Emilio Morales* (Café Fuerte

A real estate broker advertises homes with cardboard signs on the Paseo del Prado promenade.
A real estate broker advertises homes with handwritten signs on the Paseo del Prado promenade. Photo: cafefuerte.com

HAVANA TIMES —When, at the close of 2011, after more than fifty years of restrictions, the Cuban government opened the Pandora’s box of Cuba’s real estate market, many experts predicted that the country would experience a veritable boom in home sales and purchases. Rather than a mad spiral of sales, however, this incipient and atypical market has given rise to a speculative phenomenon.

There are approximately 3.3 million homes in Cuba (houses and apartments), 57% of which are in poor condition. The country’s current household deficit exceeds that of 700 thousand homes. This rather dilapidated real estate panorama is coupled with the highly limited average purchasing power of Cubans who are dependent on their State salary, which is about 20 Cuban Convertible Pesos (CUCs) a month. (One CUC equals around 1.10 USD).

At first glance, the development of a real estate market with so few charms strikes one as a pipe-dream as delirious as the 10-million-ton sugarcane harvest of 1970. However, for the first time in 50 years, Cubans feel that they have finally come into possession of a financial asset: their own homes.

An Ads Epidemic

The right to sell a house or apartment and to freely establish its price has unleashed a veritable epidemic of on-line ads. Currently, over 100,000 houses are advertised in different web-sites and portals. It is worth pointing out that, even though Internet access is a privilege enjoyed by some State institutions and not the population in general, Cubans still manage to publish such ads.

What is most striking about these is that the majority of sellers lack the basic knowledge required to objectively evaluate their house and establish a price that is in accordance with its structural condition.

There is no real estate institution, in Cuba, which provides home sellers with a tool or formula that could help them calculate a price on the basis of the characteristics of the home. This explains why the advertised prices, in most cases, are extremely high and far from appealing.

How did this phenomenon come about?

Conservative Deregulation

To begin with, the deregulation of the real estate market, which the Cuban government undertook nearly two years ago, has proven extremely conservative and limited. Cuban citizens are entitled to a single home within city limits and to an additional property in a tourist area. According to the new Housing Law, Cubans living abroad or foreigners interested in settling on the island – the group of potential buyers with the greatest purchasing power today – may not legally purchase property.

We are witnessing the growth of a market whose sellers are still completely inexperienced in the valuation and sale of real estate. The fact most Cubans have no real sense of what household maintenance entails has a big say in the way a price is established and how the sale of a property is negotiated.

The limited purchasing power of the population – a condition which has not changed significantly in over fifty years – has turned entire cities into veritable ruins, and most have no notion of what it means to maintain a house in optimal or at least presentable condition, from a structural and aesthetic perspective.

In addition to this, because of the pressing material needs which the population has accumulated in the course of so many years, many a Cuban is desperate to obtain a considerable sum of money in the quickest way the law allows. This is a psychological factor which has turned Cuba’s real estate market into a highly speculative realm.

Inflated Prices

Many home sellers set a price for their properties without taking into account the major repairs that these households require, repairs which, in some cases, are valued at 50 percent of the established sale price. For instance, a four-bedroom, two-bathroom house located in Havana’s municipality of 10 de Octubre, valued at 60,000 CUCs, may require repairs of up to 30,000 CUCs. Thus, the buyer would ultimately have to pay 90,000 CUC to come into possession of a house in optimal condition.

The real value of the property, to use this same example, is probably 30,000 CUC. The initial sale price, thus, is inflated by 50 percent.

One of the greatest challenges faced by this nascent market is the re-education of sellers in real estate valuations and sales. The workings of the market itself will no doubt impel this process, gradually adjusting prices to real market conditions, but this transformation will require time and a series of conditions to become stabilized.

A recent study conducted by the Havana Consulting Group reveals the drastic disparity between the high average prices caught sight of in Cuba’s fledgling real estate market and the modest purchasing power of the population. The random sample selected comprised 1,094 homes and encompassed six of the country’s 15 provinces.

Province          Average Price (CUC)          Number surveyed

Havana             38,849.00                                                   763
Artemisa          24,033.00                                                     57
Camaguey       25,764.00                                                   100
Villa Clara        27,432.00                                                     50
Matanzas         44,731.00                                                      88
Cienfuegos      29,450.00                                                     36

Total                  31,709.83                                               1,094

As can be appreciated above, the average real estate property price in the nationwide sample was of 31,709.83 CUCs, a very high figure when compared to the flimsy purchasing power afforded by the average Cuban salary: 455 regular Cuban pesos (equal to under 20 CUCs) a month.

In some municipalities located in the province of La Habana, which reports the country’s highest purchasing power, the average real estate price exceeds that of 50,000 CUCs, as is the case in the municipalities of Playa and Plaza. The most expensive homes in the entire country, in fact, valued at 59,191 and 52,050 CUCs, respectively, are located in these two neighborhoods in Havana.

At the municipal level, the prices registered for the province of La Habana by the Havana Consulting Group study were the following:

Havana Municipalities     Average Price      Number surveyed

Playa                                           59,191                           64
Plaza                                           52,050                        171
10 de Octubre                           29,218                           66
Boyeros                                     36,985                         149
Cerro                                          30,162                         122
La Lisa                                       26,609                           49
Old Havana                               25,189                           43
Habana del Este                      37,845                           89
Arroyo Naranjo                        34,556                            10

Total                                                                                   763

Who, then, are the people currently selling and purchasing homes in Cuba?

