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Panamania

By Nick Foster

New housing aimed at young expats is revising Panama’s reputation as a tropical retirement haven

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It is hardly a steal. With an estimated value of US$2.5m, the large, rather dilapidated hacienda-style mansion stands in 3,245 sq m of grounds in the upmarket San Francisco district in Panama City. But with an economy growing to the tune of 9.7 per cent (in the first quarter of 2011 from a year earlier) and a US$5.25bn expansion of the Panama Canal expected to serve as a catalyst for further growth, it seems strange that this property has been put up for auction by the state twice this year and failed to attract one bid.

On closer inspection, however, it is perhaps not so odd: this was once the home of Manuel Noriega, former dictator of Panama, who was convicted of drug trafficking and racketeering in the United States and of murder by a French court.

Since Noriega was ousted from power in 1989 and democracy restored, the country’s GDP has nearly quintupled. One of the most visible signs of change is the gleaming wall of tower blocks facing the Pacific on Panama City’s Avenida Balboa. After four boom years that came to an end in late 2007, most now have unoccupied units.

“Panama is on a roll otherwise,” says Margaret Summerfield, a director of Pathfinder International, a specialist homefinder service specialising in Latin America. “There is no double whammy of a stagnant economy and a slowing property market. But there is a definite oversupply of condos because of a lack of US buyers.”

In the middle of the last decade, many North Americans targeted Panama because of a perception that there were bargains to be had. In late 2004, prime waterfront property in Panama City exchanged hands for around US$1,000 per sq m. “At that time, about half of all upscale city condos were being bought off-plan by North Americans,” says Summerfield, who is Irish and lives in Panama City’s colonial Old Town.

Off-plan condos sold in 2004 and 2005 – in retrospect, the best time to have bought – had resale prices averaging US$2,500 per sq m in 2007. “People who bought a year or so before the meltdown are now in trouble,” says Summerfield. “They are unable to flip a product for which there is little local demand, and in many cases have to come up with 70 per cent of the purchase price to close.”

Panama map

Still, buyers hoping for widespread fire sales might be disappointed, she adds. “Developers prefer to sit on unsold inventory rather than slash prices. They would rather not alienate 80 existing investors by giving 20 new buyers a better deal.”

So it is perhaps not the most auspicious moment for Donald Trump to launch his Trump Ocean Club Panama, a dramatic, sail-shaped 70-storey tower in the city’s Punta Pacifica neighbourhood containing luxury apartments, a hotel and restaurants. The most expensive unit still available is a four-bedroom, 394 sq m apartment on the 53rd floor: the asking price is US$2.2m. One-bedroom flats start at US$500,000 and include a parking space. The developer says that contracts have been exchanged for 90 per cent of the 1,004 units in the development.

According to Jim Hawley, an estate agent at the Panama Sol agency, most overseas buyers in the country have a budget ranging from US$200,000 to $450,000. Hawley says that almost half his clients buy in resorts on the Pacific Coast, around an hour’s drive south-west of the capital.

In one of these, Buenaventura, Panama Sol is asking US$559,000 for a three-bedroom, three-bathroom condominium close to the beach. Competitive offers are the order of the day in Buenaventura and nearby resorts, dubbed the Gold Coast in the years before the economic downturn.

Hawley says that it’s the “high comfort level” that attracts many foreign buyers to Panama. Having previously set out its stall as an easy-going tropical retirement haven – applicants need to demonstrate as little as US$750 a month in pension payments to qualify for a pensioner’s residency permit – Panama is now aiming for bigger things. The emphasis is now on attracting logistics, scientific research and film-making – and younger expat residents.

Nowhere exemplifies the switch better than Panama Pacifico, a plan to turn a 1,400-hectare former US Air Force base near the Canal into a new urban environment with business parks, a media village and as many as 20,000 homes to be built over the next 40 years. The project offers the benefits of a special economic zone, including tax breaks for companies who set up there: Caterpillar, 3M and BASF have announced investment plans.

In 2007 the Panamanian government selected UK-based London & Regional Properties as master developer for the site. The first batch of 61 houses and 74 flats will be ready by year end. A nearby Lycée Français is one of several schooling options. “A lot of Latin Americans relocating to Panama appreciate the green spaces so close [20 minutes’ drive] to the city,” says Panama Pacifico spokeswoman JuliAnne Murphy.

Typical off-plan prices for detached houses are in the US$400-$700,000 price bracket. Studio flats are marketed at US$98,000. In the meantime, there is work to do: Panama’s infrastructure, particularly its sewage facilities and the electricity grid, is struggling to keep up.

These are reminders of an earlier Panama that Manuel Noriega, likely to return soon in handcuffs, would surely recognise.