Sunday, June 23, 2013

Cuba, home of the world’s oddest property market

June 21, 2013 5:02 pm

Cuba, home of the world's oddest property market
By John Arlidge

The country is finally allowing its people to buy and sell homes but
property lawyers and agents are still illegal
It's only 9am but it's already 33C on the Malecón, Havana's corniche,
and my brain feels like a conch fritter. I've come to meet a man who we
will call Rafael – because that's his name. But that's the only part of
his name he is prepared to reveal. Rafael is an estate agent but he does
not want anyone to know it. "Being an estate agent is illegal here," he
Rafael, 44, wants to show me a penthouse for sale. He says it is worth
$2.5m but no one, not even he, really knows the right price because no
one has bought or sold houses here for 54 years. "The market changes
wildly every day. It's emotional," he smiles.
If we do agree a price, Rafael will advise me not to buy the penthouse
in the normal way. Instead, to avoid tax, I should pay him a nominal
amount locally, say 20 per cent, and "deposit the rest in an account in
Spain, please". I must not talk about the true price because, under new
laws, anyone caught lying about the price of property goes to prison.
Also, I must not reveal the name of the lawyer who does the paperwork
because working as a private property lawyer is illegal.
Undercover estate agents? A legal system that is illegal? Jail for lying
about house prices – which everyone the world over does? Welcome to the
oddest property market in the world. Welcome to Cuba.

Half a century after Fidel Castro's government expropriated all private
property, the sunshine socialist state is up for sale – in part. Raúl
Castro, who took over as president from his ailing brother in 2008, has
introduced new laws that allow Cubans to buy and sell homes. Billions of
dollars in property assets that have been frozen in place and time,
unvalued or undervalued, are now up for grabs.
Raúl Castro's move is the latest – and boldest – step in a slow economic
liberalisation programme designed to generate economic growth. Cuba
desperately needs new sources of revenue. It is only kept afloat thanks
to cheap oil, and other subsidies worth $5bn a year from its ideological
ally, Venezuela. The subsidy deal was agreed by Fidel Castro and former
Venezuelan president Hugo Chávez, who died in March. If Venezuela's new
president, Nicolás Maduro, renegotiates the agreement – and many
analysts say that, with Venezuela's economy slumping, he has no choice –
Cuba will grind to a halt.
After half a century in which they could only swap houses in a creaky,
bureaucratic and often corrupt state-run process known as permuta
(exchange), which involved finding two properties of roughly equal value
and then getting state approval to transfer the title, Cubans are
relishing their new-found economic freedom.

First-in-a-lifetime buyer Guillermo Rey stands next to the scruffy
portico of a four-bedroom, three-bathroom house in Vedado, Havana's most
high-end, fashionable district. The price, says the owner Rosa Marin, is
350,000 CUC, or convertible pesos, Cuba's hard currency, which is
roughly equivalent in value to the US dollar. She is selling because she
wants to move into a smaller property "and buy my daughter a car, a good
one, a Lada".

It is a scene repeated all over Havana. The market is growing so fast
that queues form outside the tumbledown offices of Cubisima, a
Havana-based property sales website. "Every day we get more people
looking to sell and more people looking to buy," Mayelin Aguilar tells
me as she keys the latest listings into her bulky Russian-built desktop
computer – so old it still runs Windows 95.
The tree-lined Prado is polka-dotted with estate agents, their listings
written in longhand in school exercise books. Their commission? A
whopping 5 per cent – if, that is, the buyer pays up. With estate agency
not on the approved list of private businesses Cubans can now set up,
buyers know agents have no recourse to law, so many simply refuse to
pay. "I'm lucky if I get commission for one deal in five," says one agent.
Some 45,000 homes were sold in 2012, according to Cuba's National
Statistics Office. Observers say informal deals take that number to
almost 100,000. Prices range from $10,000 for a small, run-down flat in
Old Havana to $500,000 for villas in sought-after districts, such as
Siboney and Miramar, and more than $2m for penthouses in modern blocks.
The average price last year was just $16,000. The Cuban on the calle is
still desperately poor.

This being Cuba, the conditions surrounding home sales are complicated
and, occasionally, bonkers. The law says that only Cubans and permanent
residents can buy and sell property and they must limit themselves to
one main residence and, if they have the money, one holiday home. Raúl
Castro does not want Cubans to become property barons.
Nor does he want to encourage armies of foreign investors, especially
the many arch-critics of the regime, to descend on Havana and buy it up,
block by block. But, thanks to an early flirtation with capitalism 20
years ago, there are a few apartment buildings in Havana where
foreigners can buy. The best are in the Atlantic Building, a 25-storey
tower on the Malecón, where Rafael shows me the penthouse he says is
worth $2.5m. Few want to say so publicly but some are being snapped up
by Miami-based Cubans, via local relatives, making it difficult to
divine whether the émigré Cuban or the relative is the real buyer.
President Barack Obama recently relaxed the restrictions on foreign
remittances from Cubans living in the US. Up to $5bn a year now flows
into Havana and much of it ends up in bricks and mortar.

