What are the risks of buying a property in Panama?

Authored by the expert who managed and guided the team behind the Panama Property Pack

Everything you need to know before buying real estate is included in our Panama Property Pack

As we reach mid-2025, Panama continues to attract foreign property buyers with its territorial tax system, use of the US dollar, and relatively stable economy.

However, the Panama real estate market comes with specific risks that every foreign buyer must understand before investing. This comprehensive guide breaks down the 12 most critical questions about property risks in Panama.

If you want to go deeper, you can check our pack of documents related to the real estate market in Panama, based on reliable facts and data, not opinions or rumors.

Who is the author of this content?

THELATINVESTOR

A team specialized in real estate investing in Latin American countries (Panama, Colombia, Mexico, Costa Rica, etc.).

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Panama. If you'd like to learn more about us, you can check our presentation page.

What Legal Nightmares Keep Foreign Buyers Awake in Panama?

The biggest legal risk for foreigners buying Panama property in 2025 is purchasing Right of Possession (ROP) land instead of titled property.

ROP land technically belongs to the government, and you only have usage rights based on occupation. This type of land cannot be registered in Panama's Public Registry, making it vulnerable to overlapping claims and disputes. Unlike titled property that offers legal security similar to fee-simple ownership in the United States, ROP land leaves buyers exposed to significant legal vulnerabilities.

Even with titled land registered in the Public Registry, cases of registry manipulation have occurred where properties were fraudulently sold to multiple buyers or by people without legitimate ownership rights. The sophistication of these schemes has increased, with fraudsters creating legitimate-looking documentation that can fool even experienced buyers.

Anonymous corporate ownership through Panamanian corporations creates another layer of complexity. While this structure is legal and commonly used, it can obscure true ownership and transaction prices, making proper due diligence significantly harder for foreign buyers who may not understand the intricacies of Panama's corporate laws.

It's something we develop in our Panama property pack.

How Bad Is the Title Fraud and Registry Problem Really?

Title issues and land registry inconsistencies remain a serious concern in Panama's property market, with fraud occurring regularly despite technological improvements.

While Panama's registry system is sophisticated and moving toward blockchain-based transparency as of June 2025, the transition period has created new vulnerabilities that sophisticated criminals exploit.

The Public Registry manipulation cases typically involve sophisticated schemes where legitimate-looking documentation is created to transfer ownership illegally. Foreign buyers are particularly vulnerable because they often rely on local agents or lawyers who may be part of the scheme, and language barriers can prevent them from identifying warning signs in documents.

What's the Real Story with Pre-construction Horror Stories?

Pre-construction projects in Panama carry substantial risks, with developer insolvency affecting approximately 15-25% of new projects as of mid-2025.

The combination of oversupply in the condo market, slow sales, and rising construction costs has created a perfect storm for pre-construction failures. Buyers often find themselves with unfinished properties or, worse, empty lots where their dream home was supposed to be built.

Hidden contract traps in pre-construction agreements have become increasingly sophisticated. Occupancy rent clauses force buyers to pay monthly rent between receiving the occupancy permit and making final payment, sometimes for years. Material cost escalation provisions allow developers to pass construction cost increases directly to buyers without limit. Initial maintenance fees are often set 200-300% above market rate until the homeowners' association takes control, which may never happen if the building remains largely unsold.

Delayed delivery penalties in contracts typically favor developers, offering minimal or no compensation for project delays that can stretch for years. Quality reduction clauses allow substitution of materials without price adjustments, meaning the luxury finishes promised in the showroom may become builder-grade materials in reality.

The Panama condo market specifically faces severe oversupply issues, with some developments sitting 40-60% unsold years after completion, creating ghost buildings with minimal services and rapidly deteriorating common areas.

Can You Trust Panama's Courts When Property Deals Go Wrong?

Panama's legal framework gives foreigners nearly equal property rights as locals, but the system's reliability varies significantly depending on location and case type.

Court cases involving property disputes typically take 2-7 years to resolve, with costs ranging from $10,000 to $50,000 in legal fees alone. This doesn't include the opportunity cost of having capital tied up in a disputed property or the stress of prolonged legal battles in a foreign system.

The judicial system shows clear weaknesses that particularly affect foreign buyers. Rural area courts often favor local parties over foreigners, regardless of the legal merits. ROP land disputes rarely resolve in the buyer's favor, as courts tend to support government claims. Enforcement of judgments can take additional years even after winning a case, and collecting damages from Panamanian defendants proves nearly impossible in many instances.

Mediation exists as an alternative but success rates remain below 30%, often serving merely as an expensive delay before inevitable litigation. Appeals can extend cases by 3-5 additional years, during which property values may decline significantly.

