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Look Before You Leap
As in other parts of Panama, some land is titled and some is homestead property, or what everyone refers to as Rights of Possession Property (ROP) land. Titled property is not unlike "fee-simple" titles in the United States. Titled property is subject to taxes, is verifiable through a Public Registry system and can be mortgaged. Rights of Possession Property is similar to "squatters rights" as it existed years ago in the United States. ROP property is government owned, untaxed and cannot be mortgaged. Disputes also occur over agreement on property lines. Maria Pinzón of the Mossack Fonseca & Co. Boquete branch advises that you "not buy or invest in property without first seeing a lawyer."
Laws are frequently updated, making due diligence a must. To stimulate foreign investment, Panama's government is creating legal incentives in immigration and real estate. For one, the 20-year tax exemption law has been extended, which is often confused as a property tax exemption. "First of all this is not a property tax exemption, the exemption is for the improvements, meaning the construction that you will build on the property," explains Pinzón. "You still have to pay property taxes if the property value is more than $30,000. If it's less than $30,000, the property is exempted from paying property taxes. So really what is exempted is the construction. Let's say you own a property valued $25,000 and you decide to build a $500,000 house on it. The Panamanian government will exempt for 20 years the building and since the property is less than $30,000 there will be no property taxes. There is no restriction on the amount of improvements."
A Lifestyle Choice and a Portfolio Play
Charming and vibrant, Boquete remains an attractive investment opportunity. The area continues to lure transplants with attractive home prices, especially compared to Costa Rica, and an affordable cost of living without sacrificing access to modern convenience. Furthermore, Taliaferro says that those interested in shifting strategy will find "safety of investment in solid projects that are well underway and capitalized. Our focus is on having a safe place for you and your assets to ride out the economic storm that is raging."
Slower growth may support a safer environment for investment. "It will be more difficult for developers with little infrastructure because they will have to spend money in order to make it instead of trying to have their sales pay for infrastructure as most do," explains Taliaferro. "Less risk for the buyers, banks and developers too."
Boquete has certainly weathered its share of real storms recently too, one of which significantly changed the direction of the Caldera River and damaged some of the area's coffee crops. Where Boquete ends up when the economic dust settles may be more predictable. Coined by some as a 1980s San Miguel de Allende, this sophisticated enclave feeling less dependent on loans and speculators may find itself in a unique position to weather the economic crisis and emerge strong with a healthier, more sustainable real estate market.
By Beverly Gallagher, photo credits as indicated.