Authored by the expert who managed and guided the team behind the Panama Property Pack
Yes, the analysis of Panama City's property market is included in our pack
Airbnb in Panama City can be profitable, but only under specific legal and market conditions.
Short-term rentals are officially prohibited in most of Panama City except for designated tourist zones like Casco Viejo, where proper licensing is mandatory. Properties in these legal areas can generate gross monthly revenues of $1,916 to $5,468, with net yields of 5-6% annually after expenses. However, operating costs, regulatory compliance, and seasonal fluctuations significantly impact profitability.
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Short-term rentals in Panama City require proper licensing and are only legal in specific tourist zones like Casco Viejo.
Well-located properties can generate $1,916-$5,468 monthly gross revenue, but operating costs and taxes significantly reduce net profits.
| Property Type | Average Daily Rate | Monthly Revenue | Net Yield (Annual) |
|---|---|---|---|
| Studio/1BR (Legal Zone) | $107 | $1,916 | 4-5% |
| 2BR+ (Legal Zone) | $137-$192 | $3,011-$5,468 | 5-6% |
| Peak Season Properties | $153 | $3,949 | 6-7% |
| Low Season Properties | $119 | $2,159 | 3-4% |
| Luxury 5BR+ Units | $200+ | $4,000+ | 5-8% |
| Illegal Areas (Risk) | Variable | $0 (Fines up to $5,000) | Negative |
What are the typical property types that actually work well for Airbnb in Panama City?
Modern apartments and condos dominate the profitable Airbnb market in Panama City, representing 87.2% of all successful listings.
One-bedroom and two-bedroom units perform best, with single-bedroom properties making up 51.3% of the market. These units attract couples, solo business travelers, and digital nomads who prioritize convenience and central locations. Studio apartments also see strong demand due to their competitive pricing and appeal to budget-conscious travelers.
Historic properties in Casco Viejo command premium rates, particularly colonial-style apartments with unique architectural features. Penthouses with rooftop pools or terraces in areas like Punta Paitilla and Bella Vista attract luxury travelers willing to pay $200+ per night. Properties with character elements like exposed brick, high ceilings, or canal views consistently outperform generic modern units.
Larger properties with 3-5 bedrooms can work well for family groups or extended stays, but they face more seasonal demand fluctuations. These properties often struggle during low season months like August and October when family travel decreases significantly.
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Which neighborhoods have the strongest demand from short-term renters?
Casco Viejo leads Panama City's short-term rental demand as the only neighborhood where Airbnb operations are fully legal with proper licensing.
This UNESCO World Heritage site attracts tourists seeking authentic experiences, with properties averaging 60-70% occupancy rates year-round. The area's cobblestone streets, colonial architecture, and proximity to restaurants, bars, and cultural sites make it consistently popular with international visitors.
Avenida Balboa ranks second for demand, particularly properties facing the Pacific Ocean or with bay views. The neighborhood's modern skyscrapers, shopping centers, and business district location appeal to both leisure and business travelers. Properties here typically see 50-65% occupancy during peak months.
El Cangrejo and San Francisco attract business travelers due to their proximity to banking districts and corporate offices. These areas perform strongest Monday through Thursday, with weekend occupancy dropping to 40-50%. Punta Paitilla's luxury developments appeal to high-end travelers, while Bella Vista offers a middle-ground option with good restaurant access.
Obarrio sees moderate demand, primarily from extended-stay business visitors and expats in transition.
How much does property size influence occupancy rates and daily rental income?
Property size directly impacts both pricing power and market reach, with smaller units achieving higher occupancy rates.
| Property Size | Average Occupancy Rate | Average Daily Rate | Target Market |
|---|---|---|---|
| Studio | 55-60% | $85-$110 | Solo travelers, budget-conscious |
| 1 Bedroom | 50-65% | $100-$130 | Couples, business travelers |
| 2 Bedrooms | 45-60% | $140-$180 | Small families, friends |
| 3 Bedrooms | 35-50% | $180-$250 | Larger families, groups |
| 4+ Bedrooms | 25-40% | $250-$400 | Large groups, luxury travelers |
| Penthouse | 30-45% | $300-$600 | Luxury market, special occasions |
What are the average nightly rates and occupancy levels across different areas of the city?
Nightly rates in Panama City vary significantly by location and season, with Casco Viejo commanding the highest premiums.
As of September 2025, Casco Viejo properties average $120-$180 per night, with luxury colonial apartments reaching $250+ during peak season. The area maintains 55-70% occupancy year-round due to its tourist appeal and legal status for short-term rentals.
Avenida Balboa properties with ocean views command $100-$160 per night, while interior units average $80-$120. Peak season (January, March, December) sees rates increase by 25-30%, with occupancy reaching 65-75%. Low season months (August, October, November) experience rate drops to $70-$100 with occupancy falling to 35-50%.
