CubaNews / November 2011
By Larry Luxner
For the first time since Fidel Castro’s 1959 Revolution, ordinary Cuban citizens and foreigners who reside legally in Cuba will be able to buy and sell property — thanks to the island’s new Ley de la Vivienda (Housing Law) which took effect Nov. 10.
Officially known as Decreto Ley #288, the new regulation promises to spark a brand-new real-estate market throughout Cuba — with listings on a Craigslist-style website already mushrooming and prices for single-family homes ranging from the tens of thousands of dollars up to $1 million.
“This affects virtually everyone,” said Cuba analyst Phil Peters of the Lexington Institute.
“I think it’s much more important than cellphones or hotel stays or computers or DVDs. This is something that creates wealth and options for hundreds of thousands of Cuban families. They get title to their homes. Overnight, it vastly increases the value of their assets.”
Peters told CubaNews that “it’s also important because it’s a sign from the government that it’s willing to allow a very large amount of economic activity that didn’t exist before, and a market in which foreign capital from Cubans abroad will play a very significant role.”
Under the law, Cubans will be limited to owning a maximum of two homes each, with one being designated a “holiday home.”
A stamp duty of 4% will be charged to both the buyer and the seller, with the buyer having to submit proof that the source of any funds is through legitimate means.
Given that average state income is about $20 a month, some may struggle to explain where the money to purchase property worth several thousands of dollars comes from.
As The Guardian reported, “the reality is that most of the money will come from abroad, largely from Cuban relatives in the U.S. Once branded gusanos by Fidel’s government, Cuban-Americans are increasingly providing a vital source of hard currency for the island.”
However, the new, legal market will not be unrestricted. Foreigners, apart from those who have permanently emigrated from Cuba, will not be allowed to buy property. (The Cuban government is still considering a separate scheme that would allow foreigners to buy new-build houses around proposed golf and beach resorts. It’s not entirely clear how this will work; stay tuned for details).
The law was first announced in August. At that time, Cuban officials made clear that this reform would take effect before year’s end.
“One can guess that a lot of people in Cuba who have title to property that’s bigger than their needs,” Peters said. “Many of them will consider selling. Others have properties in extremely attractive locations, and some will be tempted, for example, to sell a two-bedroom apartment on the Malecón and use the proceeds to buy a larger place in Marianao. The market will shake out in a number of ways, and prices will settle not simply based on local demand and purchasing power, but al-so based on demand driven by Cubans living outside of Cuba and the money they send.”
Antonio Zamora, a Miami attorney, real-estate expert and part-owner of CubaNews, says he expects the law to spark the development of a real-estate industry complete with brokers, mortgages and appraisers.
Construction will take off, Zamora predicts, along with a proliferation of paladares (private restaurants) and bed-and-breakfasts.
“There’s been a tremendous rush in Cuba to register titles,” he said, noting that 85% of Cubans own their own homes — the highest percentage in the Western Hemisphere.
“Before, people didn’t put any value on their real estate because they believed that nobody was going to take it away from them. And secondly, it didn’t have any value, even though a law was passed in 1996 requiring people to register their titles. But very few people did.”
Zamora added: “There is also a tremendous amount of money going from Miami to people in Cuba to fix up their houses, expand them, add a couple of rooms, do a second floor.
“People are looking at the possibility of a second home, which has been permissible for a long time,” he told CubaNews. “Imagine you have maybe three million houses in Cuba that were worth next to nothing because you couldn’t do anything with them. Now, they’ll be worth $40,000 to $50,000 each.”