Friday, March 22, 2013

Cubans on the move as new real estate market grows

Cubans on the move as new real estate market grows
By Jeff Franks
HAVANA | Wed Mar 20, 2013 1:12am EDT

(Reuters) - At an informal housing market on Havana's historic Paseo del
Prado, Renaldo Belen puts the hard sell on a prospective buyer under a
tree hung with hand-lettered signs advertising homes for sale.

A house near Boyeros, the avenue to the city's airport, is being offered
for the equivalent of $120,000, with all the amenities.

"The house is beautiful, it has four bedrooms, a pool with a bar and a
fountain with a lion's head on top. Look," says Belen, pointing to
photos on the sign, "water comes out of the lion's mouth."

Pausing for dramatic effect, Belen, one of the many touts, or "runners"
working at the market, delivers what he hopes will be the coup de grace.

"This place needs no work. It is of capitalist construction," he says,
using a now frequently invoked commendation meaning it was built before
Cuba's 1959 revolution and is therefore of superior quality.

Given that "capitalist" has been a dirty word in communist-run Cuba for
the last half century, the description perhaps grates on the nerves of
Cuban leaders.

But its widespread usage is a sign of the times on the Caribbean island,
where President Raul Castro has loosened things up as he tries to
modernize the country's economy in the name of preserving the socialist
system put in place by his older brother Fidel Castro.


In November 2011, the government decreed that Cubans could buy and sell
homes for the first time since the early days of the revolution, paving
the way for a real estate market that has become an exercise in
bare-knuckled capitalism. Previously, Cubans could only do swaps - or
"permutas," in Spanish - with their houses.

"For Sale" signs are now a common sight on homes and apartments across
the country, more than 100,000 properties are posted for sale on
Internet sites and even state television has gotten in on the act,
devoting part of a daily show to sales announcements sent in by viewers.

The government last released figures on the market in September 2012
when it said 45,000 dwellings had changed hands in the first eight
months of the year, partly through sales, but mostly through "donations."

Cubans, accustomed to finding ways around heavy-handed government rules
and regulations, say many sales are disguised as donations to avoid
paying sales fees and taxes.

The new market, despite its apparent vibrancy, is still sorting itself
out and still faces hurdles. The main one is that many people are trying
to sell and few Cubans, who receive various social benefits but earn on
average the equivalent of $19 a month, have the money to buy.

"With the new law, you can sell your house, but there's no money, nobody
to buy. There's more being offered than there is demand," said retired
economist and math professor Raul Cruz, who has had his apartment in the
Vedado district on the market for five months.

Havana was once considered an architectural jewel with an eclectic mix
of colonial homes and modern Art Deco construction, but much of the city
outside the touristy Old Havana district is in a dilapidated state after
decades of neglect and corrosion from humidity and salty sea air.

A study by a Miami-based group found that asking prices range from the
equivalent of $5,000 to $1 million, with a median price range between
$25,000 and $40,000. Cuba has two currencies, the peso and the
convertible peso, the latter of which is used in most housing
transactions and is pegged one-to-one with the U.S. dollar.


What has developed is a two-tier market, the runners at Paseo del Prado
say, with Cubans mostly buying small places for between $5,000 and
$10,000 and foreigners with Cuban connections buying the more expensive

Sixty-year-old graphic designer Pepin, who did not want to give his full
name, has been trying for six months to sell his nearly century-old
Vedado home, two stories and painted blue, for $130,000.

So far almost everyone taking a look has been a foreigner or a Cuban
with family abroad providing the money, he said, and all have tried to
bargain for a lower price.

"One Chinese man, for example, offered me 80,000, but I'm not desperate
or anything. If they give me what I want, fine. If not, I'll stay here,"
he said, relaxing in a chair on his plant-enshrouded front porch.

By law, the market is open only to Cubans on the island or those living
temporarily abroad. But foreigners, including Cubans living in the
United States or other countries, are buying properties in the names of
Cuban spouses, family members or friends.

Companies with offices abroad have sprung up to cater to foreign buyers,
posting photographs and descriptions of properties across the country on
the Internet. Attempts to speak with one of them, Point2Cuba, went

The reasons foreigners buy are varied, said Emilio Morales, president of
the Havana Consulting Group in Miami.

"I have heard of people who are buying homes and turning them into
businesses," he said. "Some are looking for an investment, others doing
it for their family (in Cuba)."

The Cuban government has laid the groundwork for allowing foreigners to
buy property on the island, but only in resort developments for which
approval has been pending for years.

It could inject billions of dollars into the cash-strapped economy by
opening the real estate market to all in a new foreign investment law,
said Morales.


Information on pricing in the real estate market is sketchy, but the
general sense among Cubans is that asking prices began high and have
come down somewhat.

Most blame the drop on the supply and demand problems, while others
point the finger at another Raul Castro reform - a newly liberalized
migration law, which took effect on January 14 and makes it easier for
Cubans to go abroad.

"Prices have dropped now because there's a greater incentive after
January 14 to sell and abandon the country. Which is to say that people
hurry up and want to sell quickly," said Roberto Perez, who is trying to
sell his two-story home near the sea in Havana 's Playa district for

The prices depend on the necessity of the seller. "Someone who has a
visa (to go to another country) and has a house worth 60,000 may sell it
for 30,000," said Belen, the Paseo del Prado runner.

Selling is being driven by Cubans wanting to cash in on the sole major
asset most of them have. One of the quirks of Cuban communism is that
while most things are property of the state, the vast majority of the
country's 3.2 million homes are owned by the people living in them.

"This is one of the things that gave longevity to the Revolution. They
have something that most people in Latin America don't have and wish
for," said Miami lawyer Antonio Zamora, a Cuban American who visits the
island frequently.

While some sellers want to sell so they can leave, many simply want the
money so they can live better in Cuba. Most said they would use part of
the money to buy a smaller house, then live off the rest or use it to
open a business.

Need and the low economic standards on the island have created some
incredible bargains for people accustomed to paying high housing prices
in other countries.

One woman, who did not want to give her name or the location of her
residence, said she had recently sold the six-bedroom penthouse with a
sweeping sea view she shared with several family members for the
equivalent of $130,000. The buyer was a European with a Cuban spouse.

"I know it's going to be worth a lot more in 10 years but everybody in
the family wanted the money now. When we were moving out, a man came
running up and told me he would give me 50,000 more than whatever the
sale price was, but we had already signed the contract," she said with a

Zamora, the Miami lawyer, predicted that Cuba would one day be a big
market for Cuban Americas retirees.

"This is going to be huge," he said, noting that Cuba has low crime and
health costs, as well as good airport connections to the United States
and a well developed money transfer industry for remittances.

"$750 in social security in the U.S. is nothing here in Miami but it can
go a long way in Cuba," he said.

(Additional reporting by Nelson Acosta and Rosa Tania Valdes in Havana
and David Adams in Miami; Editing by David Adams and Claudia Parsons)

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