For many real estate investors, diversifying an investment portfolio with a range of properties across the country or even North America is a priority.
Canadian real estate buyers have often looked to south for investment properties - either in the States or in Central America, specifically the Caribbean.
Whether you're hoping to boost your investment portfolio, escape the winter blues, or settle in to a new place for your retirement, the Caribbean has many different countries that make great investment opportunities. One of the most popular countries for expats and business owners is Panama.
Panama is a country located in Central America, known for its stunning beaches, tropical climate, and vibrant culture. The country borders both the Caribbean Sea and the Pacific coast and is next to the South American country Colombia. Its capital city is Panama City and the country is home to roughly 4 million citizens.
Over the past number of years, Panama has emerged as one of the fastest-growing economies in Latin America, attracting a large number of foreign companies, buyers, business professionals, and retirees.
One of the primary incentives behind this trend is the booming real estate market of Panama, which offers several benefits to foreigners and business professionals.
Benefits of Investing in Panama for Foreign Investors
If you're looking for a foreign investment, retirement home, or winter home, you have probably looked to the Caribbean for these opportunities. Panama offers a variety of properties and opportunities to foreign laborers and buyers alike.
In this blog, we will explore some of the reasons to invest in Panama and the benefits and tax incentives that come with the investments, including:
- Foreign Direct Investment
- Diversity in a Stable Country
- Rental Income Opportunities
- Numerous Financial Advantage
Investing As a Foreigner is Quite Straightforward
One of the best reasons to invest in Panama is the ease of investing compared to some other countries in the Caribbean.
The Panamanian government has created a residency program that allows international buyers to pursue citizenship through property ownership and is called the Panama Residence by Investment Program.
What is a Foreign Direct Investment?
Panama has made it easier for foreigners to obtain residency and citizenship, making it more attractive to international buyers. This mode of Panama immigration requires a minimum investment of USD $100,000 which can be in the form of a real estate investment.
The private investment visa allows investors and their family to live and invest in Panama and conduct business there without any restrictions. Full citizenship can be obtained after five years of holding residency status and passing a naturalization test. This timeline is considered an easier route for some professionals compared to applying for work permits and short term visas.
There are several benefits to this method of pursuing residency, including:
- The right to live, work, and study in Panama
- Access to the Central, South, and North American markets/resources
- Residency can be applied to a spouse, children under 18, children aged 18–25 who are single, full-time students with no children, children of any age who are physically or mentally differently abled, and parents of any age
- The home of the Panama Canal, one of the world’s most strategically placed and used waterway, the chief commodities carried through it being motor vehicles, products and grains, petroleum, and coal
- Accessibility to Colombia, Ecuador, and Venezuela, allowing for better access to business opportunities with these nations
Diversify Your Investments in a Stable Country
Another main benefit for both multinational companies and individual buyers to invest in Panama is its stability as a country.
Panama's strategic location is one of the main reasons why it has become an attractive destination for foreign buyers. The country serves as a vital link between South and North America, making it an essential center for international trade and commerce.
The Panama Canal, which connects the Atlantic and Pacific Oceans, is also a critical global trade route that is one of Panama's main income generator. It is recognized as one of the seven wonders of the modern world and the Panama Canal Authority generates roughly $2 billion dollars a year with the canal.
Panama is also known for having a well-connected transportation system, including international airports, highways, and ports, making it easy to access from anywhere in the world.
Additionally Panama has one of the most robust economies in Latin America, with a stable political climate, sound legal system, and a friendly business environment. In fact, it is consistently rated as one of the most stable Latin American countries by the World Bank and is also recognized for the ease of doing business in Panama. The country's capital - Panama City - is the political, business commerce, and administrative hub.
The country benefits from a dollarized economy connected to the United States of America, consistent economonic policies, and a stable government that supports the trades and seeks to attract foreign direct investment.
Panama makes significant investments in its infrastructure which has enabled the country to become an excellent location for business owners.
Additionally, Panama has consistently high credit ratings - even higher than other well developed countries like Costa Rica or El Salvador. This stability not only makes it more attractive to residents and tourists, but also to international companies and business professionals.
The country's economic growth rate has remained consistent over the years, with GDP increasing gradually over the past number of years. The country's currency, the US dollar, also offers stability and adds to the appeal of doing business in Panama.
Countries in Central America, including Panama, also offer investment opportunities in hotels, resorts, and shopping centers due to the large tourism sector.
Panama also pursues other projects like property development, charter dive operations, film operations, call centers, and forestation projects. With such a variety of options available, investors can tailor their investments to suit their budget and portfolio strategy.
