Interesting Analysis of the Cuban Real Estate Market

[Nino]

I have long ( or rather short ) discussions with Cuban friends where I point out that, provided political, financial and property stability, many foreigners would buy real estate there and spend 4-6 months on the island bringing income and benefitting the economy - they all agree but despair at the slow pace of the reforms, for themselves and for foreigners.

A year after Cuba passed a "new" legislation on buying & selling of property in Cuba, here's a very lucid analysis of the outlook.

For the complete article, please see :

http://www.cubastandard.com/2012/12/13/analysis-cubas-new-real-property-rights-%E2%80%94-one-year-later/

But at this slow pace, it is Myanmar (Burma, as I still prefer to call it), and not Cuba, that is staking a claim to become the newest attraction for serious real estate investors. A recent visit by President Barack Obama reinforces that perception — and should invite us to wonder why a presidential trip to Cuba remain inconceivable when a visit to a still authoritarian regime that is slowly emerging from behind its bamboo curtain is kosher. But I am digressing, and probably inviting the usual shower of claptrap that passes for an explanation of this absurdity.

And I am not suggesting that we Cubans should seek any guidance in Burma’s transition. Looking for a game plan for post-Castro Cuba in the experiences of people who hardly resemble the Cuban people (be they Hungarians, Estonians, or now Burmese) has long been a staple of that uniquely Miamian science known as ‘Cubanology.’ I have always thought that perhaps the only people whose ‘transition’ from an authoritarian system into a democratic one merits a closer look by all Cubans is the Spanish people, whose idiosyncrasy, for better of for worse, truly matches ours. And I still do.

But when it comes to nurturing and developing a healthy real estate market, the hyper-leveraged Spanish model and the Spanish people’s most recent experiences with it would probably scare most Cubans used to taking their housing for granted and understanding the right to housing as protected under existing international human rights law (see Article 25(a) of the 1948 Universal Declaration of Human Rights and the first paragraph of Article 11 of the 1966 International Covenant on Economic, Social and Cultural Rights). What with people jumping from balconies to avoid eviction, while foreigners are being offered legal residence in Spain if they buy a little piece of the huge unsold real estate inventory widely scattered over the landscape of Spain’s financial crisis.

And the rain in Spain falls mainly from clouds that originally gathered over our own American plains. So when we talk about the Spanish model for a real estate market, we are talking about our U.S. model. For Miamians, the model is one where real estate prices are set by wealthy Brazilians, desperate Venezuelans and cash-rich Canadians (and now even Chinese), with no regard whatsoever for the true buying power of our local workers’ salaries. We seem to be, yet again, at the stage in the cycle where the usual suspects among our real estate tycoons shed their last vulture feathers and are reborn like the Phoenix. I can almost hear the trumping sound made by a scrum of semiliterate businessmen with egos as tall as the Petronas Tower and laughable political ambitions (although one lesson apparently learned from “the crisis” is to stay away from christening buildings after themselves).

My hunch is Cubans will not buy into this model, whether it comes from Spain or from the United States. It makes little sense to pay close to $1,000 a month to a landlord for renting an apartment that does not look much better than their present housing units in Centro Habana, as a series in a Miami newspaper showed not long ago.

And that very human need for housing is what Cubans should be focusing on — not on 18-hole golf courses, shopping malls, or hotels with marinas — as far as their “real estate market” is concerned. It is hard to see how the changes made to Cuban housing laws over a year ago have made a dent in Cuba’s chronic housing shortage. And for that failure, the blame lies squarely with the Cuban government, which has been slow to open its housing market to foreign capital, while tentatively opening up to touristic developments and similar ventures.

José Manuel Pallí is a Cuban-born member of the Florida Bar, originally trained as a lawyer in Argentina. He is president of Miami-based World Wide Title.

[cottierm]

Fascinating read, thanks Nino. By the way don't you have a plane to catch very soon?

Best,

Michel

[cottierm]

I suspect that many Canadian brothers and sisters would be interested to buy in full or shared property a humble abode in Cuba if the legalistico-administrative problems are solved. Am I right or wrong?

Best,

Michel

[Puros Y Vino]

I suspect that many Canadian brothers and sisters would be interested to buy in full or shared property a humble abode in Cuba if the legalistico-administrative problems are solved. Am I right or wrong?

Best,

Michel

I'd be interested.

[cottierm]

I knew you would!

I'd be interested.

[Nino]

Fascinating read, thanks Nino. By the way don't you have a plane to catch very soon?

Best,

Michel

De rien, Michel.

Le vol est demain nuit .... :-)

[cottierm]

Enjoy your stay! And don't forget to post the pictures here or on your site.

Amities.

Michel

De rien, Michel.

Le vol est demain nuit .... :-)

[tdlfoto]

I suspect that many Canadian brothers and sisters would be interested to buy in full or shared property a humble abode in Cuba if the legalistico-administrative problems are solved. Am I right or wrong?

Best,

Michel

definitely.

[Orion21]

The problem is that you can't open the real estate market to open investment without revamping the whole system. If the real estate market would be opened up the prices would quickly far exceed the means of all Cubans to afford their own homes. Whenever a house would come on the market a Canadian (or other nationality) buyer would swoop in and with pennies buy what only hundreds of thousands would have bought them elsewhere. The market would quickly hyper appreciate. Yes, the foreign investment and spending would slowly provide more and more revenue to the State, but how quickly would that make it to the people? And how quickly would wages increase to allow them to compete with foreign investors. Short answer, it wouldn't.

Personally, I could see myself owning a villa (after the embargo is lifted) and enjoying mojitos and cigars in the Cuban sun. But I don't see myself surrounded by the wonderful Cuban people. I see myself in Mexico surrounded by other wealthy foreigners enjoying what we think is a truly Cuban experience, but it really isn't. The real Cuban experience would remain in poverty, while we carpetbaggers create our own version of paradise.

[Puros Y Vino]

Good points Aaron. I'd like to think that Cuban officials would possibly put a limit on foreign land/housing ownership so that Cuban nationals have a shot. But I don't think they will. They'll see it as a great opportunity to infuse their economy with huge wads of foreign cash. Altruism would go out the window. It would be highest bidder takes all. Regular Cubans lot in life would not change noticeably. As much as I'd like a place in Cuba, I'd hate to do it at the expense of others. The more Cuba opens up, the more it enriches "the few" in power there. Cuba's policies are "fickle". They can change year to year...month to month..day to day.

[ajgagnon]

All good points.

How many foreigners do you think would invest in delapidated Cuban buildings that are harder to fix than let fall down? Some would surely be heritage, tourism or other current opportunities, but I think every form of capital has been run pretty hard in Cuba.

I can't help think that a related impact would be the razing of entire urban or suburban areas for new development to take place. However, there is no replacement housing for Cubans, so either the pressures on Cubans would be huge or new land for foreigners would have to be in satellite communities... or... there would have to be some sort of off-site levy to fund Cuban 'project' neighbourhoods. Difficult choices. They're going to have to be creative and have a "realist" driving policy (yet in a way that jives with political sensitivities) otherwise the transition is a hard one to envision.

/end of political soapbox