Property Prices Fall in Boquete, Panama

Right now, real estate values in Panama’s highland country around Boquete are perhaps the best they have ever been—certainly the best in seven years.

A short stroll up the hill from Boquete town center is the exclusive neighborhood of Santa Lucía. Here I saw a 1,900-squarefoot home on a corner lot. I met the seller who wants out now. I reckon he would accept an offer of $152,000. Before the economic crisis he would have easily gotten $210,000.

Close by, in Volcancito Village, for just $95,000 you can own a newly-built duplex of 883 square feet with a 355-square-foot terrace.

In the middle of town a new, 1,453-square-foot, two-bedroom, two-bathroom condo will set you back $120,000. Rentals are in high demand here and you could easily make $1,000 a month renting this place.

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With prices so low, now is the time to act on property in Boquete. The mountain air is still crisp and the sunshine warm. And the town has never been so vibrant. There’s a new theater, new cafés and restaurants, and an international school. The city of David is only 40 minutes’ drive away, and road improvements underway are going to shorten that to 25 minutes within the next two years. Plus, there’s talk of more flights coming to the airport.

Yet despite all this, prices have dropped. Why?

Three decades ago, Swedes came to build the first hydro-electric power station on the Caldera River down the valley. They built their homes in areas like Santa Lucía, close to town. Then, 12 years ago, North-American expat pioneers arrived, attracted by the climate, rich pastoral setting, inexpensive real estate, and glowing reports in the pages of International Living  magazine.

In 2004 and 2005 Boquete really caught on. The trickle of pioneers turned to a flood of North American real-estate shoppers, developers, and speculators. When I visited in 2007, I counted more than 20 real-estate projects at various stages of planning and development—targeted mostly at the North American market. Prices shot through the roof. A two-bedroom, two-bathroom condo could set you back $200,000 or more.

But then the housing market in many parts of the U.S. collapsed. Credit dried up back home. Buyers could no longer buy with the stroke of a pen to release an equity line of credit on their home. Folks felt poorer. With few buyers over the next six years, the market ground almost to a halt. Projects failed or never got off the ground. And now you’ll find some private sellers who need out.

There was an initial period of denial but the clear-out is now complete and prices are at their lowest levels since 2006. And, back then, the Boquete you were buying into wasn’t nearly as attractive as now, nor as well served with amenities.

This situation is a “value window.” I don’t expect it will stay open long. Boquete is beginning to appear on the radar of wealthy Panamanians and other Latin Americans as a second-home location. They are catching on to Boquete as a weekend retreat.

At 4,000 feet, Boquete has a beautiful mountain setting. The Caldera River roars down the mountainside and through the middle of town. There’s rich pasture. And then, the dormant Volcán Barú is a dramatic backdrop. The mountain air is fresh and temperatures are a comfortable 60 to 77 F. All around town you’ll find different micro climates. Depending on the altitude and aspect, you can choose how much sun and warmth you want.

Here in the Chiriquí highlands you are in Panama’s breadbasket. This is where Panama’s milk, coffee, vegetables, flowers, and fruit are produced. You can buy fresh produce on the roadside. This is also horse country.

The town of Boquete is buzzing with expats gathered in cafés, restaurants, and community social areas. It feels healthy and relaxed, and it’s this simpler, healthier mountain life that draws people. You can hike, play golf, go whitewater rafting, bird watching, or bathe under a crashing waterfall or in hot springs.

You’re comfortably in the game here for $100 per square foot. (You could have been looking at $200-plus in a new luxury community back in 2007.) Spend that on an older home and you’ll have some cash left over for renovations. In fact, even in the luxurious Valle Escondido, known locally as “Millionaires’ Row,” I have seen homes listed for $100 per square foot—$350,000 for a 3,500-square-foot property.

You need to know how to buy, though. The best deals sell fast. And, because the rental market is strong, only folks who need out will take a bargain-basement price.

Therein lies the key to buying: Find a distressed seller. This takes boots-on-the-ground research. Come to Boquete, make as many local and expat contacts as you can, and be upfront. Make it clear that you are here to snag a deal and that, for the right deal, you are ready for a quick closing.

It’s not like opening the yellow pages or a listings website. But it can save you tens of thousands of dollars.

I have scouted Boquete many times in the past decade. Now, for the first time in over six years, I’m seeing deeply undervalued opportunities from distressed sellers. And when I hear of these distressed opportunities, I announce them quickly as part of my Real Estate Trend Alert.

I like the Santa Lucía area just outside town. It’s not a private community, so you won’t have HOA fees or be subject to the whims of a developer. This is where the Swedes first built when they came almost 30 years ago. Today it’s a friendly, multinational neighborhood. You can join the private (but simple and inexpensive) club and hang out with neighbors around the pool. Or you can stroll into town.

This is where I saw that comfortable, 1,900-square-foot home on a corner lot. The asking price is $165,000 and at that level it’s priced to sell. But I get the impression the seller would take $152,000.

You won’t get great mountain views in Santa Lucía. For great views and value, trot a bit farther up the mountain to Volcancito Village. This is where I saw the 883-square-foot duplex with a 355-square-foot terrace for $95,000.

And you’ll also find deals in high-end, gated communities. Like $188,500 for an ocean-view penthouse in Boquete Country Club. Or you could buy a completed home of over 2,000 square feet for the low $200,000s. With developer lot prices here in the $75,000 to $100,000 range, you’ll do much better buying from an eager seller than building yourself.

Soon Boquete will revert to its growth curve and opportunities like this will be a distant memory. In the meantime, I’ll be keeping a close eye out for these deals… and so should you.

Three Things to Consider about Buying in Boquete

1. Panama Property-Tax Exemption: In Panama you can pay up to 2.1% property tax on the value of a property above $75,000. Under this figure you pay based on a sliding scale. Buy a property whose construction permit was issued before December 31, 2011, and a transferrable, 20-year tax exemption applies. A complicated sliding scale applies to properties registered after this date, with rates depending on price and time of registration. You can find full details on the bands and how to compute your property-tax liability (if any) here.

2. Rentals: The rental market in Boquete is strong. Expats continue to come, while fewer buy their own home than did in the mid-2000s. In particular, the rental market for condos is strong right in the middle of town. Folks coming to Boquete to take life here for a test drive generally prefer being able to travel mostly on foot. Finding a rental can be difficult. Landlords have plenty of demand and yields can be strong. Buy a well-located condo in the middle of town and you could figure on grossing 7% to 10%.

3. Residence through Real Estate: Spend $300,000 or more on real estate in Panama and you can be eligible for Panamanian residence. To apply for the Person of Means residence program, put $300,000 in property, a fixed-term deposit in a Panama bank, or a combination of the two. Once your application is processed, keep the property and/or fixed-term deposit for the two-year, provisional-residence period until you are granted permanent residence. This is a good option if you’re already planning to invest this amount. If not, there are easier residence options, like Panama’s famed Pensionado program, which do not require a large investment.

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