Cuba’s Real Estate Market

By Fernando Ravsberg

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.

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 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.