The whole concept of ‘cost of living’ is a tough topic to handle. As I wrote in my earlier post about the cost of living in Panama it may seem like an easy – objective thing to consider. But it’s not! In fact it’s very subjective and the main subject is you – your life – your lifestyle and how you like to live. For example, in a few places I have lived I have chosen to rent instead of buy. The reason? In those places I was able to live twice the lifestyle for half the price. In other words the price to rent was half of what it would have cost me to buy in those particular places.
Now that I have prefaced this topic let me try and shed some light on what is happening in Panama. You may have heard this elsewhere online or in the media – “Inflation has been driving up the cost of living in Panama.”
The reality – when one looks at one part of the cost of living in Panama City the numbers do in fact show that the costs of many items have risen 20% to 25% in just a few sort years. But lets look at a few specifics and the reason I say it’s just ‘one part’ of the cost of living equation.
Milk was $3.75 – now it’s US$4.75 – up just over 25%
Bread was $1.25 – now it’s $1.60 – up 28%
Pizza was $3.25 – now $3.95 – up 22% (That is a personal pan pizza combo @ Pizza Hut)
Ground beef was $2.90 – now $2.60 per lb. Wait a minute – that one went down!
OK, I could keep going but let me repeat the reality is some items now cost 25% more than they did three or four years ago. While some things are about the same and some have even gone down – like ground beef. Now thinking about my earlier statement about all of this being subjective, let me ask you this – what if you were a lacto-vegetarian? My basket of goods above wouldn’t really raise much ire with you would it?
Let’s now talk about other lifestyle considerations. For example one of the best bargains in Panama is entertainment. Going to the movies used to cost just $3.25 – that’s for a new release, Hollywood Blockbuster, English movie in a modern movie theatre with Dolby Surround Sound and all the other bells and whistles. Now that same ticket runs $3.95. And what’s a movie night without treats? A large popcorn combo including two large Cokes $4. Has the price gone up? Sure it has but last time I was in Canada I took my family of four to the latest instalment of Tom Cruises Mission Impossible. That set me back over $80 – for tickets at $15 a piece and $20 for that same combo. Yes, going out in Panama is a bargain and something we can do on a regular basis – even a couple of times a week.
When I arrived in Boquete the barber charged me $2 to cut my hair and he still charges me that. Dry cleaning is another big bargain – a few years ago we figured it ran around 90 cents per item – an average of suits, shirts, dresses and blouses – now it’s about $1. Talk about lifestyle convenience – why do laundry when you can send pretty much everything to the dry cleaners!
Some people are screaming about the price of gas. At one time it was subsidized in Panama but not anymore so gas is up – over $4 a gallon. But gas is up everywhere! Did you know it’s the equivalent of $9.90 a gallon in Norway and almost that high in England? In Canada it’s well over $5 a gallon and forecasters say it will be well over $6 by summer time. Bottom line here – I don’t think it’s reasonable to put gas in the cost of living basket for comparison – the reality is we’re paying more everywhere.
Back to my opening point: The reality is the cost of living in Panama has risen. Some things are are up quite noticeably, while others only marginally, and some day to day items are actually down in price. Eating out is still a bargain compared to any other modern place with restaurant prices up just a little – going to the movies is up but again still a bargain when compared to our home town in Canada. Of course this is all subjective – it’s not hard scientific objective data. But that’s my point. Everyone is different – we all eat differently – we all find enjoyment in different things – we all live differently.
What’s the bottom line? Panama isn’t the “cheapest” place to live on earth. But it wasn’t when we first arrived here a decade ago. However, it’s still a whole lot cheaper than other places we have lived.
I feel like I may be rambling here so let me get back on track and talk a little about the ‘other part’s I mentioned in the beginning. In my Letter from Panama I’ve written about those other important, BIG, costs of living that most people seem to pay little attention to but I believe you need to take into consideration. Specifically – housing. I’ve talked about Panama Weather and Insurance and Taxes and how all of these things can have a dramatic impact on your housing costs.
Most housing in the world reached a peak around 2007. And so it was in Panama but unlike other markets, like the United States, the Real Estate bubble in Panama hasn’t exactly burst. It’s actually been more like it has been in Canada. There has been some correction – more in some places where the bubble has lost some air and less in others. In Panama City for example the rental market is down by as much as 25% from the peak. It’s a lot easier today than it was in say 2008 to find a nice apartment in a nice neighbourhood at a reasonable price. Rather than a bursting bubble of greed and excess as it was in the States Panama’s price adjustment is more the result of simple market influence of supply and demand. People say Panama City developers built too much too quickly – over supply – and the market forces have responding with price adjustments. That’s good news for anyone thinking of renting before buying or just renting period.
And it’s good news for buyers too because house prices in general have also dropped over the past few years – down about 25% than during the boom. Combine that with cheap house and health insurance; pensionado discounts and huge property tax holidays and the bundle of groceries we talked about earlier becomes an inconsequential rise in your total cost of living. In fact it’s more than negated.
Yes, Panama City is seeing ever increasing numbers of tourists (thanks in part of media exposure like The Bachelor) and business people (many from South America). Some, like the tourists and business execs setting up shop, are just here short term but, some will be based here over the long term. Meanwhile, Panama City has also been growing and developing it’s middle class who have the desire and wherewithal to buy a home of their own. New housing continues to come online, at a normalized rate. From Trump Tower – a hot spot for transient execs – to suburb communities just outside the city but within relative commuting distance. This is key to supplying a workforce for those city construction and service jobs. Now, don’t get me wrong – it’s not boom time again and some of those high rise Panama City Condos still stand with many dark windows in unoccupied units, but the ratio of purchasers is enough to balance and keep prices from moving further lower.
It’s important to point out that the observations I’ve presented in this post are essentially Panama City focused. You’re probably now thinking, what about the rest of Panama? Well, in many cases that is a different story. There are different supply and demand forces in place that affect each market differently. I’ll be sure to update the cost of living and housing in other parts of Panama in a future post.
For now let’s say that, while Panama City isn’t the cheapest place to live, there are still parts of Panama where it can be!