the future of the panama real estate market

Post-COVID19: The Future Of The Panama Real Estate Market

Households, businesses, and institutions are all grappling with an uncertain future due to COVID-19.

Over the last few weeks, the Panamanian government has received praise for its proactive approach to the COVID outbreak. But will Panama’s response be enough to reactivate the Panama real estate market that has been losing steam since 2018?

No one knows how widespread the impact will be on sectors such as retail, tourism, or construction. And as we all know in Panama, it’s very hard to get real-time information on such industries.

Recognizing that transparency is the best approach in a pandemic, Panama Equity has decided to open our books.

This is why I’m going to be sharing six key components of our core business, related to sales, property management, and leasing.

Panama Equity has been representing buyers, sellers, and property owners since 2008. Our clients include European family offices, US and Canadian private equity, as well as families and individuals from around the world.  They trust us to help buy, sell, lease and manage their properties.

I want to reiterate, this is not the type of information we usually share.

But in solidarity with the business community and fellow property owners, we decided to make an exception.

The goal for disclosing what we normally keep in house is to give you a solid foundation on which to base your property decisions.

Let’s call it, an inside look on how we as a company have been reading the tea leaves, and how you as an individual can now have access to what we have had all along.

In a more developed real estate market like New York, Hong Kong, or London, figures such as closed sales metrics and apartment vacancies are readily available. This is not so when it comes to the Panama real estate market. Until today.

There is a very real possibility that the Panama real estate market will not come back to pre-COVID levels for one to two years.

Then again, there are a few scenarios that could play out in Panama and pave the way for a real estate recovery that would happen much faster than any other country in the region, and perhaps even the world.

Here, I will present a series of statistics based on external research and our in-house figures. The goal, once again, is to help decision-makers and those already invested in the Panama real estate market make better, more informed decisions.

Panama Rental Market Insights

Because the rental market is a critical component of the real estate market, I’d like to start by focusing on how our rental inventory has been performing.

We launched our property management division last year. Currently, we manage more than 100 rental units ranging from $500/month to $3,500/month which breaks down to a price of $6.00 – $10.00 per meter, per month. The sizes of the properties range from 40 meters to 220 meters and include 1,2, and 3 bedroom apartments.

The majority of our properties are in Bella Vista, El Cangrejo, and El Carmen. However, we also manage units in Punta Pacifica, San Francisco, Paitilla, Avenue Balboa, and Casco Viejo. Lastly, 90% of our inventory is residential and the rest is a mix of retail and commercial.

In 2019, average vacancies across our entire portfolio were running at 36 days. In other words, it took us around 36 days to place a tenant into an empty property. The range on that placement time was as quickly as 6 days to as long as 90 days, but the average was 36 days.

The apartments which were the fastest to rent out were generally priced between $600 to $900 per month. Those that took the longest to rent out were in what the industry considers as “luxury properties.” Most of our luxury inventory is in the JW Marriott Ocean Club (formerly the Trump Ocean Club) and it generally took us around 90 days to rent out those units.

Our portfolio of properties under management in 2019 had an 84% occupancy rate. In other words, if you had a property that we managed on your behalf, then it was likely to be empty for 16% of the year.

The difference between these two numbers is because of the time it takes to perform maintenance and repairs while an apartment is empty.

Now I’m going to explain why those numbers above are important predictors of where the market could go.

Property Yield and Appreciation: An Investors Best Friend

As any real estate investor knows, there are two ways to make money in real estate. In simple terms, if you buy a property today and sell it tomorrow for a higher price, then you have made a profit. We call that appreciation. And if you buy a property today and rent it out, you’ve produced an income. We call that yield.

In a simple market, if there are more buyers than sellers, appreciation is likely.

If you are an investor focused on yield then the rental price is the determining factor of the asset. And if you are looking to lease out your property quickly, there are a number of things you can do. You can invest in improvements to make the property more attractive, you can spend more money on marketing, or you can lower the price.

So what’s the first thing a property owner does once they have a property vacant for more than 15 days? In most cases, they lower the rent. And what happens when this property owner looks to sell the property to an investor? The first thing the investor will do if they are focused on yield is to look at the rental value. And if the rental value has come down because of a competitive market, then the value of that asset is reduced.

That’s why occupancy is an important factor to study when trying to predict the Panama real estate market pricing pressures.

So let’s go back to our numbers.

This year, we were starting to notice a slight improvement in occupancies. Meaning vacancies were declining. As of March 1st, 2020 our property portfolio is at 97% occupancy.

