Panama or Costa Rica: US Expat Property Buying Guide

Which country is better for investing in real estate, Panama or Costa Rica?

Americans looking to move abroad while staying within the North American continent are increasingly asking this question.

Both Latin American countries offer tropical climates, unspoiled nature, and vibrant expat communities. Of course, the two countries differ in some key ways—these differences are notable when comparing the real estate markets, tax laws, cost of living, and overall vibes.

Below, we’ll walk you through investing in real estate in both Panama and Costa Rica. Read on for a breakdown of each country’s real estate prices, purchase processes, taxes, lifestyles, and more.

Country snapshots

Panama

• Population: 4.5 million
• # of Americans: ~20,000-30,000
• Monthly cost of living (minus housing): ~$779 for one; $2,804 for a family of four
• Top expat areas: Panama City, Bocas del Toro, Coronado, Boquete, Chitre

Costa Rica

• Population: 5.2 million
• # of Americans: ~70,000
• Monthly cost of living (minus housing): ~$862 for one; ~$3,136 for a family of four
• Top expat areas: San Jose, Heredia, Tamarindo, Atenas, Quepos

Real estate purchase overview

Purchase rights

Both Costa Rica and Panama have policies that encourage foreign investments in real estate. When it comes to purchasing and owning property, foreigners have the same rights as locals. Foreigners don’t even need to be living in the country already or have a residence visa before they can buy real estate.^,

In fact, both countries offer pathways to residence through real estate purchases. In Panama, the Friendly Nations visa grants residence to Americans who purchase real estate worth at least $200,000. Costa Rica’s investor visa has an even lower qualifying threshold of $150,000.

Purchase process

The process for buying property in Panama as well as Costa Rica isn’t too different from buying property in the US. Generally, you will need to:

• Identify the property you want & negotiate a price
• Draft a sale contract 
• Conduct due diligence on the property (e.g. appraisals, surveys, title search)
• Sign the contract
• Pay agreed-upon property price, fees, & taxes
• Register the property & transfer title ownership

While you don’t necessarily need professional assistance to purchase property in either country, most expats choose to do so anyway. Real estate agents can help expats find properties, negotiate, overcome language barriers, and more.

Many expats also choose to hire a knowledgeable local real estate attorney, who can be especially helpful in procuring and reviewing legal documents like sales contracts, loan agreements, property appraisals/surveys, etc.

In both countries, deposits are typically about 10% and closing takes between one to two months.

Notable regulations

In both Panama and Costa Rica, buying coastal property usually works differently than buying inland property. Those who “purchase” shoreline property often don’t own it outright. 

In Panama, buyers lease shoreline property from the government for a fixed period (e.g. 20 years), after which point they must re-sign to stay. In Costa Rica, you can only hold 49% of shoreline property and must purchase it through an LLC.

Depending on how close the property is to a body of water, it may even be illegal for owners to prohibit public waterfront access. There may also be restrictions on how much and where you can develop on the land — especially in high-tide zones.

Real estate market overview

The real estate markets in both Costa Rica and Panama have seen significant growth in recent years, thanks to:^,

• General political & economic stability
• Growing middle classes
• Infrastructure improvements
• The rise of digital nomadism
• Increasing levels of tourism
• An influx of retirees

However, average prices remain significantly lower than in the US — presenting an attractive opportunity for investors. 

Both countries have particularly hot real estate markets in bigger cities and areas frequented by tourists and expats. Among the most in-demand property types include:

• Urban housing
• Luxury rentals
• Beachfront properties
• Mountain retreats

At present, there are no major legislative changes or regulations pending that would jeopardize real estate market health. Primary risk factors include global economic fluctuations and natural disasters, particularly those caused by climate change.

Keep in mind that cash purchases reign supreme. It can be tough to secure loans or financing — and when they do come through, rates are often high.

Panama-specific real estate trends

In Panama, overall price increases due to the growing economy and population have cooled somewhat since the widespread October protests. Beyond that, there is a notable oversupply of commercial and office real estate. That said, now may be a good time to take advantage of the resulting decreased prices. 

There is also a great deal of confidence that prices will rebound (and then some) due to:

• The growing, diversified economy
• The increasing population
• The strategic location of the Panama Canal, a major driver of economic activity + jobs (& therefore, housing demand)
• The opening of a major new airport terminal

A few prime types of investments include fincas (countryside estates), skyscraper units, and golf course townhomes. Particularly popular areas to invest in include: 

• Bocas del Toro 
• Pedasi
• Panama City 

Costa Rica-specific real estate trends

Real estate in Costa Rica tends to be slightly more expensive compared to Panama due to factors like its: 

• More well-known status as a tourist/expat/retiree/digital nomad destination
• Longer history of political & economic stability
• Slightly lower crime rates

Having said that, it’s not impossible to find property at a reasonable price in Costa Rica.

