Cuba’s Real Estate Market

By Fernando Ravsberg

For Sale or Exchange

HAVANA TIMES — A short while ago, I read an article on CNN-Expansion where it was suggested that “with its rapprochement with the United States, Cuba should learn to develop a housing market ecosystem which would overcome the years of zero construction and attract investment.”

It frightened me because the famous “real estate market” was precisely the one that almost sunk the US and European economies, when it took advantage of the “housing bubble” which had increased the value of homes to levels which were no longer in the reach of the large majority of the population.

I remember that just before the crisis, prices had increased so much that Spanish banks were studying the possibility of creating a 70 year mortgage, that is to say that you would buy a house and leave its debt as “inheritance” to your children.

The economy can’t function without the market but giving it free reign in certain areas can bring about lethal consequences. This is what happens when the human right to having a home becomes a product to make profit.

Legalizing the buying and selling of homes in Cuba was a positive step which made people’s lives easier, avoiding illegal transactions which used to be made under the guise of exchange, inheritance, fake marriages and countless tricks.

Private real estate companies have popped up in order to “facilitate” this buying and selling, but in reality all they are are third parties who increase the price of a house by 5% to 10%, for doing the job any newspaper ad could do perfectly well.

Property speculation in Cuba can have disastrous effects in a country where there are real shortages and where half of the existing housing stock is in a poor or average state. Photo: Raquel Perez Diaz

These agencies not only make the house more expensive, they also have all the contacts they need to go through any legal loophole they need to. Foreigners are now buying property through these agencies and are investing money into the island in this way.

This influx of foreign capital, which is willing to pay more on the condition they can launder their wealth, is also encouraging an increase in prices. A process which was already on the horizon ever since Cuban emigres began to invest in the country.

The difference here is that Cubans, rich or poor, residents or emigres, are a part of this country and have the right to buy a house in line with their financial means. If this creates a little bit of inflation then the country will have to learn to live with it.

The danger is that Cuba will fall into the international housing circuit, with all of the flaws of this sector: unpayable mortgages, toxic assets, money laundering, price bubbles or buying property as a simple means to invest.

For example, in Spain, there came a time when there were 3 million empty houses, bought just for speculation, and they kept on building like crazy until one day it all came crashing down. Then the banks began to throw thousands of families out of their homes.

Some people tried to stop these evictions, others silently resigned themselves to their fate and quite a few of them killed themselves. In Barcelona, the group created to fight against the evacuations became so big that its leader, Ada Colau, was elected and is now the city’s Mayor.

In this film, the suicidal maneuvers which the US housing market took and the terrible consequences this had for ordinary people can be clearly seen.

In the US, hundreds of thousands of families lost their houses. The film “The Big Short” reflects what happened. It’s the true story about some investors who discovered the housing market’s feet of clay and earned billions when it collapsed.

The good part of coming to the market late is that Cuba can study other people’s mistakes so as not to repeat them. A necessary reform such as approving the buying and selling of homes could revert to becoming another crisis if it isn’t properly regulated.

Now that there is a real estate mogul as the US president, I’m sure he will push Cuba to open itself up to this market, pretentiously called an “ecosystem”, as if it was something that Nature herself created.

In order to prevent property speculation in this country, it’s of the utmost importance that regulation laws and strict controls are created. Treating it as essencial social property for life, it should “protect itself” against speculators who are only looking to make quick profits no matter what the cost.

5 thoughts on “Cuba’s Real Estate Market

  • The poor are going to get screwed either way. So what else is new?

  • Houses in Mirimar and Siboney AW1021 have sold for hundreds of thousands of dollars. The average Cuban cannot even dream of living there, No doubt Fidel Castro’s five house complex with tennis court and swimming pool would be valued in the millions. How much his two island retreat of Cayo Piedra would sell for is a matter of conjecture – but obviously millions. to take a look at the Siboney property Google Earth 5 ta D Havana.
    Where we live in Cuba, prices vary from 8,000 to 15,000 CUC, but few sell as there are so few Cubans able to afford those prices when only having incomes averaging the equivalent of 21 CUC per month.
    There are even more poor outside Havana than within it.
    The ‘rich’ who buy in Mirimar and Siboney are usually funded by relatives in other countries particularly the US, who are hoping that the Communist regime’s days are numbered.

  • “saved” a market for who moses? the rich? this type of speculation rarely benefits the poor, of which there are plenty in havana. and i doubt the “forces of supply and demand” will work “just fine” for them.

  • Only Cubans can own property in Cuba with the exception of foreigners who have legal permanent residence. There are no “tourists” buying property. I did not suggest that foreign capital should be a driving force in reinvigorating Cuba’s housing stock. I am suggesting that foreign capital should not be excluded. I agree that foreign investment in business should be a priority. I also agree that there are abuses taking place in Cuban real estate transactions. Finally, there are numerous examples around the world where foreign capital “saved” a local real estate market. In Miami, Brazilian and Venezuelan buyers buoyed the market during the worst period of the recent economic recession in real estate. Likewise, Russian buyers in New York. Saudi money flooded the Los Angeles market. Paris, London and San Francisco saw a huge investment from Chinese buyers. What I am suggesting is very common.

  • Be careful what you wish for Fernando. Government oversight and regulation is what is wrong with Cuba today. The forces of supply and demand will work just fine. To the extent outside investors begin to purchase Cuban real estate for purely speculative purposes, some limits on who can purchase real estate may be necessary but should be applied carefully. It is foreign capital that is exactly what Cuba needs. The best protection against Cuban nationals being priced out of the market is growing the economy and therefore the economic well-being of Cubans. Fernando writes that Cuba, as a latecomer to the market, has the advantage of learning from the mistakes of others. Likewise, Cuba has the ability to repeat what other countries have done correctly as well.

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