The Final Word From Panama

In Paris, my office overlooks an interior courtyard. Every day at 10 a.m. a colossal clash reverberates up from the

cobblestones below to my fifth-floor window. A restaurant shares our building. The mighty crashing is the sound of its empty wine bottles, courtesy of the previous evening's patrons, being dumped into the back of the city garbage truck making its morning rounds. The noise, as it's pushed up the column of the courtyard, is deafening. And comforting. Every morning, on cue, crash! We four in the office glance up from our laptops and smile. Another work-a-day morning in central Paris…

Here in Panama City, the view from our Bayfront apartment, my temporary office, is of the harbor, the city's famous high-rise towers, and a crew of guys dismantling a giant billboard several floors below us. I've opened our 10th-floor windows to let the street sounds filter in. Car horns, jack hammers, occasional shouts… It's 6.30 a.m. and already this city is open for business.

What's new in this part of the world? Our Panama editors have been doing a good job this week keeping you up-to-date on the many recent and ongoing developments in this country relevant to the would-be retiree, expat, and investor. The property tax exemption is due to expire. What does that mean for investors who haven't satisfied the requirements yet? Will they lose the tax break?

In fact, our insiders say the deadline for compliance may be extended.

The country's tourist visa, formerly valid for 90 days, today gives you but 30 days in the country…and may not be renewable. How, then, is the would-be retiree or resident expat to get a feel for life in Panama? Again, the controversy that has followed this change is putting pressure on the local legislature…which is indicating it may reconsider.

"The 30-day visa law was passed," a friend told Lief and me over drinks last night, "because of growing crime problems. Every crime in the city for a long time that wasn't related to a domestic dispute has involved a Colombian. The more restrictive visa is meant to help keep them out."

About 18 months ago, the teak visa option for anyone interested in residing in the country indefinitely was taken off the table. Not good news, as, frankly, this is one of the two most realistic options for anyone wanting to live here full time (the other is the "person of means" visa, which requires a $200,000 investment in real estate in the country). The teak visa, though, was reinstated late 2006. Our friend, an attorney, well-connected, says, "I don't think they'll mess with this any further."

Which is good news, as it's the option Lief and I have chosen to pursue. In fact, yesterday we took possession of the certificate indicating we're the proud owners of 1.3 hectares planted with teak trees…and able, therefore, to submit our teak visa paperwork.

Three big-deal high-rise towers formerly in the works (and being sold pre-construction) will now not be part of the Panama City skyline. Rumors say other such projects may be scrapped, as well. Does this signal a downturn in the market? Lief says, "Not a downturn, exactly, but a shaking out. Anyone paying attention could see that inventory has been outpacing demand. But this will play itself out. Bottom line, interest in this market has never been hotter."

Indeed, this is low season, and the city's big hotels are full. We've heard from several people this week of the troubles they had finding a hotel with availability.

Likewise, rental occupancy rates are high. Lief's rental manager for our Bayfront unit reports she had 85% occupancy last month for her units in this building…and 70% the month before.

Music to Lief's ears. When we depart, our unit, now fully outfitted, will join her inventory.

Kathleen Peddicord
Publisher, International Living

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P.S. Frankly, I'm skeptical of rental properties as an investment strategy. Unless you go into it in a big way, with many multiple units, in my experience, it's hard to make the numbers work. In Paris and Buenos Aires, for example, where we have experience with single rental apartments, the returns have been marginal at best. Unexpected repairs, unplanned maintenance, taxes not figured fully into the return projections… Here in Panama City, though, the numbers we've been reviewing are encouraging. This may be a market where even a single rental unit can earn a good (that is, better than 5%) return…while enjoying capital appreciation.