It’s difficult to say if that improvement was due to an improving economy, tenant turnover, or aggressive marketing. So assuming other property management companies are seeing similar results, my takeaway is that an ever so slight recovery was starting to happen in Panama in the first quarter of 2020.

Tenant Defaults and Late Payments

So now that we have established a pre-COVID baseline for vacancies, the next thing to cover is collections. How was our portfolio performing as far as people paying their rent on time?

Before I get to that, first, let’s talk about who is renting our properties.

The people living in the apartments we manage come from all walks of life. We have Copa pilots, Procter & Gamble executives, and retirees from all over the world. We also have waiters, maids, mid-level managers, and independent contractors.

Looking at a snapshot of our rent collections for the last 6 months, 72% of our tenants have paid on or before the date their rent was due. 10% of our tenants generally paid within 5 days from the date that the rent is due. We call those 5 days their “grace period” and after the grace period elapses, we charge a 10% penalty.

From there, collections get a bit tricky. Fortunately, we’ve developed a pretty effective system of escalating pressure and a very aggressive eviction process that keeps our rental portfolio reasonably healthy. At any one point, around 10% of our tenants are between 30 and 45 days late but only 8% of our tenants ever reach 60+ days.

So that’s the baseline: Around 18% in what we call late-bucket collections.

March 2020 Tenant Late Payments and Collections

In the month of March, our collections were generally tracking normally. However, during the first two weeks of April, we saw a spike in late payments, with nearly double the number of tenants going into the 30 days late category for the first time.

As to be expected, the majority of these clients are in industries such as food service, retail, and tourism. And the majority of our multinational tenants have paid the April rent with no questions asked. 

Obviously we’re watching these numbers very closely and have started to work with tenants on payment plans which aim to help them and owners get through these unprecedented times.

The conclusion here is that it’s too early to draw a conclusion. Workers who live paycheck to paycheck cannot afford to forego food purchases and will opt to short the rent instead. So we’re dealing with this directly and proactively.

Fortunately, most of our owners are understanding, given the current situation. The message we’ve been delivering to our tenants is “we will work with you on this, but we need to see an effort on your end,” and that’s paid off in the short term. And it’s also likely to pay off in the long term with increased lease renewals and goodwill.

As long as collections stay healthy, we are seeing tenants more likely to renew their leases in the short term, mostly because of the fear of the unknown. They aren’t necessarily keen on moving to a new apartment because they don’t know what the conditions will be like in terms of hygiene and in today’s quarantine environment, they are also restricted in terms of mobility.

Panama Property Sales In Q1 2020

Another side of our business focuses on developer sales. The properties in this category tend to be either under construction or planned for construction based on a certain presale level established by the bank financing the project.

Panama Equity’s primary buyers are those looking to spend at a minimum of $200,000. In general, our clients are not going to be using a mortgage. The regions we cover include Panama City, Coronado, El Valle, and Pedasi. Our buyers generally come from the US, Canada, and Europe and are a mix of investors and end-users.

Most of the buyers we bring to Panama have a similar model: they are reaching retirement age and plan on gradually spending more time in Panama. They decide to buy a property that will be delivered in, say 2 to 3 years, and initially are looking to rent out that property.

For our investor clients, Airbnb has been a successful model for our property owners outside of the city. They have found that the revenues generated from the platform are a way to cover costs and enjoy the property throughout the year. Our city-based investors, of course, count on us to lease out and manage their properties and we’ve started to also explore the short stay (45 days – 6 months) market with limited success.

Post-COVID, based on the last three weeks, I can say that those buyers are still around. They are still looking. But, right now they cannot travel to Panama.

Based on the inquiries on our website, buyers are looking to get out of heavily populated urban environments like New York, Miami, and LA. People seem to be gravitating towards places like Altos del Maria, Pedasi, and Buenaventura right now.

But it’s important to look at the market as a whole, and not the market of only expat buyers, so let’s do that right now.

Panama Condo Sales Figures Q1 2020

One of the best sources of accurate market information is Galeria Inmobiliaria. They are a Colombian company and have been operating in this market for 10+ years. Galeria Inmobiliaria does a fantastic job documenting supply and demand trends, and I’d like to talk about their March report.

In March, there were a total of 645 units sold across 618 residential projects. To put things into context, in February 2019 there were a total of 1,771 units sold. February 2019 was actually the high mark for the last three years. And on the other side of that range is December 2017, when only 266 units sold. So 645 sold properties is not great, but it’s not terrible either.

