Cuba’s Real Estate Market – Buyer Beware – Part II

VILLA CLARA - 65,000 CUC

VILLA CLARA – 65,000 CUC

Raul’s change in real estate policy is certainly a step forward. Billions of dollars of valuable real estate holdings that have never been valued or been for sale in an open market are now for sale. Like the country’s infrastructure, the country’s housing is in terrible shape. Leaky roofs, inconsistent plumbing and electrical systems and rotted stairways typify the housing scene. Without building materials to repair damage, the state of Cuba’s housing continues to deteriorate.

Escambray - 100,000 CUC

Escambray – 100,000 CUC

Trying to understand what property is worth in a market that regards real estate agents as outlaws and views the payment of commissions as illegal is certainly challenging. There is supply, a lot of it, and there is demand, an amazing amount of that too, but there are no legal agents, no central listing service and no legitimate tracking mechanism for selling prices.

Havana Estate - 300,000 CUC

Havana Estate – 300,000 CUC

And, here is another surprise. If you seek legal advice from a property attorney, good luck. In Cuba, property lawyers are like real estate agents, another brand of outlaw.

Matanzas - 150,000 CUC

Matanzas – 150,000 CUC

Oh, and did we mention that central computer systems where photographs of homes that may or may not be on the market are either not in existence or do not paint the whole picture of any one community. It is fair to say that Cuba’s real estate market resembles the Wild West. But, let’s be clear, business is being transacted.

Miramar

Fidel’s brief “flirtation” with a market approach to real estate has left a few properties in Havana as “pre-existing, non-conforming properties” that can be purchased by non-Cubans. Today, any other purchase can only be achieved by Cubans or “full-time” residents. With Cubans unable to afford homes in a marketplace void of mortgage lenders, they invariably turn to Cubans living abroad to provide funding. Many Miami-based and US-based Cubans end up financing native family members. It is difficult to know who the buyer and owner really are but that is not unique to Cuba. The bottom line is there are essentially three markets; one for foreigners, one for Cubans with family backing from abroad and one for Cubans with no external backing.

Camaguey -  28,000 CUC

Camaguey – 28,000 CUC

So, how does a Cuban resident with an average annual wage of $240.00 purchase real property in a country without a mortgage industry? And, how are new homes built when existing homes are falling down and new construction materials are virtually impossible to get?

Miramar - 1,500,000 CUC

Miramar – 1,500,000 CUC

As mentioned, the Cuban real estate market is multi-tiered. Cubans are buying and trading properties valued at less than $10,000 while foreigners and Cubans living abroad are participating in a market where prices are significantly greater than $10,000. In fact, in the pre-existing, non-conforming areas, foreigners are paying prices comparable to US property prices, up to and exceeding $2.5 million.

SIBONEY - 125,000 CUC

SIBONEY – 125,000 CUC

Cubans living away from Cuba buy for their extended families. Foreigners married to Cubans also are buying and foreigners are buying outright in areas where foreigners are permitted to buy. This is certainly progress but again is it real?

Holguin - 12 000 CUC

Holguin – 12 000 CUC

If you are confused, it is okay. Markets tend to sort themselves out. Accept that asking prices are just asking prices, not based on previous sales or sales of comparable properties but usually more a reflection of what the seller would like to receive.

Some Cuban real estate stories are pretty unnerving. One Dutch investor bought a home for his Cuban girlfriend only to find that when she had title to the suburban $400,000 home he was no longer her boyfriend. Now, her family and extended family reside in the residence and he is persona non grata. Stories like this give new meaning to the term; “let the buyer beware.”

point-2-cuba-back-yard_thumb

As for new construction of residential homes, startups and completions are slowing since a surge in 2008. This reality is described in a report from Sergio Diaz-Briquest, a US-based demographer, who says Cuba’s housing deficit is somewhere between 600,000 and 1 million residences and widening every year as more existing homes become uninhabitable.

Vedado - 5 Bdrm, 5 Batch - 220,000 CUC

Vedado – 5 Bdrm, 5 Batch – 220,000 CUC

But, make no mistake about it, for many investors, Cuba’s real estate has tremendous appeal. The sun, the amazing wildlife, the history, the culture and the potential have undeniable appeal. But, conservative investors remain cautious about Raul’s ability to navigate privatization in a country that is short of everything except rhetoric.

Santa Maria - 150,000 CUC

Santa Maria – 150,000 CUC

In 2008, Cuba’s Office of Statistics reported that new housing starts totaled 44,775. In 2011, new starts totaled 32,540. In 2012, 32,104 new homes were completed. By October 2013, only 18,000, new homes were underway for the year. The lack of housing for natives just keeps widening.

Pinar del Rio - 300,000 CUC

Pinar del Rio – 300,000 CUC

According to the National Statistics Office, 45,000 homes were sold in 2012. Illegal agents who pose as photographers in order to post listings for sale, which is legal, and who show properties for sale, which is not legal, say the real number of sales is closer to 100,000.

GUANTÁNAMO - 5,500 CUC

GUANTÁNAMO – 5,500 CUC

There are a number of schemes used to mask selling prices and deny the government its 4 percent tax from every buyer and every seller and there are a number of schemes to disguise who the actual buyer is. Prices for sold homes range from below $10,000 to over $2 million. In 2013, the average selling price was believed to be $16,000 but most non-agents would say the average sale was significantly higher. Here’s another interesting fact. If one is caught lying about the selling price, the crime is punishable by prison time.

House for Sale Havana Playa VHPLSD01

It is worth noting that Raul also legalized the used car marketplace. However, it against the law to open a business dedicated to selling used cars. This seems to be how privatization of Cuba will come about, in baby steps without sweeping reforms. Until agents are legal and property attorneys are permitted to provide valuable services and a central selling price tracking network is in place, Cuba’s real estate market will continue to resemble the Wild West. Let the buyer beware!

4 Readers Commented

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  1. Hiroyuki Daini on December 27, 2014

    Dear Sir

    Can we foreigner buy properties in Cuba?
    Can we pay by bank mortgage loan?
    Please send me some example case to buy land and building.
    (Budget less than 100,000 USD)

    Hiroyuki Daini

    • Dave Oberting on February 3, 2015

      Hi Daini:

      Foreignors can buy property in Cuba. However, there are no mortgages available at this time. This should change in the coming years. Send me an email at Info@TravelGuideCuba.com for more details.

      Best,
      Dave

  2. Sherry on June 9, 2015

    Can canadians buy a apt in moron ciego de avila cuba
    If so can you tell me how it works for us canadians ty

    • Dave on June 11, 2015

      At this point we do not think it is possible for Canadians to buy and apartment there. There are Apartments in Havana that foreigners can buy but the supply is limited and they are at least twice as expensive as the apartments of similar construction that Cuban nationals can buy.

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