Business districts like El Cangrejo and San Francisco see strong weekday demand at $90-$140 per night, but weekend rates often drop 20-30%. Punta Paitilla luxury properties average $150-$250 per night but face occupancy challenges, typically achieving 40-55% annual occupancy due to their niche market appeal.
Overall city averages show $107 per night for smaller units and $137-$192 for larger properties, with seasonal fluctuations causing significant revenue variations throughout the year.
How much gross rental income could a well-located property realistically generate per month?
Well-located properties in legal zones can generate $1,916 to $5,468 in gross monthly income, depending on size and management quality.
Studio and one-bedroom units in Casco Viejo or Avenida Balboa typically generate $1,500-$2,500 monthly during average months, with peak months reaching $3,000-$4,000. Two-bedroom properties in prime locations average $2,500-$4,000 monthly, with exceptional properties exceeding $5,000 during peak season.
Seasonal variations significantly impact monthly income. Peak months (January, March, December) can generate 60-80% higher revenue than low months. Properties achieving $3,000 in peak season might only generate $1,500-$2,000 during August or October when tourism drops.
Professional management increases revenue potential by 15-25% through optimized pricing, better guest experience, and higher occupancy rates. Properties with premium amenities like pools, gyms, or unique features can command 20-40% rate premiums over standard units.
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What are the common running costs, such as cleaning, utilities, maintenance, and management fees?
Operating costs typically consume 25-40% of gross rental income for Panama City Airbnb properties.
Cleaning fees range $30-$60 per booking, depending on property size and service quality. For a property with 15 bookings monthly, this represents $450-$900 in monthly cleaning costs. Many hosts charge guests cleaning fees separately, but market competition often requires absorbing these costs to remain competitive.
Utility costs average $100-$250 monthly, varying significantly based on air conditioning usage, property size, and guest behavior. Larger properties or those with pools can reach $300-$400 monthly during peak season when occupancy and AC usage increase.
Property management fees range 10-25% of gross income for full-service management, including guest communication, cleaning coordination, maintenance, and pricing optimization. Self-managed properties save these fees but require significant time investment and local presence.
Additional monthly costs include maintenance ($50-$150), insurance ($20-$30), internet/cable ($40-$60), and emergency repairs averaging $100-$300 when they occur. Licensing fees in legal zones add annual costs, while illegal operations risk fines up to $5,000.
After deducting expenses, what does the net yield usually look like compared to the gross yield?
Net yields typically range 60-75% of gross yields after deducting all operating expenses and taxes.
Panama City's average gross rental yields of 7.8-8.5% translate to net yields of 4.5-6.5% for well-managed Airbnb properties in legal zones. This significant reduction reflects the high operational intensity of short-term rentals compared to traditional long-term rentals.
Professional management reduces net yields by an additional 10-25% but often increases gross income enough to offset management fees. Self-managed properties achieve higher net yields but require substantial time investment and local market knowledge.
Tax implications further reduce net returns, with proposed minimum taxes of 15% on vacation accommodations potentially decreasing net yields by 1-2 percentage points. Income taxes on rental profits add another layer of reduction depending on the host's overall tax situation.
Properties in illegal zones face zero or negative net yields due to fine risks, making legal compliance essential for any positive returns. The investment in proper licensing and legal operations typically pays for itself within 6-12 months through avoided penalties and consistent income generation.
How does the return on short-term rentals compare with long-term rentals in the same neighborhoods?
Short-term rentals in legal zones typically generate 40-80% higher net income than long-term rentals in the same Panama City neighborhoods.
Long-term rentals in Casco Viejo or Avenida Balboa average 4-6% net yields with minimal management requirements. The same properties operated as legal Airbnb units can achieve 5-7% net yields despite higher operating costs, due to significantly higher gross rental income.
Risk profiles differ substantially between the two strategies. Long-term rentals provide stable, predictable monthly income with minimal vacancy risk and lower operational complexity. Short-term rentals face seasonal fluctuations, regulatory changes, and market competition but offer higher profit potential.
Management time requirements heavily favor long-term rentals, which typically require 2-5 hours monthly versus 10-20 hours weekly for active Airbnb management. This time investment must be factored into return calculations, particularly for investors without local presence.
Market conditions in 2025 show increasing competition in the short-term rental space, potentially reducing the income advantage over long-term rentals. However, properties in prime legal zones continue to outperform long-term alternatives for investors willing to accept higher complexity and regulatory compliance requirements.
We did some research and made this infographic to help you quickly compare rental yields of the major cities in Panama versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.
What local regulations, licenses, or restrictions apply to Airbnb hosts in Panama City?