The transfer of property titles for as many as 45,000 homes was reported a year after Cuba’s real estate sale and purchase law came into effect.

The study conducted was able to identify a number of groups of sellers with different economic needs and possibilities. The main ones are:

  • People who are leaving the country and availing themselves of the opportunity to sell their homes, so as to emigrate with a sum of money that will afford them a financial base on which to start a new life elsewhere.
  • People who have found an incipient niche in the real estate market, where they can purchase property, repair it and sell it.
  • People who live in large homes and are looking to secure a sum money that will allow them to live more comfortably, by selling their current home, purchasing a smaller property, and pocketing the difference.
  • People who own a large house in poor condition and do not have the money needed to repair it, who choose to sell it and secure a sum that will allow them to purchase a smaller house in better conditions and, perhaps, walk away with some money with which they can address material needs they’ve been unable to satisfy for many years.
  • People in need of capital to open a private business, who have no other means of securing the money.

The following groups of buyers were identified by the study:

  • People who have relatives living abroad, who have the money to invest in a business venture.
  • Cubans living abroad who want to invest in real estate in Cuba, thinking about possibilities in the country over the next 10 to 15 years.
  • People who have relatives abroad willing to help them with their housing situation.
  • Cubans who participate in official government work programs abroad and return to Cuba with enough money to purchase a house (athletes, health professionals, actors, diplomats, etc.).
  • Cubans residing abroad who want to invest in a business venture on the island, with a relative or friend.
  • Foreigners who want to invest in a restaurant or a home rental business aimed at tourists, purchase a summer house they can use when they travel to Cuba, or simply invest in the real estate sector with a view to securing profits in a post-Castro Cuba.

The conditions that would allow Cuba’s real estate market to develop in a sustainable fashion, however, do not yet exist in Cuba.

Current limitations in this connection include the limited purchasing power of the population and the next to inexistent participation of the private sector in the construction of new real estate.

Building is Key

Building new houses and ensuring properties are available for rent or purchase is one of the conditions needed to develop Cuba’s real estate sector dynamically. Without this, the country is unlikely to experience a sales boom in the sector.

In other words, if Juan sells his home, Juan needs to buy or rent a house where he can live. In Cuba, there is no apartment or house rental market a person can resort to after selling their house. Everything is resolved through the by now well-known and messy house-swapping (permuta) market.

The construction of homes by the private sector is an indispensable step towards a dynamic real estate market in Cuba. Hundreds of thousands of people could be employed by such initiatives, including construction professionals such as architects, civil, hydraulic and electrical engineers, carpenters, bricklayers, plumbers and others.

The Crucial Link

The production of building materials by private sector industries is also a crucial step that can no longer be postponed. Without this link, the house production chain will not break out of its current stagnation.

A banking institution capable of financing mortgages in the real estate market is also of the utmost importance. In Cuba, there are no financing plans and the full value of the property is paid in one cash installment. No real estate market on the planet can hope to develop without a monetary support that allows buyers to finance their mortgages. There is no other market in the world where homes are purchased with a single cash payment.

If the Cuban government were able to introduce these changes in the short term, Cuba’s real estate market would experience a 180 degree turn and would become immensely attractive for potential buyers. If not, the speculative illusion experienced in this market today will soon become a boom in stagnant boredom.

(*) Cuban economist. Former head of strategic planning and marketing for Cuba’s CIMEX corporation and author of the books “Cuba: A Silent Transition to Capitalism?” (Cuba: ¿tránsito silencioso al capitalismo?) and “Marketing without Advertising, Brand Preference and Consumer Choice in Cuba.” He is the current president of the Havana Consulting Group, based in Miami.

21 thoughts on “Cuba’s Real Estate Market: Booming Speculation

  • July 15, 2014 at 10:49 am

    Correction: In the example in the article, if the house is worth 30,000 and is listed at 60,000, its price is inflated by 100%, not the 50% stated in the article. A 50% inflation would equal 15,000, making the price 45,000.

  • June 8, 2013 at 8:55 pm

    From the article:

    if Juan sells his home, Juan needs to buy or rent a house where he can live. In Cuba, there is no apartment or house rental market a person can resort to after selling their house.


    In Cuba, there are no financing plans and the full value of the property is paid in one cash installment.
    There is no other market in the world where homes are purchased with a single cash payment.

    This sounds like the optimal system to me. It is needs based & any sales must be paid for in full by the sale of the old place. Nothing down speculators can take a hike. Jee. Give the system a try, if you think you’ve got an angle; come on! The only difference is that in Cuba, you need your “skin” in the game.

    The only downside is the same as in any other country that warps personal housing into asset ownership: A fool & his assets are soon parted. It would be nice if there was an outcry for mortgage capitalization. Then Roul could flood the banks with fake credit & milk the population just like Bernanke & his cronies. Roul might as well do the ca$h grab if it is a publically supported one. Better than real estate profiteers. I think he’s learning from the enemy & their brainwashed lemmings.

  • May 17, 2013 at 3:45 am

    This post is really good.
    Thanks Posting……..DLF My Town

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