Contract enforcement in Panama ranks 147th globally according to World Bank data, indicating systemic inefficiencies that particularly affect complex real estate disputes involving foreign parties.

What Scams Are Targeting Foreign Buyers Right Now?

Well-known scams continue to evolve, with double-selling schemes and fake title documents becoming increasingly sophisticated in their execution.

Unlicensed agents operating without accountability represent a growing threat, as Panama lacks comprehensive licensing enforcement. These individuals often present themselves as "consultants" or "facilitators" to avoid legal requirements. Overpricing schemes exploit the lack of MLS data, with some properties listed at 200-300% above local market value specifically targeting foreign buyers who lack price references.

Lesser-known but equally dangerous risks have emerged in 2025. The Corporate Shell Game involves properties hidden in layers of Panamanian corporations to obscure ownership and enable fraud, making it nearly impossible to determine who actually owns the property you're buying. The Maintenance Fee Trap includes contracts allowing unlimited fee increases after purchase, turning affordable properties into financial nightmares.

The View Guarantee Scam promises protected views that disappear when adjacent lots develop, leaving buyers with blocked views and significantly diminished property values. Infrastructure Promise schemes claim future roads, utilities, or amenities that never materialize, leaving buyers in isolated areas without basic services. The Tax Exemption Expiration targets properties marketed with tax benefits that expire soon after purchase, dramatically increasing carrying costs.

It's something we develop in our Panama property pack.

How Much Money Can You Lose from One Bad Decision?

The financial consequences of poor due diligence in Panama's property market can devastate even wealthy investors.

Without proper market analysis and professional guidance, losses can quickly escalate beyond initial investment amounts when factoring in legal costs, carrying charges, and opportunity costs.

Properties in undesirable areas or with legal issues often become completely illiquid, meaning you cannot sell them at any reasonable price. Some foreign buyers report being unable to sell problem properties even at 50% losses, effectively trapping their capital indefinitely in Panama.

Which Professionals Are Absolutely Essential (And How to Find Good Ones)?

Assembling the right professional team can mean the difference between a successful investment and a costly mistake in Panama's complex real estate market.

An independent real estate lawyer stands as your most critical protection, but they must have zero connection to the seller or agent to avoid conflicts of interest. Look for minimum 10 years of Panama property law experience and insist on client references from the last 12 months. Typical costs range from $2,000-$5,000 for a complete transaction, money well spent compared to potential losses.

Licensed surveyors prove critical for rural properties and any ROP land, verifying boundaries match title documents and identifying encroachments or disputes that could destroy property value. Professional surveys cost $500-$2,000 depending on property size but can reveal issues worth hundreds of thousands in potential losses.

Public notaries, required for all official document certification, must be licensed and in good standing with Panama's notary college. While usually arranged by your lawyer, verifying their credentials independently adds another security layer. Costs typically run $300-$1,000.

Red flags when choosing professionals include pressure to use their recommended lawyer, reluctance to provide references, unusually low fees that often indicate inexperience or corner-cutting, inability to provide proof of licensing, and poor communication or delayed responses that signal future problems.

Are Building and Zoning Laws Actually Enforced in Panama?

Zoning and construction law enforcement in Panama varies dramatically between urban and rural areas, creating a patchwork of compliance that catches many foreign buyers off guard.

The Ministry of Housing and Territorial Planning (MIVIOT) oversees zoning, but actual enforcement depends heavily on local authorities who may have different priorities or levels of corruption. Strictly enforced areas include Panama City's banking district, Costa del Este, Punta Pacifica, and major tourist zones where international standards generally apply.

Loosely enforced areas encompass most rural provinces, mountain communities, many beach towns, and agricultural regions where local customs often override official regulations. This creates situations where neighboring properties may have vastly different compliance requirements based solely on political connections or historical precedents.

Common violations that foreign buyers discover after purchase include unpermitted structures found in 30% of rural properties, setback violations especially near beaches, height restrictions exceeded without consequence, commercial use in residential zones, and environmental protection violations that can trigger federal intervention.

Remedying these violations typically costs $5,000-$100,000 and can take 6-24 months of bureaucratic processes, during which time you cannot legally sell or develop the property.

Where Can't Foreigners Buy, and What Are the Workarounds?

Understanding Panama's foreign ownership restrictions prevents costly mistakes that can result in complete investment loss.

Absolute restrictions exist for specific zones that no workaround can legally circumvent, despite what some unscrupulous agents might claim.

The ROP land loophole allows foreigners to acquire possession rights even in restricted zones, but this provides no real ownership and carries extreme risks. The government can reclaim ROP land with minimal compensation, and you cannot mortgage or freely transfer it, making it a dangerous gamble for foreign investors.

