Yes, there are islands in Panama, in fact, Panama is one of the only places in the world with three island archipelagos. Two archipelagos on the Caribbean ocean, Bocas del Toro and the San Blas islands and on the Pacific ocean, the Pearl islands and the largest island in Central America, Coiba Island, which is a designated National Marine Preserve and near to Panama city, Taboga island.
This is Executive beach, one of 7 white sand beaches on Contadora island, in the Pearl islands, 35 miles straight South of Panama city in the Pacific ocean. Contadora island has a small airport, restaurants and small hotels and is easily accessible by two daily ferry services from Panama city. The Pearl islands are beautiful and many uninhabited and rich in Spanish explorer and pirate history. Whale Watching is a popular activity here. From July to October there are many humpback whales in the Pearl islands who come to breed and give birth. In fact, we often see whales from this very beach while we are preparing to board our whale watching boats (that you can see at anchor in this picture.) There is also clear, warm tropical waters, rich in colorful fish, coral reefs, secluded beaches and it is a great area for sunbathing, swimming, big game sport fishing, relaxing and of course, whale and dolphin watching.
Bocas del Toro is a group of islands on the Caribbean side within 40 miles of the Costa Rica border. It has a very distinct flavor, compared to the rest of Panama. It was settled by many Afro-Caribbean descendants who had originally been brought to Panama to work on the canal. So it has a very Bahamas or Caribbean island influence. Many of the homes, hotels and restaurants are built out over the water. On the main island, Isla Colon, there is an airport and has a bustling town, called Bocas town, where there are many hotels, hostels, restaurants, tour companies, water taxis, bars, stores, etc. Bocas town is popular with the younger, backpacker, surfer travelers. The outer islands are quieter and more tranquil. The waters are crystal clear in most areas and are great for snorkeling, surfing, boating and fishing. Not all the islands are on the grid, so living there will require you to be a bit more adventurous with water catchment and solar power ingenuity. All islands and the mainland are easily accessible by a short water taxi ride.
The San Blas islands, also on the Caribbean ocean, East of Colon, Panama are the autonomous territory of the Guna (formerly Kuna) tribe. It is made up of 365 small islands, all with beautiful white sand beaches and coconut palms. Many have Guna families living on them or have complete Guna towns. The San Blas islands are an incredible place for a romantic get away. There are many small, Guna owned eco hotels of varying prices, from camping up to luxury cabins. The waters are crystal clear with fabulous snorkeling. There are also many sailboat charters for trips in the islands. Because it is the Guna tribe's territory, no one except a Guna tribe member may live or own property there.
Coiba island is the largest island in all of Central America. It is located on the Pacific ocean and near the Chiriqui and Veraguas provinces. It is a designated National Marine Preserve, and also a UNESCO world heritage site. It is known for its unique biodiversity, with wild monkeys, tropical birds, including scarlet macaws, crocodiles, nesting sea turtles, dolphins, whales, whale sharks and manta rays. It is a snorkeler or scuba diver's paradise. It was home to a former prison, which kept it in its pristine state. There are no real accommodations on the island, except the rustic ranger station. To visit it, the best way is to stay in nearby Santa Catalina on the mainland and take a tour to the island or a live aboard boat tour. It is not open for private or commercial real estate sales.
Taboga island is only a few miles and a short ferry ride from Panama city. It has a sweet little town, some decent beaches, although they can be quite crowded on the weekends, and some nice hikes on the island. It is known as the flower island and the French painter, Paul Gauguin stayed here, and was influenced by the tropical lifestyle here.