Panama offers a number of benefits to those seeking a retirement or second home property in the country.
Most important is the moratorium on property taxes on new construction for up to 15 years from the date of occupancy
(exempt if one's only residence). This can amount to many thousands of dollars in savings each year. There is also
a very substantial discount on products and services for those qualifying for a visa under the 'Pensionado Visa'
pension program. By showing a minimum income from a foreign source (Social Security, Company Pension) of $500 a
month you can qualify. Here are a few of the many available benefits:
50% discount on weekdays hotel stays and 30% on weekend.
50% discount at most recreational activities such as movies and sporting events.
30% discount off public transportation (including buses and ships & ferrys).
25% discount off Copa/Continental airline flights (tickets purchased in Panama).
25% discount at sit-down restaurants.
15% discount at fast-food restaurants.
10% discount off prescription drugs.
20% discount on doctor’s visits.
15% discount on dental work.
25% discount on your electric bill (if less than $50) & 25% discount on your telephone and water bills.
Importation of $10,000. worth of household goods & duty-free automobile every 2 years.
'Baby Boomers' and the Real Estate Bubble?
Today's news tells us that last year, residential property prices rose on average 11.17% - (CA, FL & NV were almost double that) & the fastest rate of increase in 30 years. The Washington Post tells us that the middle class is speculating in houses - buying second and third homes, sure that they will go up in price. The New York Times tells us that people in Florida are making hundreds of thousands of dollars by "flipping" condos before they are built. Entire condo developments are sold out before a backhoe ever appears on the property. Then, they are sold...and resold...all before construction begins.
Buyers have no intention of ever actually owning. It is merely a speculation - on credit, of course. In beach areas, particularly, real estate has become the surest, fastest way to get rich.
Every bubble pops. And there are signs that this one may be approaching its pin. Bond yields are rising. If this continues, mortgage rates will rise too...turning off the easy money. Personal incomes are falling - down 2.3% in January. How are people going to pay for all these new houses? Don't ask; don't tell. And house prices actually fell in the latest reported month - sharply.
There are 70 million baby boomers in America alone, about to start retiring - and every one of them is thinking about how he will organize his retirement. These are people who grew up on the dream of "going to the mountains or the beach." They listened to the Beach Boys. They went to Ft. Lauderdale for spring break. They worked on their tans...and now dream of walking hand in hand with their true loves on mountain trails or along the beach until they finally drop dead.
And we're thinking that while there is an almost infinite number of houses that could be built around major metropolitan areas, the supply of actual oceanfront property is limited, like the supply of gold, by nature. And then, most of the oceanfront property in the world is not very desirable. It is too cold, or too remote, or too hot...or simply, not very attractive. You could walk hand in hand along the beach near Vladisvostok, for example, but you will freeze to death. Location, location, location - as they say; the supply of really good mountain and beachfront property must be very small.
The other thing we're thinking is that a lot of people who want to live near the beach are going to need to find cheaper ways to do so. The middle class may be forced to sell their Florida condo, but they won't give up the dream. So, while the million-dollar condo in Florida could fall 50%, we wonder if a $135,000 'Swiss Chalet' home in the mountains of Western Panama would fall as much - doubt it.!
And then, we approach real estate investing as we approach stocks. We pose the question that Warren Buffett asks: if this investment fell 50% in price...would we still want to own it?
Well, we will certainly regret having bought at the higher price. But real estate is not like stocks. When you need a place to live, you need a place to live. And your choice is sometimes particular, rather than fungible; you want to live in a particular house in a particular place. If you are buying as a speculation and you think prices will fall...you wait. But if you are buying a house to live in, you may want to pay the price...and not worry about what price the house would fetch in the future. After all, it is not really an investment at all - it is a consumer item.
Right now, millions of people have huge gains in their houses. But in order to "unlock" those gains, they have to sell. And then, they still have to live somewhere. The ideal thing would be to sell high ("before the music stops"...and buy low. But nothing much is low in North America - especially not at the beach or even in the mountains. In Panama, prices have gone up, but they are still very low in comparison to those in Florida or California. Even if prices collapse in America, the baby boomer might still be able to sell his house and get enough money to buy here.
In fact, Panama might be one of the few places where he could still realize his dream of retiring in the mountains and near the beach!
