By Matilde Calamai
Interview with attorney Giovanni Caporaso, Italian expatriate and resident in Panama since 1991, owner of the law firm Caporaso & Partners Law Office.
Why invest in real estate in Panama?
Because it is a constantly growing market and offers opportunities for all budgets. Tax exemptions on new apartments and real estate properties with a cadastral value of less than USD 30,000 are also an excellent incentive.
What return can be expected from real estate investments in Panama?
From 6% net in luxury properties to 10-20% in popular ones, and up to 10% for commercial real estate.
So, are popular properties in Panama more affordable than luxury properties?
Without any doubt. The luxury real estate market is saturated by increased demand due to the thousands of foreigners who decide to settle in Panama each year. Rental prices, however, are decreasing because there are many empty apartments. There is a great demand for studio-type apartments, from 30 to 60 square meters, but builders seem to despise this type of building. In the field of real estate there is a shortage of 150,000 accommodations just for Panamanians and the same number for foreign workers who are becoming more and more attracted by the ease of finding a job, with salaries above the regional average. Renting a small apartment in a semi-peripheral area, at a price of $200-300 per month, takes 24 hours, renting a luxury apartment for $2,500 is almost impossible.
How much is a popular apartment in Panama?
They can be found at the bank auctions between USD 20 to 40,000. Then you will need to invest another 3 to 5 thousand dollars to restructure it.
It seems easy and profitable to invest in real estate in Panama...
Yes, it is. Foreigners can buy without restrictions using names or through a Panama company. In Panama you can invest in properties from USD 5000 to 6000 to multi-million dollar properties.
What of the commercial real estate sector in Panama, is it possible for good business?
It is also difficult because commercial properties are scarce. A good commercial space in a high-traffic area or banking area, is a gold mine. There is also a great demand for accommodation in low cost hotels in the banking area. If you can buy a property in the central area, where you can make hotel rooms worth less than USD 50.000 each is a great business. To have a reasonable income, however, you need to have at least 12 rooms, although the optimal would be 20 rooms.
In Panama, is it worthwhile to invest on land?
Yes, without a doubt, it can generate a much higher income than a building. I recommend small construction plots for social housing, islands and land facing the beach. Much attention, however, with the documentation.
What is the difference between buying using your name or via a Panama company?
With a company, it is possible to maintain anonymity and in the case of a sale, it is sufficient to transfer the shares and in practice, the sale is tax-free. For very small apartments, however, it is less convenient since the company's price (around USD 1500) should be added to the cost of the annuity, which varies according to lawyers from USD 500 to 800, including the annual tax of USD 300 dollars.
As well, are there other obligations for a Panamanian company?
No, if the company does not do business in Panama, it is only necessary to maintain an account, it is not obligatory to make an income statement.
Is it easy for a foreigner to get a mortgage in Panama?
Relatively yes, although in general, banks do not give foreigners more than 60%. However, the cost is high: from 1 to 1.5% of the closing cost, which is charged every 5 years and the interest varies between 8 and 13%. There are subsidized interests for households less than USD 80.000, but access to these mortgages is more difficult for a foreigner who often cannot prove a source of income.
How to identify a good business in Panama?
First, it is very difficult since you necessarily need to know very well market prices and trends, which, although is always growing, are subjects to price curves with peaks of more or less than five years. In general, market offers are assessed through a real estate agent who is interested in selling the property where he gains a higher commission. In Panama, the buying and selling commissions are paid by the seller and therefore the Realtor tends to protect the interests of those who sell and not those who buy. Buyers, on their part, have the tendency not paying for a consultancy service "in theory” is offered free of charge by the real estate agent.
Is there a risk of fraud when buying a property in Panama?
Quite limited, but they do exist. It is important for an attorney to always check the documents and investigate from who you are buying. It is also essential to pay great attention to the stipulation of contracts with builders and developers, these often contain unfair terms, costs and unjustified increases. Also, in this case I always suggest that you first contact an attorney: It is less advisable to go to court! In addition, often with counseling you can save costs that generously covers the rate of a professional. The biggest problems are in the purchase of new apartments from builders and developers who generally make contracts with abusive clauses and declare the building's surface, including common areas. These problems are solved by consulting a good lawyer and, in certain cases, it is possible to request for compensation after purchase.