Other overseas investors get around the restrictions by giving money to
a Cuban friend, or more often, girlfriend, to buy a property – although,
when the deal is completed, some swiftly discover that their girlfriend
is no longer their girlfriend. "I took a risk and it failed," sighs one
Dutch-born investor, whose $400,000 "home" in the fashionable Kholy
western suburbs is now home to his former girlfriend and her extended
family who cannot believe their luck – and his naivety.
Tax is troublesome, too. Both sellers and buyers must pay 4 per cent but
most disguise the value of deals to reduce the liability. Raúl Castro's
dream of generating much-needed tax revenue from home sales is, so far,
a forlorn hope.
But he might have an ace up his linen guayabera shirt – or, rather,
130km down the cracked highway from Havana in Varadero. It is Cuba's
"touristic zone", a ghetto of white sand and whiter westerners, who sip
mojitos and snap up Che Guevara T-shirts without bothering to wonder
what Che would make of them splurging their Yankee dollars on a swanky
beach holiday.
"This is where the £1.5m villas will be. And, over here, right next to
an 18-hole golf course, is where the country club will be," says Andrew
Macdonald, striding across the scrub in canary yellow shorts. The
Scots-born entrepreneur runs Esencia, an Anglo-Cuban firm, that wants to
build Cuba's first new golf course since the revolution, with 800 homes
available for foreigners to buy.

He has signed up some big names to build the $350m development at
Carbonera, near Varadero. Sir Terence Conran will design the homes.
Adrian Zecha, founder of Aman resorts, is in charge of the
country-club-cum-hotel and spa. Golf champion Tony Jacklin will help
design the golf course. "Cuba is the top emerging tourism market in the
Caribbean by a mile, and it's in the top five emerging markets
globally," Macdonald says. "It's a long slog getting stuff done but the
potential is huge."
"Slog" hardly does justice to the tortuous process he has had to undergo
to get this far, and which has cost him $3m on feasibility studies. He
began negotiations in 2006 and each year the government has said it will
approve the venture. But each year then becomes next year. Manuel
Marrero, Cuba's minister of tourism, says the deal has finally been
approved in cabinet but Macdonald still does not have the formal
sign-off he craves.

If and when Macdonald, 47, does get the formal go-ahead, it will mark
the end of Cuba's bunker mentality when it comes to golf. Fidel Castro
declared golf "incompatible with the glorious revolution" and ordered
Cuba's courses to be put to less "bourgeois" use. Today, one of them
lies abandoned just outside Havana; another is a military special forces
training ground; and a third forms the rolling lawns of a city's arts
Macdonald wants to build 150 colonial-style oceanfront villas and 670
apartments. Prices for the apartments will start from $2,700 per sq
metre and range from 75-140 sq metres. The villas will cost $3,750 per
sq metre and range from 350-600 sq metres. Six-hundred investors have
registered an interest, Macdonald says. Buyers will have what passes for
freehold title under Cuba's nascent property laws, and will be able to
rent out their property.
Cuba has retained the original Spanish, pre-revolutionary land registry
and Macdonald says it shows that no overseas parties have a claim on the
land at Carbonera. Tens of thousands of exiled Cubans, who left the
country after the revolution, still claim rights over properties. On a
bluff just along the coast from Carbonera stands the DuPont villa, the
former vacation home of the wealthy US chemicals family. It is now a
government-run guest house.

Investing in Cuba is only for the most steely-nerved. Not only is there
the vexed question of potential claims on properties from exiled Cubans,
the Cuban government has a long, ignominious history of first
encouraging and then choking off economic liberalisation. It relaxed
restrictions on home sales 15 years ago, only to reverse the policy a
few years later.
This time, however, observers say Raúl Castro, who is more pragmatic and
less ideological than his older brother, is unlikely to do a U-turn. One
western business leader, who has set up a financial services consultancy
in Havana, says: "Cuba is bankrupt. Ministers may not like it but they
know the only way to balance the books is to encourage the local market
and to allow overseas investors to build homes and golf courses and
maybe eventually buy villas in Havana."
That would be good news for Rafael. The more the market expands, the
sooner he hopes the government will legalise his profession. "That way,"
he smiles, "the next time you come into Cuba, I can tell you my name."
For details of Carbonera, visit
For details of apartments to buy and villas and apartments to rent,
visit and Havana Concierge at

Source: "Cuba, home of the world's oddest property market -" -

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