Cuba’s new real estate environment
By Toby Welch
While Cuba has finally legitimized the sale of homes, the government has been slow to completely legalize the work Realtors and brokers do. Although the sale of properties is now allowed, those who facilitate deals do so on the down-low. For example, one broker claims that his business is photographing properties and helping home sellers create advertising; he doesn’t broadcast that he is a broker. It’s the same as the used car market in Cuba – the government legalized a used automobile market but it is still illegal to open a business that sells used cars.
Before the Decree-Law No. 288 took effect in November 2012, it was illegal to bring buyers and sellers together and for a third party to make money from the deal. Since the late 1950s, Cubans could only barter or swap their homes. It was the only way for residents to move or change their accommodations because private home sales were strictly prohibited. But the 16-page Decree-Law grants Cubans the right to sell their home to another person or exchange their abode without having to get permission first from authorities. Essentially, they can now purchase, sell, donate or trade their house. Two conditions apply – a civil law notary must document the conveyance and the title to the owner’s housing rights must be recorded with the Cuban property registration office, Registro de la Propiedad. Before the Cuban Revolution in the 1950s, Cuba had a recording system that rivaled record keeping in most industrialized countries and they are attempting to reconstruct their efficient system.
One caveat is that Cubans cannot sell their property to just anyone. Buyers have to be Cuban residents or foreigners who reside in Cuba full-time. Foreigners cannot come to the island and purchase property, ensuring the door is kept shut to massive foreign investment. Exceptions are being considered for a few tourist developments and time will reveal whether the foreign companies get the thumbs up for development in Cuba.
Along with this relatively new property freedom and the ability to buy and sell homes, Cubans will have to pay inheritance taxes and transfer fees, something they previously didn’t have to pay. A tax of about four per cent is paid by both the buyer and the seller on each residential transaction. This is a relatively small price to pay, some Cubans say, for the right for the first time in decades to have a legal title to a sale-able property.
Mortgages and lending are not a booming business in Cuba so property must be paid for with cash or a money transfer.
In the two years since the new regulations took effect, sales have slowly escalated. In the first quarter of 2012, 2,730 sales were reported. The second and third quarter of 2012 saw another 42,000 sales, as reported by Cuba’s National Statistics Office. One of the numerous challenges Realtors face is that since the country hasn’t had a real estate market in half a century, price points are tough to pin down. Two identical homes can have asking prices that vary greatly, depending on what the owners believe the homes are worth and how desperately they want to sell.
A perusal of Cuban property for sale reveals that asking prices range from US$5,000 to over $1 million with a median price range between $25,000 and $45,000. More than 100,000 properties are for sale in Cuba. For now, expatriates are the main buyers of Cuban property as Cubans earn an average salary of $19 per month. Future prices aren’t easy to predict either, with the market still in its infancy.
Just to be clear, the majority of property laws haven’t changed. All land in Cuba is still owned and/or controlled by the government but new regulations allow for 99-year leases in some instances. All real estate transactions still have to go through Cuban bank accounts to ensure regulations are adhered to. Not just any bank will suffice – it has to be one on the approved list of financial institutions. The money for the purchase has to be verified as legitimate. Cubans are still limited to owning two homes, one in the city and one in the country; that hasn’t changed. The rationale behind not amending that law is to decrease the likelihood of one person accumulating a lengthy list of real estate investments or properties.
Why the changes in the regulations to allow property sales? It appears that President Raul Castro and the communist government are hoping to revitalize their sluggish economy. For the first time in decades, authentic economic opportunities and development are becoming a priority in Cuba. These changes will increase the likelihood of more money flowing into the country more than it has seen since the early days of the Cuban Revolution in the 1950s. These are baby steps toward a freer market in a country that remains socialist at its core.
When looking for Cuban real estate, check out Point 2 Cuba and Cubisima, websites that buyers and sellers recommend. For a country filled with people who grew up believing that private home ownership was wrong because property should be shared, the advent of Realtors and brokers is a major adjustment.
Disclaimer: The author is a Cuba junkie who has followed the changing climate in that country with gusto. But she is not an expert and recommends you seek legal advice before doing business in Cuba as economic conditions change constantly. For more information on investing in Cuba or other Caribbean destinations, please contact us: email@example.com