This drawing shows what the Onix One building should look like once completed. It’s not fancy, but you may find the location and price are just right for you.

January 25, 2008
Panama City, Panama

We may soon see an extension of the Ley de Interés Preferencial, or Preferential Interest Law, that allows buyers in Panama to obtain very low mortgage interest rates. If we’re lucky, a new pricing threshold will apply to a wider range of property.

The law, set to expire at the end of this year, applies to new construction with a sales price of up to $62,500, on which buyers can obtain mortgage interest rates of just 2% to 3% (regular mortgage interest rates are currently 6.5% to 7.25%).

Various organizations—including the Panama Chamber of Construction (CAPAC) and Panama’s Association of Real Estate Brokers (ACOBIR)—are lobbying for the law to be extended and for the threshold to be raised to $82,000.

Sources say the law is likely to be extended. As for raising the threshold, that’s another story. The government has long refused to do this, saying that the law, as is, continues to help low-income families. Critics say that the $62,500 threshold is no longer reasonable, considering that price increases for certain key materials (like cement) have raised property prices. Even property built for the local market, as opposed to the many "luxury" developments that target expats and affluent Panamanians, is more expensive.

Housing Minister Balbina Herrera is behind the proposal and has promised to raise the threshold, according to Panama’s La Prensa. We’ll let you know if she succeeds.

Property on the Market Today

You may think that it’s impossible to find property in Panama for less than $82,000. Not true. What is true is that the average expat is looking for a home or condo that meets high standards or conforms to American and European tastes. These types of properties have become much more expensive in the past year. But it is still easy to find homes priced from $50,000 in rural areas. Even in Panama City, there are options…on the local market.

Bottom line: if you have a small budget and are willing to live like a local, this law could help you halve your monthly mortgage payments.

Keep in mind, there are trade-offs. When we say "live like a local" we don’t mean just living outside a gated community or going without high-end fixtures. Living like a local could entail much smaller living quarters than you’re used to…or buying in a middle- to lower-middle class neighborhood in the city…or living in a middle- to upper-middle-class suburb outside of the city. If you’re willing to do this, there are residences available in this price range…

Here are a few properties we found recently:

El Mare: Construction on this new building should be complete by the end of the year. Apartments in El Mare start at about 650 square feet in size. Pricing starts at $79,000.
The building will have a pool and a social area or party room, and views of the Metropolitan Park.

Another new building, dubbed Onix One, is coming up in Club X, a part of the Greater Bethania area. Prices start at $66,300 and apartments vary in size from 840 to 1,240 square feet.

By the way, I live in Club X now; I feel safe and I like the central location…I’m just 10 minutes from the El Dorado shopping area, and about five minutes from a large El Rey Supermarket, a Super 99 bargain supermarket, and a nice Metro pharmacy.

How It Works Now

Basically, for the purchase of a home of up to $16,000, you pay an interest rate of 2%; for a home of up to $25,000 you pay 2.5% interest and for homes of up to $62,500 you pay just 3% interest.

Remember: the preferential interest law is not limited to Panamanian citizens. Anyone meeting the price requirement can apply. Among other requirements, the home must be new and it must be your primary residence. Most banks limit the mortgage term to 15 years. That said, don’t be afraid to ask your loan officer for an exception…every once in a while, the banks are willing to make exceptions on a case-by-case basis.

Best regards,

Jessica Ramesch
Editor, Panama Insider

P.S. Learn more about inexpensive property in this month’s edition of Panama Insider, a publication for people like you who want to know exactly how to take advantage of the many benefits Panama has to offer. Find out which new destination is our favorite retirement location for 2008 ( hint: it’s in the mountains, but four to five hours closer to Panama City than the famed retirement destination of Boquete…it’s also much less expensive). It’s all in the current issue of Panama Insider . Become a subscriber to Panama Insider.