Panama City enforces strict regulations requiring minimum 45-day rental periods, except in designated tourist zones where special licensing allows shorter stays.
Most residential areas in Panama City prohibit rentals shorter than 45 days, making typical Airbnb operations illegal outside specific zones. Casco Viejo and Panama Canal district are the primary legal areas for short-term rentals, requiring official licensing from the Panamanian Tourism Authority (ATP).
License requirements include property inspections, fire safety compliance, liability insurance, and ongoing compliance monitoring. The licensing process typically takes 2-4 months and costs $500-$1,500 depending on property size and complexity.
Penalties for operating without proper licenses are severe, with fines reaching $5,000 per violation. Repeat offenders face property closure orders and potential criminal charges. Building associations in residential areas often enforce additional restrictions through HOA rules, even in legally permitted zones.
Hosts must also comply with tax registration requirements, guest registration protocols, and ongoing reporting obligations. Regular inspections ensure continued compliance, with license renewals required annually or biannually depending on the specific zone and property type.
How competitive is the Airbnb market right now, and how easy is it to stand out from other listings?
The Panama City Airbnb market has moderate competition with increasing entry barriers due to regulatory restrictions limiting new legal listings.
Competition is most intense in legal zones like Casco Viejo, where limited licensing restricts new entrants while demand continues growing. This creates opportunities for well-positioned properties but makes market entry challenging for new investors without existing legal properties.
Successful differentiation requires professional photography, premium amenities, and exceptional guest experiences. Properties with unique features like historic architecture, rooftop access, or high-end furnishings command significant premiums over basic units.
Technology integration including smart locks, high-speed internet, and automated check-in systems has become essential for competitive positioning. Guest experience elements like local guidebooks, concierge services, and flexible policies help maintain high ratings and repeat bookings.
Market saturation varies by property type, with luxury and unique properties facing less competition than standard apartments. New entrants should focus on legal compliance first, then differentiation through service quality and property features rather than competing solely on price.
What taxes do hosts have to pay on short-term rental income, and how do they impact profitability?
Short-term rental hosts in Panama City face multiple tax obligations that can reduce net profitability by 15-25%.
Proposed legislation includes a minimum 15% tax specifically on vacation accommodation income, though implementation details remain under discussion as of September 2025. This tax would apply to gross rental income before deducting operating expenses.
Standard income tax obligations apply to rental profits at rates varying by total income level and residency status. Foreign investors may face additional withholding taxes or treaty considerations depending on their home country tax obligations.
Municipal taxes and tourism fees may apply in certain zones, particularly in historic districts like Casco Viejo. These typically range 2-5% of gross income but vary by specific location and licensing requirements.
Proper tax planning and compliance are essential for maintaining profitability. Many hosts underestimate tax obligations, leading to unexpected liabilities that can eliminate profits. Professional tax advice is recommended for serious investors, particularly foreign nationals unfamiliar with Panama's tax system.
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Looking at all factors together, under what conditions is running an Airbnb in Panama City truly profitable?
Airbnb profitability in Panama City requires specific conditions: legal location, proper licensing, professional management, and realistic financial expectations.
1. **Legal Compliance**: Properties must be located in designated tourist zones like Casco Viejo with valid ATP licensing. Operating illegally guarantees losses through fines and closure risks.2. **Prime Location**: Success requires properties in high-demand areas with tourist attractions, restaurants, and transportation access. Secondary locations struggle with occupancy rates below 40%.3. **Professional Management**: Either full-service management or significant personal time investment for guest communication, cleaning coordination, and maintenance. Amateur management typically reduces revenue by 20-30%.4. **Financial Cushion**: Sufficient capital for 3-6 months of expenses during low seasons or unexpected problems. Cash flow fluctuations can be severe during off-peak months.5. **Market Understanding**: Knowledge of seasonal patterns, pricing strategies, and local competition. Properties without dynamic pricing typically underperform by 15-25%.Under these conditions, investors can expect 5-7% net annual yields from well-located properties, outperforming long-term rentals but requiring significantly more effort and compliance costs. Properties failing to meet these criteria typically generate negative or minimal returns, making thorough market research and legal compliance essential for success.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
Airbnb success in Panama City depends entirely on legal compliance and professional execution in designated tourist zones.
While potential returns can reach 5-7% net yields, the combination of regulatory restrictions, operational complexity, and seasonal fluctuations makes this a strategy suitable only for experienced investors with proper local support.
Sources
- AirROI Panama City Market Report
- Airbnb Panama City Listings
- PanaCrypto Digital Nomads Real Estate Analysis
- Frapan Invest Airbnb Regulations Guide
- Global Property Guide Panama Market Data
- Newsroom Panama Vacation Rental Tax Proposals
- Hostaway Panama Airbnb Investment Analysis
- Wise Rental Yield Calculation Guide