Among the most in-demand property types in Costa Rica include eco-friendly developments, condos, and homes in gated communities. Some of the best areas to invest in include:

• Guanacaste
• The Central Valley (including San Jose & surrounding suburbs)
• The Caribbean coast (including Cahuita, Manzanillo, Punta Uva, etc.)

Tax considerations for potential property owners

While Panama and Costa Rica levy certain taxes on property purchases, ownership, and sales, they are lower than in the US. Below is a breakdown of some of the most common taxes for property owners:

Panama

Panama’s property purchase taxes include the following:

• New constructions: .5% to 4.5%, depending on value & type (e.g. commercial vs. residential)
• Existing properties: 2% transfer tax, 3% advanced payment on future capital gains
• Registration: .3%³
• Notary fees: 1%

When it comes to property ownership taxes, here’s what you may need to pay:

• Primary residences: 0% to .7%, depending on property value
• Other residences: 0% to 1%, depending on property value
• Rental income taxes: 0% to 25%, depending on overall income

Property sale taxes include:

• Capital gains tax: 10% (unless you paid the initial 3% income tax advance)

Costa Rica

Costa Rica’s property purchase taxes:

• New constructions: 13%
• Existing properties: 1.5% split between seller & buyer
• Stamp duty: 0.85%

Property ownership taxes you may need to pay involve:

• Property tax: .25%
• Rental income taxes: 15% (only 85% of rental income subject to tax) 

Property sale taxes include:

• Capital gains tax: 15% on properties held up to two years, 10% on properties held for more than two years
• Transfer tax: 1.5%
• Stamp duty: 0.85%

Life in Panama vs. Costa Rica

There are many overlapping benefits of life in Panama and Costa Rica. Both countries share:

• Tropical climates
• Good public healthcare systems
• Beautiful nature, from beaches to mountains, rainforests, & more
• Lower costs of living than in the US
• Large expat communities
• Low crime rates relative to the rest of Latin America
• Lots of things for expats to do and experience

That said:

• Panama’s dry season is slightly more hot & humid than in Costa Rica
• The Costa Rican public health system is the best in Latin America
• Panama’s beaches are generally more secluded
• Costa Rica is slightly safer than Panama
• Expenses in Costa Rica tend to be higher than in Panama
• Costa Rica’s expat community is larger & more established than Panama’s
• Panama has a more vibrant capital city & better shopping, while Costa Rica is better for outdoor adventures & wildlife spotting

And of course, each country has its own unique charm. Costa Rica is known for its:

• Laidback, pura vida lifestyle
• Friendly, outgoing people (known locally as ticos)
• Excellent surfing 
• Wellness culture
• Numerous national parks
• Status as one of the happiest countries in the world
• Environmental friendliness
• Nicoya Peninsula Blue Zone, home to one of the world’s longest average lifespans

Panama, on the other hand, is known for its:

• Diversity
• Cosmopolitan capital city
• Historical landmarks
• Modern infrastructure
• Strong, diversified economy
• Low taxes
• Business-friendly environment
• Generous retiree benefits

Panama or Costa Rica? Make an informed decision

Both Panama and Costa Rica offer great real estate investment opportunities and lifestyles. Which one you prefer depends largely on your budget and preferences. Those looking for a bargain price in a tax-friendly country with a cosmopolitan capital may prefer Panama. However, outdoor adventure enthusiasts with a higher budget may prefer Costa Rica.

Whether you decide to invest in Costa Rica or Panama, though, you will still have US tax and reporting obligations. The US’ citizenship-based taxation system means all American citizens and permanent residents — even expats — are subject to US taxes. 

As such, purchasing property in Panama or Costa Rica can have long-term US tax implications. So before making a move, make sure to consult with a US tax specialist.

Resources:

1. Cost of Living in Panama
2. Cost of Living in Costa Rica
3. Buying property in Panama as a foreigner: a full guide
4. Guide To Buying Property in Costa Rica: What You Need to Know
5. A look at Panama’s residency options in 2023 (and its Retirement Visa, in particular)
6. Residency for Investors in Costa Rica: A Guide for Inversionistas
7. Panama Real Estate FAQS
8. The real estate market in Costa Rica: 2024 forecast
9. Real Estate Investment Trends in Panama: What’s Hot in 2024
10. The real estate market in Panama: 2024 forecast
11. Panama – Corporate – Other taxes
12. Panama Property Taxes
13. Buying property in Costa Rica as a foreigner: a full guide
14. PROPERTY TAXES IN COSTA RICA – ONE MORE REASON TO MOVE HERE
15. Health Insurance and Healthcare in Costa Rica Explained
16. Costa Rica is one of the world’s happiest countries. Here’s what it does differently