Tax on new homes suffocates buyers and builders

The application of Real Estate Transfer Tax (ITBI) of 2% to new homes is generating alerts in the sector due to its direct effect on economic activity, employment and consumer access to the real estate market.

During a conversation in which representatives of the National Housing Council (Convivienda) participated, the economist Eric Molino Ferrer and the labor expert Rene Quevedoit was warned that the measure not only makes the purchase more expensive, but also introduces a brake on the entire production chain linked to construction.

From an economic point of view, analyzes indicate that the increase in costs immediately impacts demand, so a more pronounced drop in sales is expected.

Although this tax, which is equivalent to 2% of the total sales cost of the home, is paid to the General Directorate of Revenue by the promoter or developer, Convivienda warns that the reality is that in practice this rate will increase costs and the charge will be transferred directly to the consumer that you will have to pay for it in the price of the home.

The collection of this tax has always been exempt to promote the sale of new homes and the construction industry. Only second-hand homes paid for it.

Elisa Suarezdirector of Convivienda, warned that any tax applied to housing inevitably ends up being transferred to the final price paid by the consumer. In most cases it is not a cost that the developer assumes; That cost is directly reflected in what the family pays.

“This tax will affect families with less purchasing power“, said.

As it is a highly price-sensitive market, the tax reduces the purchasing capacity of households and delays decisions to purchase homes, which ends up translating into fewer sales.

This effect also sends a negative signal to developers: with fewer placements, the start of new projects slows down, affecting the future supply of housing.

In numbers, the projected impact is significant. The economic study presented by Eric Molinowarns that around 6,700 mortgage loans would be delayed and 762 could be lostwhich would imply $526 million less in financing and a drop of up to $1.3 billion in economic activityin addition to a reduction of more than $120 million in tax collection.

Molino indicated that the tax would barely generate about $37 millionfar below the negative effect that it would have on the economy.

The deterioration of the sector is already visible in the Convivienda data. Elisa Suárez explained that in 2025 they will be sold 4,020 homes, a drop of more than 34%and that the sector accumulates reductions close to the 55% in the last two years.

In addition, construction activity has shown collapses in different regions, with falls that exceed the 40% in some segmentsreflecting a sustained brake on investment and the placement of housing units.

The impact extends to employment. René Quevedo warned that the country is going through a critical labor situation, marked by the loss of formal jobs and the increase in informality. In recent years, Panama has lost 24 thousand salaried jobs in the private sectorwhile they increased 264 thousand informal workersand only in the interior have losses of more than 100 thousand jobs linked to productive activities.

This deterioration has reduced the purchasing capacity of families and limits their access to housing loans.

The figures also show a contraction in consumption. The loss of wage bill in provinces such as Panama and Panama Oeste reached about $60 million monthlywhich led to a drop in household spending estimated at $128 million a month. This weakening of consumption directly impacts home sales and other sectors of the economy, deepening the cycle of deceleration.

In this context, the spokespersons agreed that the effect of the tax goes beyond tax collection.

They warned that this is a measure that could restrict access to housing, slow down private investment and aggravate job loss at a time of economic fragility.

In the midst of this scenario, the president of Convivienda, Norberto Delgadowarned that the impact is not isolated, but systemic: Less construction means less employment, lower consumption and a general slowdown in the economy.

He recalled that the sector is one of the main productive engines of the country and that every decision that affects it ends up having a direct impact on growth.

For its part, Elisa Suarez He insisted that the debate should not focus solely on revenue, but on the real consequences on the population.

He stressed that Housing cannot be treated as a tax burden, but as a development tooland warned that Measures like this tax end up excluding thousands of families from accessing a housing solution. Both agreed that reviewing the measure is key to avoiding a further deterioration in employment, investment and the purchasing capacity of Panamanians.

Income is not enough to buy a home

The income of the majority of Panamanians is not enough to access formal housing. As explained by economist Eric Molino Ferrer, around 72% of the population does not qualify for a mortgage loanmainly because their income levels do not meet the requirements of the banking system.

To size the problem, an average home of $75,000 requires a monthly letter close to $300which implies that the home must generate at least $1,000 monthly income and you will have to pay an initial amount of $3,000 plus $1,500 tax (ITBI).

In the case of homes up to $120,000, the necessary income increases to $1,500levels that are out of reach of a large part of the employed population.

Added to this is the limited savings capacity. Molino explained that many homes already have between 43% and 53% of your income committed to debtwhich makes it difficult to collect the initial payment. Even to cover the increased cost of the tax, a family or person with an income of $1,500 it could take up to 10 additional months to save the money necessary to pay the 2% rate plus the depositwhich delays or prevents the purchase of a home quickly.

The call from representatives of the housing sector, as well as the economic and labor spheres, is for the Ministry of Economy and Finance to review the Preferential Interest Law again and incorporate the article that allowed the exemption of the Real Estate Transfer Tax for new homes.

For this year 2026, Convivienda projects sales for $634.75 million to place around 5,530 housing units.

However, the application of Real Estate Tax can undermine those aspirations and leaving many families out of the real estate marketin a country where the housing deficit is180 thousand homes.

Katiuska Hernandez

Economy section journalist.