“A man, a plan, a canal: Panama.” It may be an impressive palindrome, but there is much more to this central American country than its famous canal.

Panama is a tropical paradise too far south in the Caribbean for hurricanes to be a risk. It is also politically and economically stable, following the US intervention in 1989 that brought the downfall of the Noriega regime and modern infrastructure, including roads, banks and telecommunications, that wouldn’t be out of place in the first world. Yet property prices in the country remain squarely in the developing world category. One lucky buyer recently snapped up a pair of small islands off the coast for $27,000.

“It’s not a sophisticated market here. Bargains come walking out of the forest each day,” said Don King, who set up Bocas del Toro Realty Services three years ago in what is now one of Panama’s hottest property spots. But “a lot of people believe there will be much more tourism here in the future, [so] there’s a big buying spree happening here right now.”

Although Bocas del Toro, the hub of an idyllic archipelago on Panama’s Caribbean coast, is an active market it is not yet a transparent one. There is no way of appraising land with any degree of accuracy. But, for buyers, that is usually a good thing. Sellers tend to ask what they think is a fair price; and more often than not, refreshingly un-businesslike locals seem to err on the side of caution.

King says that when he tells his friends in Florida that he can sell them half-acre lots of beachfront land for under $70,000, “they just say, ‘How many?’ This won’t last forever,” he acknowledges, “but it’s still there.”

Beyond pioneering buyers who have found their dream property, professional developers are also beginning to arrive, as well as investment groups interested in diversification and future capital gains. One of the larger projects under way in Bocas del Toro is the uncompleted Red Frog Beach Club. Even though its prices for its condominiums and villas have quadrupled since they were first put on the market 18 months ago, one recent buyer commented: “I couldn’t believe there was actually going to be a place like that that I could afford.”

Beyond Panama’s Caribbean coastline, most of which cannot be developed because of Indian reservations, there is its Pacific side. Land prices in the areas closest to Panama City are beginning to rise as new resorts bring better infrastructure and amenities, but the country’s westernmost Pacific province of Chiriqui remains inexpensive if somewhat less accessible. According to Julio Arango, who runs Panorama Panama estate agency, a hectare of beachfront land sells for $7,000 as opposed to up to $30,000 closer to the capital.

Inland Panama, with its striking mountain scenery, is also an option for holiday-home buyers who prefer cooler climes. The rich coffee-growing region of the Chiriqui highlands, where mountains reach up to 10,000 ft, is another attraction.

None of this is expected to remain a secret for much longer. International Living recently ranked Panama first in its 2005 Global Retirement Index, explaining that it offers the perfect balance of cheap prices and amenities even the most demanding senior would want.

And you don’t even have to be old to qualify for pensioner benefits in Panama: anyone who proves they have the means to “retire” (that is, an income of more than $500 a month) can qualify for a host of benefits, including discounts on hotels from Monday to Thursday and 25 per cent off utility bills and restaurant prices. Even successful dotcom entrepreneurs are known to be taking advantage of this scheme.

“Add a breathtaking natural beauty, an abundant and varied environment, a great climate and a government promoting foreign investment, and it is easy to see Panama will become the next Costa Rica, but bigger, faster and better,” says Saskia Delic, who runs Happy Whale Real Estate Panama, a company that’s already benefited from that country’s property boom.

According to King, Costa Ricans are landing in Bocas del Toro with the intention of investing in real estate now that their own market is no longer a bargain.

Delic’s advice is simple: “Discover Panama before the crowd does.”