alternatively, try and work with a reputable company, if possible one recommended by a friend. The contract normally entitles you to leave with 1 months’ notice to your landlord. If the landlord asks for more, you might want to keep searching. You also have the right to get your security deposit back assuming the property is in the required condition.
Although the rental industry is not as well developed here as in the U.S. it is a growing industry. You can find properties to rent on the internet and though real estate companies. Private individuals rent through Airbnb and other sites such as gumtree. Don’t put any money down for a property you haven’t seen or hand over any cash without getting a receipt. Take photos of any existing damage to the building or furniture. This is for security in case the landlord tries to unlawfully keep your security deposit.
It is worth remembering most properties you are looking to rent in Panama will not have hot water. If you are living in a more isolated area you will also need to make sure the property you rent has a reserve water tank. Low pressure at the end of the dry season can affect your ability to obtain water in these areas, sometimes for days at a time. Be sure to check the air-conditioning is working when you view the rental property. If you are in the higher areas of Panama this won’t be important but for a lot of the country, air-conditioning is a must.