Compared to March of 2019, sales in March 2020 were 25% lower.

The construction projects which Galeria Inmobiliaria reports on range from $45,000  to $1,000,000 and I would say they have about 95% of the city covered.

From March, a total of 80% of the sold units fell under the new preferential interest range of $180,000. In the sector that we focus on, a total of 126 units were sold in March 2020.

Of those 126 units sold, 45 were priced between $180,000 to $250,000. 49 of those sales were for properties between $250,000 – $300,000. 5 units then sold at prices between $300,000 – $400,000, 22 between $400,000 – $600,000 and 5 for prices above $600,000.

These sales represent a total of 87 million dollars of inventory sold in March.

The demand for pre-construction properties in Panama peaked in September 2016 and has been declining since. Some of the reasons for this decline include rising unemployment, more stringent bank policies, and a strong dollar.

The takeaway here is that buyers are in shorter supply now than they have been for a few years.

What’s it going to take to reverse this trend?

A weakening dollar will likely bring in foreign buyers based on increased purchasing power. Job creation could also fuel demand, as first-time buyers look to move forward on the purchase of a home. However, neither of these two factors is looking like they will come to fruition in the short term.

What may be the saving grace of the industry or at least something that could move the needle and inject some much-needed activity would be some major price concessions by developers.

In addition to price concessions, a large corporation or two settings up operations in Panama would have a major impact on employment and help jump-start the pre-construction market.

And finally, watch interest rates closely. The recent Fed reduction in leading up to the Pandemic is likely to get passed along to consumers in Panama. Lower interest rates are a key component for fueling investment and preserving yields.

If we see a move by the banking community to lower interest rates to below 4% for investors, you can expect a wave of new local buyers who can afford to take advantage of the new leverage.

Available Inventory of Condos for Sale in Panama

On the supply side, the trend is a bit more positive: Since June of last year, total inventory has started trending downward. In other words, buyers are finally purchasing units faster than developers can build them.

A developer, however, is not likely to see the current situation as positive, considering the industry average is one unit sold per project per month. That’s down from a February 2019 high of 2.8 units per month.

Here’s how that looks in the real world.

Let’s say that your average residential development is designed to have a total of 150 apartments for sale. The presale period can last up to 12 months, at which point between 30-40% of the project sells to early buyers. The presale period, by the way, is the time between when a project is announced to when it starts construction.

So this means that our developer starts construction with around 100 units left to sell. Based on the average sales numbers mentioned above, you are looking at selling one to two units per month. So by the time construction finishes, our unfortunate developer will still have 60 unsold units.

That’s quite a change from 4 years ago when developers generally sold out before delivering their project.

Property Financing In Panama

Another factor keeping finished inventory on the market is the banks. Right now bank requirements are making it difficult for buyers to qualify for a mortgage.

One good piece of news is that Scotiabank has started accepting expired passports from Venezuelan buyers. Outside of COVID, this would have likely brought in new buyers and is likely to have a positive impact once things get back to normal.

The other good news is that of the 618 projects, 37% of these developments are in the pre-sales stage. In other words, they have not started construction.

If the current trend continues, there will be a few developers who decide to cancel their projects. If 100% of the developers who have projects that are in the presale stage decide to cancel, we will see 10,000 fewer units hit the market. And if 50% of the planned projects don’t move forward, we will still see a 5,000 unit reduction which represents an 18 % reduction in total condos either planned or in construction. And if they all decide to cancel, we are looking at a roughly 10,000 unit reduction and a very minimal hit to the economy.

10,000 fewer units hitting the market over the next 2-3 years would have a positive impact on equalizing supply and demand, and this current crisis may be the catalyst to make it happen.

We may also start seeing new amenities in the projects that move forward including larger home office spaces, conference rooms, and other work-from-home perks. Touchless plumbing in common areas, as well as voice-activated technology, may also see a rise in popularity.

So that’s the supply and bit of the demand side of the pre-construction market.

Let’s take a deeper dive into the demand-side and explore where buyers are coming from. In this case, our buyers.

Foreign and Domestic Property Buyers in Panama

As I mentioned earlier, we’ve been in the property business since 2008. Our core market of buyers is generally foreigners either already living in Panama or looking to invest in Panama.

Typically our investors are looking for at least a 4% net return on their investment and up to now have been mostly focused on core areas including specific areas of Panama City as well as secondary markets such as Pedasi, Coronado, and El Valle.

