Supply and Demand: Good Quality Beachfront and Oceanfront is Hard to Find

You sit at home on one of those icy winter evenings dreaming about your next tropical vacation—maybe to Panama or Costa Rica. You start to think that it would be nice to own a piece of tropical paradise. Somewhere to build a vacation home on the beach. Or a place to spend your retirement years, drinking mojitos as you watch the sun go down over the ocean.

So you grab a map of Panama, or any other country in Central or South America. You see hundreds of miles of coastline. You naturally start to think that coastal property should be cheap and plentiful. After all, these countries are poor and there is so much coastal land. And, yes, we’ve just had a world-wide real estate crash. So all this beautiful coastal property should be dirt cheap, right?

Wrong. Look at the map again. Or, better yet: take a trip and drive along the coastal areas. Or try to. You will soon discover that there are vast areas of the coast – in Panama, Costa Rica and elsewhere -- with no road access, or which can be reached only with a 4 wheel drive vehicle after a long ride down muddy, nearly impassable roads. And, of course, these areas do not have electricity or cell phone or internet coverage. How could you live there?

You have just discovered that good quality coastal property with decent road access and basic amenities like electricity and cell phone and internet coverage is in short supply. This is your first clue as to why it isn’t as cheap as you expected.

Titled Property versus Rights of Possession

On your trip along the coast, you should also be aware that there are two types of property ownership in Panama: titled property and rights of possession. Titled property is what you are used to back home in Canada, the US or Europe. It is land you own outright – what lawyers in the Ango-Saxon tradition call Fee Simple ownership. Rights of possession, on the other hand, are squatters’ rights (under Roman law they were called rights of usufruct). The state owns the land; you just have a right to live on it and maybe grow some bananas.

Titled land is much safer for foreigners to buy. I could tell you dozens of horror stories about foreigners -- and locals -- who have bought rights of possessions only to discover that neighbors or relatives of the seller have claims on the property that the new owners think they own. Now they are looking at years of litigation in the Panamanian court system, which isn’t a lot of fun.

But those are stories for another day. It is enough for you to understand that, unless you are an especially venturesome buyer, someone willing to take substantial risks, you should be looking at titled property, not rights of possession.

Titled Beachfront and Oceanfront is expensive because there isn’t much of it.

Back to your trip along the coast. As you are driving along the small areas of coastal land with decent road access and electricity, you ask the locals how much of the land is titled. Again, you make an important discovery: very little of it is titled. Most of it is right of possession. And you already know how much trouble that can be.

Time to pull out your pocket calculator. You do some quick arithmetic and realize that 90%-95% of coastal properties in Panama are not accessible by road, do not have basic amenities like electricity or cell phone or internet coverage, or are not titled.

Now you are beginning to understand why titled property on the coast, with decent road access and electricity is not going for a song. The reason is simple: there is very little of it in Panama or anywhere else in Central or South America. That is why it hasn’t dropped in price like a Vegas condo, of which there is an almost unlimited supply that no one wants.

Naturally, you start to feel disappointed. You thought you were going to pick up a piece of tropical paradise for a few kopecks. Now you understand that isn’t going to happen.

Everyone wants a piece of Tropical Paradise

But then you have another thought: if there is so little good quality, titled property on the coast, maybe it will become more valuable in the future. Maybe it would be a good investment. Because, well, there must be millions of people just like you who would love to own a piece of tropical paradise where they can sit on their own private beach and drink mojitos, while frigid winds are blowing back home.

Congratulations. You have just discovered why titled beachfront and oceanfront property in Panama is a good long-term investment. It’s a matter of supply and demand. Everyone wants it. There isn’t much available. And no one is making any more.

Taking the Plunge

So you decide to make an investment. You buy some beachfront or oceanfront land in Panama and build a home. It wasn’t cheap, but not that expensive either – just a fraction of the price you would pay for a comparable property in Florida or California, even after the crash of 2008.

And you don’t have to worry about hurricanes or sky-high property taxes or insurance. (By the way, medical care in Panama is very good and inexpensive.)

Now you have serious Bragging Rights. While your friends and neighbors back home are flying off to the same boring 10 day all-inclusive resorts at Veradero or Cancun, complete with soggy all-you-can-eat breakfast buffets and crowded hotel beaches, you can casually mention that you are headed to Panama where you will be staying at your own private beach property,

Maybe you will take pity on one or two of them and invite them to come along with you. Or maybe not. It’s up to you.

Allen Rosen

Chiriquí Coastal Real Estate
Chiriquicoastal.com