Is Panama's Property Market Getting Safer or Riskier for Foreigners?

As of June 2025, Panama's property market shows mixed signals for foreign buyer protection, with technological advances offset by deteriorating market conditions.

Improvements include digital registry implementation reducing paperwork fraud, a blockchain pilot program for title verification launched in 2024, increased penalties for real estate fraud now reaching up to 10 years prison, and more stringent licensing requirements for agents that should reduce unlicensed operators.

However, deteriorating factors create new risks. Oversupply in the condo market increases developer desperation, leading to more aggressive and potentially fraudulent sales tactics. Rising construction costs push more pre-construction projects toward failure. Slower economic growth reduces property liquidity, making it harder to exit bad investments. Court backlogs grow longer, now averaging over 3 years for property disputes.

The net result suggests that while technology improvements help prevent some traditional fraud, evolving market conditions create new risks that require even more careful due diligence than five years ago.

It's something we develop in our Panama property pack.

How Dangerous Is Buying Panama Property Without Visiting?

Remote property purchases in Panama carry extreme risks with a failure rate exceeding 40% based on buyer satisfaction surveys.

The dangers multiply exponentially when you cannot personally inspect the property and neighborhood, leading to discoveries that photos and videos simply cannot capture. Neighborhood reality including crime rates, noise levels, and industrial odors becomes apparent only through physical presence. Infrastructure problems like flooding, power outages, and water shortages often manifest seasonally or at specific times of day.

Access issues prove particularly problematic, with roads that become impassable during rainy season or properties requiring 4WD vehicles year-round. Construction quality defects that photos strategically avoid become glaringly obvious in person. Title irregularities in documents that look legitimate online often fail under in-person scrutiny when original signatures and seals can be examined.

Using power of attorney for remote purchases adds another dangerous risk layer. Even trusted lawyers can make mistakes or miss crucial details when you're not present to ask questions and verify information. Some buyers discover their power of attorney was used for transactions they never authorized.

Successful remote purchases require extensive precautions including multiple video walkthroughs at different times and days, independent property inspection by bonded professionals, local contacts visiting regularly and reporting honestly, escrow services through reputable Panamanian banks, and extended due diligence periods of 60+ days.

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How Do Panama's Risks Stack Up Against Costa Rica, Mexico, or Colombia?

Comparing Panama's property risks to regional alternatives reveals both relative advantages and unique challenges that affect investment decisions.

Panama versus Costa Rica shows interesting contrasts. Panama has better title security for fully titled land with a more robust registry system. However, Costa Rica has stronger squatters' rights that threaten owners who leave properties vacant. Both countries lack comprehensive MLS systems, making price discovery difficult. Panama offers easier foreign ownership overall with fewer restrictions, while Costa Rica has more transparent pricing in established tourist areas due to longer expat presence.

Panama versus Mexico presents different trade-offs. Mexico restricts coastal foreign ownership more severely through the fideicomiso trust system. Panama's legal system processes property disputes faster, though neither country excels in this area. Mexico has more established real estate practices in resort areas with better consumer protections. Both countries struggle with title fraud in rural regions, but Panama offers better banking infrastructure for international transactions.

Panama versus Colombia shows Panama's advantages despite Colombia's rapid improvements. Colombia is improving rapidly but starts from a much lower baseline of legal security. Panama's dollar economy eliminates currency risk that can devastate Colombian investments. Colombia has more violence-related property risks that can affect entire neighborhoods. Both countries are improving digital registries in 2025, but Panama remains significantly ahead in foreign buyer protections.

The overall risk comparison shows urban Panama with titled property as the lowest risk option in the region. Rural Colombia or ROP land anywhere represents the highest risk profile. Colombia's major cities show the most improvement trajectory, while Costa Rica's established expat areas offer the most stability for conservative investors.

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.

Sources

1. Taxes for Expats
2. Relofirm Real Estate Types
3. The Latin Investor - Panama Real Estate Trends
4. Panama Realty Zone - Pre-construction 2025
5. Relofirm Contract Problems
6. The Latin Investor - Property Pitfalls
7. Pallas Life - Property Laws
8. Living in Panama - Real Estate Scam
9. Schiff Sovereign - Real Estate Traps
10. The Latin Investor - Foreigner Tips
11. Business Panama - Property Purchase Update
12. Panama Equity
13. Living in Panama - How to Buy
14. Panama Sovereign - Choosing Agents
15. Panacrypto - Zoning Laws
16. Brig Law - Construction Law
17. Living in Panama - 10k Rule
18. Panama Equity - Q1 Market Report
19. Panama Realty Zone - Safety
20. Panama Relocation Tours