Five years ago, a number of our largest clients decided to get into the multi-family residential space and started purchasing entire buildings. Those by far have been our best-performing assets under management and are generally producing around a 6% net yield.

In 2019, our top 5 website visitor locations were in the USA, Canada, South Africa, Australia, and Panama.

At the start of this year, the country of origin for our top visitors remained unchanged, with a slight improvement in South African and Australian traffic.

March, however, saw traffic decrease by around 25% and we are tracking April closely. On the one hand, buyers certainly have more time to browse the internet right now. However, family commitments, financial concerns, and a focus on their local markets may be distracting our target market. Time will tell.

The Future of The Panama Real Estate Market

As I mentioned at the beginning of this report, it’s still too early to predict how the current economic shutdown will affect real estate in the short term.

What we can conclude from the numbers above is that leading up to the pandemic, Panama’s rental market was finally starting to turn a corner. As a company, we were seeing the ever-so-slight effects of increased tourism promotion in the form of higher web traffic. And this breakout may be the catalyst that finally induces the much-needed reduction in planned inventory in the pre-construction market.

World opinion is that Panama has managed the COVID outbreak in a proactive and pragmatic way and I believe Panama’s fundamentals still present a very compelling case for confidence.

In the last few weeks, Moodys and the IMF predicted that Panama is likely to fare better than all of the countries in Latin America and that by 2021 Panama may have the highest GDP per capita of any country in the region.

Those are predictions, but what has made Panama attractive remains unchanged:

  • US dollar-based assets are stable in the long run
  • Panama’s small and young population is better positioned than many other countries
  • The safety of Panama’s streets is undeniable
  • Financial institutions remain strong
  • Panama’s laws protect foreigners and afford the same rights and protections as Panamanians

The money will always be looking to find a home, and the business of real estate is essentially one of providing shelter, which will always be a basic need.

Panama will be affected, along with the rest of the world. However, there is a very real possibility that we will come out of the current crisis in a better position than we started it.


  1. Tom F OShaughnessy

    on said  

    Kent – this is an excellent evaluation and detailed disclosure of statistics that provides both buyers and sellers with confidence.

    It would be great to see Panama emerge from this with a solid game plan to entice foreign companies and families to consider Panama as home – tax incentives and transition support (Spanish lessons for families, temporary free rent for companie relocations etc).

    Many companies have realized through this period that remote employment is easier than they thought – so even if a company does not want to relocate they can encourage employees to work remotely (no one will know that their home is in Panama City Panama not Panama City Florida.

    Lets send that message to the new President – he seems to be a man of action.

    • Kent Davis

      on said  

      Cheers Tom, let’s hope that Nito’s reading this blog 🙂

      The fundamentals are still in place…good internet, inexpensive office rents, US Dollar based, and a good timezone for serving clients in North America and Europe. Plus the territorial tax benefits for workers serving offshore companies are still some of the best in the world. Vamos a ver!

  2. K Konstantinidis

    on said  

    Dear Kent,

    Good and quite unbiased report. I appreciate the inside info of the PTY RE.

    Some medium-term negative issues to ponder:

    1- The future of tourism and international travel is questionable, and probably slow to take off –> effect on Airbnb occupancy rates.

    2- Deglobalization progressing –> less trade, less canal traffic, less investment by MNCs outside their home turf, …. all not positive for PTY economy.


    3- Banking sector bad debt accumulation in consumer and RE exposures –> tighten of lending criteria so less developer loans, mortgages and CC credits.

    In my humble opinion, all driving forces of Panama’s economy namely logistics, speculative real estate, internal credit-driven consumption, and tourism are going to weaken quite a lot post Covid19.

    Best Regards

    K. Konstantinidis

    • Kent Davis

      on said  

      Dear Mr Konstantinidis,

      Thank you for your comments. I agree that the tourism sector is slated to be one of the hardest hit. Until airlines and hotels can reassure travelers that they have changed their models sufficiently, many will be wary to travel to Panama. My hope is that local travel, much like Colombia, will help fill the gap. But then again, loss of income across every income bracket remains to be seen. My hope is that some of Panama’s wealthy will start to travel internally for the short term, in as much from a spirit of patriotism/buying local as from a fear of planes and airports. Vamos a ver!

      Regarding your second point…it seems inevitable that global trade as a result of decreased consumer spending and disrupted supply chains will impact the Panama Canal. But remember that the Canal itself only represents around 15% of our GDP. Of course, many of the other sectors like construction, mining, and agriculture are also being impacted.

