Whether you’ve recently moved to Panama or have been here for a while, if you plan on staying more than a few years you probably want to consider investing in real estate. In Panama, and particularly in the nation’s capital, renting is often more expensive than buying.
One of the biggest questions you’ll have to decide is—Should you buy an older home or a new development? New apartment complexes can be a great opportunity to get something shiny and ready to live in, with all the amenities included. But new constructions also come with their risks.
Keep reading to find out everything you need to know about buying old vs. buying new in Panama.
Pros of Buying Older Property
It is generally accepted that construction quality is better on older buildings. The construction boom in Panama City started in 2005 and good workmen became scarce due to the high demand for their services. As a result, quality on many newer developments suffered as good workers became hard to find and keep. Pre 2005, that wasn’t an issue, meaning older buildings may not be as pretty on the outside, but nine times out of ten they’re more structurally sound on the inside.
More Bang for your Buck
As a rule of thumb, you’ll find better value in terms of price per square meter with older properties. While today no developer would dream of building a new apartment building without a pool or gym, that wasn’t the case two or three decades ago.
If you are someone who doesn’t care too much about all the bells and whistles that come with newer apartment buildings, you can buy an older property for a lower price and save yourself the monthly fees that are required to maintain such amenities. This is an especially good option if you know you’re someone who would never make use of a rooftop pool or in-building workout facility.
Before Panama’s construction scene exploded, a lot of the builders used to live in the buildings they constructed. That says something about accountability versus many of today’s developers who are just building, building, building and then onto the next project.
There was a built in system for accountability in many older buildings. Even today, you can pop up to the builder’s unit and ask about why you’re having water issues and he will you know what to tell you! This obviously isn’t the case in all buildings, but it’s a pretty unique perk when it does work out. And regardless of whether or not your building is inhabited by one of the original contractors, the mere fact that this used to be common practice tends to mean higher quality construction.
A final perk of older properties is that you aren’t likely to have as many neighbors. Don’t get us wrong, neighbors can be great, but there’s something to be said for having a bit more privacy, less noise, and more room to one’s self. Since older properties are often less dense than newer ones, you’ll likely have fewer neighbors to worry about.
Cons of Buying Older Property
Obviously maintenance issues tend to increase as a property gets older. And for older properties, this maintenance work can amount to more than just needing a fresh coat of paint. You might have bigger ticket fixes like replacing an elevator that’s 40 years old, replacing a roof, or bringing a building’s gas or power lines up to code. These projects can be costly, time consuming, and a bit of a nuisance, especially when they pertain to common building features and require consensus amongst multiple owners.
Fewer Neighbors, Higher Costs
There are two sides to every coin, and this is no exception. While having fewer neighbors can be a pro in terms of noise and privacy, it can also be a con when it comes to expenses. When there are fewer owners, there are fewer people to divide property costs between. This applies to month-to-month costs for general upkeep of the building, but also to those large-scale maintenance projects mentioned above.
In general, the real estate trends in Panama City have people gravitating towards newer properties. As a result, older properties are not as attractive on the resale market. Whether this is a byproduct of culture, human nature, or merely aesthetics and style, interest in real estate in Panama skews towards what’s new and shiny. If you’re thinking about purchasing an older home, it’s important to have an honest conversation with yourself about what your plans are regarding resale.
Another factor to consider is that in 2019, property taxes will be cut by more than 50 percent. This means that on properties that are 20 years old and not exonerated versus properties that are say only three or four years old and exonerated from property taxes there will be less of a gap.
Pros of Buying New Property
Any new construction generally comes with guarantees in the form or warranties. While warranties vary from project to project, they can always give you the peace of mind that once a building gets stabilized, you won’t be liable for any large maintenance expenses for the first few years. In an ideal situation nothing would go wrong, but it’s nice to know that if it does, you’ll be covered.
Fewer Upfront Costs
If you’re purchasing a home in a new development, you might be expected to put in say fifteen hundred to two thousand dollars when you first buy to fund the building administration balance. This is common practice with newer developments that can work in your favor. By making these smaller upfront costs spread out over a year or two, you can space out your purchase expenses and take advantage of the appreciation of the property value.
This is especially appealing to foreigners who know they’re going to be moving to Panama, but not immediately. If you don’t need somewhere to live right away, buying a pre-sale property allows you to start building equity in your home gradually without putting down a whole purchase price up front.
Market for Resale and Renting
If you end up deciding to sell your home in a couple of years, you can expect to have an easier time selling your property and get more money for it the newer it is. The same goes for renting. If you’re buying a unit as an investment and plan on renting it out, it’s worth knowing that newer homes are both easier to rent and give better returns.
Con of Buying New Property
As alluded to before, it’s generally accepted that over the past decade the quality of construction in Panama has declined. That isn’t to say that all new constructions in Panama are poor quality. What it does mean is that the quality of buildings is much more variable than they used to be.
Since new constructions haven’t been lived in before, it’s hard to know if something is poor quality until it’s too late. It isn’t until you’ve signed the purchase papers and moved in that you might discover your water pressure is terrible or the walls are paper thin. On new constructions, you can’t get a reference from an owner who already lives in the building because there likely aren’t any.
Quality isn’t the only thing that has been sacrificed as developers have thrown up buildings across the city at lightning speed. Building character has also taken a hit.
Essentially, all new construction in Panama follows the 80/20 rule. About 80 percent of the inventory is the same. Floorplans, designs, and amenities show little originality. Buildings and units can often feel like cookie cutter replications of each other even halfway across the city.
There is about 20 percent of the inventory that has a bit of unique value proposition. This means, though, that if you’re after one of these more unique homes, you’ll need to be willing to pay for it and the competition can be fierce.
Older properties, on the other hand, tend to have more character. If you find an older home in a well maintained building and in a good neighborhood, this could actually be more valuable and sought after than a one in a million new construction that looks nice but also looks like every other three bedroom apartment built in the last five years.
Whether an older home or a new one is right for you really depends on your personal taste, budget, and preferences. It’s a given that older properties are going to require more maintenance both within an individual apartment and to the building’s general spaces and infrastructure. That said, newer homes can be a bit of a gamble as you don’t really know what you’re buying until you’ve already moved in.
Your best bet in making the decision is to work with an experienced real estate agent. Whether it’s a new or old home you’re after, and experience agent will help you steer clear of money pits and find the home of your dreams for the right price.