Along with the various investment options, the real estate market in Panama is one of the fastest-growing in Central and South America, with a consistent increase in property values year on year. International buyers are attracted to Panama's developed urban areas and luxurious beachfront properties.
Thanks to its reputation as a thriving investment hub, Panama is attracting more investment from institutional investors looking for sustained returns.
Rental Opportunities for Tourists
As we've mentioned above, Panama, particularly Panama City, has a real estate market that has been growing consistently. This is due in part to the financial and tax incentives that the government offers companies and individuals hoping to do business in Panama.
Another reason for the great real estate market is because of the tourism industry.
The Caribbean is a popular tourist destination for many North Americans and individuals hoping to explore the world and escape the cold weather during the winter. Panama has been recognized by magazines and websites for its tourism industry.
The distinction has also been highlighted by Panama Tourism Authority and Panama's government in order to attract foreign direct investment and more tourists to boost the economy.
The tourism sector is one of the biggest industries in Central American countries, including Panama. When tourists land in the country, they will be greeted by the warm climate, beautiful landscapes, and laid back lifestyle which are just a few of the incentives for tourists to visit Panama.
Because of the influx of tourists to Panama, many home owners pursue investment income through rental properties available for tourists to book during their visit. Websites like Airbnb have popularized vacation home rentals for short term visits and has allowed home owners to make some investment income. Additionally, you will not have to pay income tax on the money you make from your rental properties in Panama.
Purchasing rental properties in Panama can be a lucrative investment decision for foreign investors. Panama's growing economy and booming tourism industry make it an attractive destination for foreign visitors and expats, which leads to strong demand for rental properties.
The high demand for rental properties means that buyers can benefit from high rental yields and long-term rental income.
If you're a buyer looking for a vacation home, you can have the best of both worlds as you are able to escape the winter weather and rent out the home when you're not there. Or, if you purchase more than one home, you can rent out the other properties while enjoying all of the amazing benefits that Panama has to offer its residents.
Panama offers a diverse range of real estate options to invest in, from luxurious beachfront apartments to urban guest houses in the city center. Buyers and companies can choose between residential, commercial, land, and industrial properties, making it possible to diversify their portfolio.
The Numerous Financial Advantages
The tax incentives and low cost of living is yet another thing that may attract foreign investors and multinational companies.
First, Panama, like much of Latin America, has a cost of living is much lower than many developed countries, which makes it attractive to both buyers and expats. The cost of living is also relatively low, making it a desirable location for buyers on a budget and people looking to make the most of their pension.
This affordability means that individuals can purchase their dream property without breaking the bank, making it the perfect place to buy a second home and conduct business.
Additionally, Panama's real estate market has been experiencing continuous growth over the past number of years, and the prices of properties are appreciating each year. While the real estate market has been growing, home prices still remain relatively affordable, especially if you purchase a property outside of the main city centre.
The country has seen an increase in the number of tourists and foreign buyers in recent years, driving demand for rental properties. This situation has led to an increase in rental prices, providing buyers with a great return on their investment.On top of that, you will not have to pay tax on that income either.
Panama also offers several financial incentives, including tax breaks, discounts on property purchases, and low property taxes. These incentives attract a lot of international trade companies and business professionals looking for a place to house their offshore accounts.
Additionally, there are construction benefits available in Canada. For example, you are able to deduct 100% of construction renovation costs from your income tax. You also will not have to pay duties or taxes on materials that you import for your renovation projects.
The low costs combined with these advantages make Panama an affordable retirement destination. Retirees can relax by the beach, enjoy the laid back lifestyle, and bask in the warm climate without spending their pension on high costs for goods and services.
Whether you're hoping to spend a few months in Panama or settle there for a couple of years, the low costs will help you fund your retirement lifestyle without breaking the bank.
Additionally, Panama's tax policies are favorable to foreign buyers. This is similar to many countries in the Caribbean or Central America.
Property owners in Panama are also exempt from paying taxes on the first $120,000 of their property value. Additionally, there are no capital gains taxes on property sales, making property investment even more attractive to foreign buyers.
In conclusion, Panama offers a great investment opportunity for foreign buyers looking to diversify their real estate portfolio.
Panama's accessibility, strategic location, stable economy and government, friendly tax incentives, financial privacy, high rental yields, and diverse property and land options make it an attractive investment destination for business professionals and expats alike. With the number of benefits available in Panama, you should take advantage of this viable investment opportunity while it exists and before the market prices continue to rise.
Whether you want to purchase a vacation home or invest in a rental property, Panama is undoubtedly one of the best locations in the world to invest in. With all these benefits, it's easy to see why you might invest in Panama as a foreigner.