      And as far as banking…it will of course be a function of how long the economic shutdown lasts. Historically banks in Panama have kept healthy deposits and cash positions, and our default rates and consumer debt levels have historically been lower than most countries in the region. Again…new ballgame for sure!

      Lets see amigo!

  3. Tim Wrye

    on said  

    Nice in depth analysis, as you stated there is no official government information on property in Panama. It has to be compiled by companies such as yours. Thanks for the information.

    • Kent Davis

      on said  

      Cheers Tim! You’re right…statistics on Panama’s property market and real estate prices in Panama are tricky to find. Keep an eye on our blog and newsletters for future updates.

  4. Thank you for a detailed and thorough report, lots to think about. Looking forward to what occurs after the quarantine is lifted, flights begin again and what Panama does to promote tourism.

    • Kent Davis

      on said  

      Absolutely Mikkel and thank you for your kind words on the article. As a Panama resident, I always appreciate your commentary and share your eagerness to see to what extent things “open up”, and how Panama starts to promote tourism again. Such ironic timing as our tourism motor was finally starting to turn, after a what…4 year hiatus?

      here will be some stiff competition from places like Costa Rica, so hopefully our response to Covid policies (and the effectiveness of that response) positions us higher than other destinations. Onwards amigo!

  5. Hello Kent. First Off, excellent presentation. For the novice I am it was satisfying to receive your and your sources opinions! We live in South Florida. My wife has business in Paitilla. We own a villa in DeCameron. We remain interested to purchase a small (1 – 2 bdrm) residence in Punta Pacifica, San Francisco or on Balboa! So we continue looking for bargain!
    The only disappointment we have is the terrible assistance the Gov’t has provided the people & small business! It is shameful!

    • Kent Davis

      on said  

      Hi Joseph, appreciate your feedback. As far as finding a one or two bedroom apartment for sale in the neighborhoods you mentioned…I expect that we will see some bargains very soon. Many of our sellers have reached out to us to get market feedback and have expressed their desire to lower their asking price. The challenge, as you can appreciate, is being able to “determine the market,” since right now everything is pretty much on pause given our 22 hour quarantine period. We’re able to conduct virtual and in some cases physical showings but I think we are one of the few agencies who are still active. We will definitely stay in touch!

  6. Ron Binnington

    on said  

    Terrific article. I thank you for the information, and hopefully things will start getting close to the ‘new normal’.
    Stay safe everyone

  7. scott mitchell gronsbell

    on said  

    Thanks for an educated overview. Agree with most that what transpires economically on a Global as well as a local level remains to be seen, so I choose to remain optimistic. The travel sectors ( hotels, airlines, cruise lines, Air BNB, etc. ) will have to slowly re-build their base. I live in South Florida ( the hospitality sector has gone 10 rounds with Mike Tyson here ) and my wife and I are a year or 2 away from cutting the cord and thinking about moving out of the US. Relocating to keep expenses palatable without sacrificing comfort and safety is certainly not off the table. We have traveled to many spots in Mexico and have friends that have settled in Puerto Vallarta and love it. Costa Rica, and Panama are also on our to check out list, so a trip hopefully in the not too distant future is on the calendar. Question, When you list your properties for sale do you include historical data so the prospective client can see how the values have fluctuated over a specific time frame? Moving forward, it might be a good idea so people can gauge if the investment is priced accordingly.

    • Kent Davis

      on said  

      Hey Scott, appreciate your comments and hope to see you down here. As for historical data, it’s available via the public registry but only if the past property transactions were sales of the actual asset, vs the entity which owns it. Many folks own properties in Panama using a corporation or a foundation, and when those are bought and sold, the property value is not updated if that makes sense. When the actual property is what is bought and sold, then the price does get updated so you can see some history. Cheers!

  8. Charles Benton

    on said  

    Good morning Kent. Very interesting reading and valuable insight.

    I am from Canada and I was wondering if you have looked at all at the Punta Chame district which as you know is in the beginning stages of redevelopment with a few projects on the go.

    Take care and stay safe and healthy in this world crisis.

  9. Richard Hammill

    on said  

    Kent, Thank you for a very informative and in-depth look at the state of real estate in Panama. I feel that Panama will come out this better than its neighbors due to its pro-business attitude and income from the canal.

    • Kent Davis

      on said  

      Hi Richard, I appreciate your comments on the article! Also share your optimism for the property market here. Time will tell, and rest assured we’ll have our finger on the pulse!


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