Financing Residential and Commercial Real Estate Projects in Panama

Panama

Panama is the small Central American country just above South America. As the America’s narrowest country (fifty miles) on both oceans Panama is the site of the Panama Canal. Long known as a tropical paradise Panama has become a transportation hub for the Americas and is in the midst of an economic boom.

Panama’s boom in commercial real estate and housing is primarily tied to heavy foreign investment which increased greatly after the USA turned over the Panama Canal to Panama in 1999. The high end housing boom has also been tied to Panama’s low real estate prices and easy residency requirements which have drawn a large number of North American retirees to this country that uses the dollar as its currency.

Investment in Panama

With Panama’s growing prosperity has come increasing investment in both housing and commercial real estate. Panama City skyline is sprouting up with increasing numbers of high rises. The commercial real estate market is strong based on the booming construction industry, Panama’s strong service sector and infrastructure improvements such as the expansion project which will double the capacity of the Panama Canal.

Financing Commercial Real Estate and Other Projects in Panama

With sea coasts on the Pacific and Caribbean Panama is an ideal location for development of marinas, hotels, as well as associated gated communities. Many have been developed and many are in the works. The Caribbean coast of Colon Province is especially attractive for real estate development of residential and commercial property as real estate prices are still on the low end for large tracts of land.

So, how does a developer proceed in Panama? Bank financing is available for real estate projects.

Most property here is purchased for cash. Once the owner/developer has clear title to the Panama real estate in question he approaches on of the many banks in Panama. The scenario usually proceeds as follows.

The bank will want to see plans and title. The bank will then want a mortgage on the entire property and development so that it can reclaim its loan if the project folds. As Panama real estate values have escalated so called developers have started projects and sold out in the early stages leaving the bank with a loan on an unfinished project. As such the bank will insist on a number of units being “presold” prior to the start of construction. In addition the bank will only finance in stages with the expectation that units will be sold, rented, or otherwise start to earn money before more financing is provided.

 With financing of Panama real estate projects readily available to qualified developers many have prospered with the appreciating real estate market in Panama. Currently the Panama real estate market is in a pause waiting for the world economy to settle down.

With the depreciation of real estate values in Costa Rica and the “pause” in Panama many investors are on hold. It is of note that Panama’s economy is tied strongly to world trade and that Panama tends prosper with prosperity as more trade passes through the Panama Canal. Then again as oil prices go up and the world economy slows Panama benefits from the need to ship by shorter routes thus saving on fuel. Panama is likely to see a steady prosperity for years to come.

Current Options in Panama Investment

Commercial real estate is more closely tied to Panama’s thriving economy and less dependent upon ready cash in the hands of North American retirees. Panama commercial real estate projects tied to support of the shipping and transportation sectors of Panama’s economy are good bets. As Panama has opened the old Canal Zone to investment there is a need for commercial real estate investment in support facilities for container shipping, training facilities, office complexes, and communication facilities.

Rather than starting a new residential or commercial real estate project a viable investment option right now may be to find a project in trouble and buy it out.

If you are interested in investment opportunities in Panama or advice on financing real estate projects in Panama come to see us at ABPanama. We do business throughout the country and have over twenty-three years experience managing real estate portfolios.